Derek Sivers

Entrepreneur, programmer, avid student of life. I make useful things, and share what I learn.

E-Myth Revisited - by Michael Gerber

E-Myth Revisited - by Michael Gerber

Amazon page for details and reviews.

Everything needs to be a system. Think of your business as a franchise prototype. You should be able to hand the “how-to” manual to just anyone, to do it as good as you.

my notes

Fatal assumption : if you understand the technical work of a business, you understand a business that does that technical work.
The technical work of a business, and a business that does that technical work are two totally different things.
The technician is forced to learn how to make the business work, rather than do the work himself.

Every technician suffering from an Entrepreneurial Seizure experiences the same thing:
1. Exhiliration, 2. Terror, 3. Exhaustion, 4. Despair - a terrible sense of loss, loss of special relationship with their work, loss of purpose, loss of self.


== ENTREPRENEUR, MANAGER, TECHNICIAN

Everybody who goes into business is actually three people in one:
The Entrepreneur dreams
The Manager frets
The Technician ruminates
While each of these personalities wants to be the boss, none of them wants to have a boss.

The Entrepreneur lives in the future, never in the past, rarely in the present. He's happiest when left free to construct images of "what if" and "if when".
In business, the Entrepreneur is the innovator, grand strategist, creator of new methods.
Given his need for change, the Entrepreneur creates a great deal of havoc around him, which is predictably unsettling for those he enlists in his projects.
The entrepreneur builds a house and the instant it's done begins planning the next one.

The Manager craves order, compulsively clings to the status quo. While entrepreneur sees opportunities, manager sees the problems.
The Manager creates neat orderly rows of things. The Entrepreneur creates the things that the manager puts in rows.
The Manager is the one who runs after the Entrepreneur to clean up the mess. Without the Entrepreneur there would be no mess to clean up.

Technician is the doer : "if you want something done right, do it yourself".
As long as the Technician is working, he is happy, but only on one thing at a time. He knows he can't get things done simultaneously, so he works steadily and is happiest when he is in control of the work flow.

If the three were equally balanced, we'd be describing an incredibly competent individual.
The Entrepreneur would be free to forge ahead into new areas of interest.
The Manager would be solidifying the base of operations.
The Technician would be doing the technical work.

Without all three of these personalities being given opportunity, the freedom, the nourishment they each need to grow, your business cannot help but mirror your own lopsidedness.

An Entrepreneur does the work of envisioning the business as something apart from you, the owner. The work of asking all the right questions about WHY this business, opposed to that business?


== INFANCY

Unfortunately most business do what the owner wants as opposed to what the business needs.
It's easy to spot a business in infancy : the owner and business are one and the same.
Infancy ends when the owner realizes the business cannot continue to run the way it has been, that to survive it will have to change. This is where most business failures occur.

If your business depends on you, you don't own a business - you have a job. (and you're working for a lunatic)
The purpose of going into business is to get free of a job so you can create jobs for other people.

== ADOLESCENCE

Error: Management by abdication ("To relinquish formally a high office or responsibility.") rather than delegation.
The process of deterioration where the number of the balls in the air is not only too much for you, but too much for your people as well.


== BEYOND THE COMFORT ZONE

True trust comes from knowing, not from blind faith.
To know, one must understand.
To understand, one must have an intimate awareness of what conditions are truly present. What people know, do, want, are - and what they don't/aren't.
A business that "gets small again" is a business reduced to the level of its owner's personal resistance to change - its owner's comfort zone. (works and waits for something positive to happen)
Businesses that "get small again" die, implode.
Your job is to prepare yourself and your business for growth.
To educate yourself so that, as your business grows, the foundation and structure can carry the additional weight.
** It's up to you to dictate your business's rate of growth by understanding the key processes that need to be performed, the key objectives that need to be achieved, the key position you're aiming for in the marketplace.
Write it down, clearly, so others can understand it. (If you can't, you don't own it!)


== MATURITY

Maturity is not an inevitable result of the first two phases. It is not the end of a serial process. Great companies didn't end up as mature companies - they started out that way.
Mature company must also go through infancy and adolescence, but go through them in a different way. It's the perspective that makes the difference.
Very clear picture of what the company would look like when it was done. How it would act.
Unless you act that way from the beginning, you'll never get there. In order to become a great company, act like a great company long before it ever becomes one.
Every day at IBM was a day devoted to business development, not doing business. We didn't do business at IBM, we built one.
The very best businesses are fashioned after a model of a business that works.

How must the business work?
Business as a system for producing outside results - for the customer - resulting in profits.
Picture of a well-defined future, then comes back to the present with the intention of changing it to match the vision.

Survey the world and ask, "Where is the opportunity?"
Identify it, then go back to the drawing board and construct a solution to the frustration found in a group of customers.
Acts the way the customer needs it to act, not the Entrepreneur.
"How will my business look to the customer?" "How will my business stand out from all the rest?"
Within the customer is a continuing parade of changing wants, begging to be satisfied. Find out what those wants are, and what they will be in the future.


== THE TURN-KEY REVOLUTION / FRANCHISE PROTOTYPE

A systems-dependent business, not a people-dependent business.
Integrity : doing what you say you will do, and if you can't : learning how.

Franchise prototype is where all assumptions are put to the test to see how well they work before becoming operational in the business.
The system runs the business. The people run the system.
The system isn't something you bring to the business. It's something you derive from the process of building the business.
Entrepreneur : franchise prototype is the medium through which vision takes form in the real world.
Manager : franchise prototype provides the order, predictability, system.
Technician : franchise prototype is where he is free to do the things he loves to do : the technical work.


== WORKING ON YOUR BUSINESS, NOT IN IT

Your business is not your life.
Your business is something apart from you, with its own rules and its own purposes. An organism that will live or die according to how well it performs its sole function : find and keep customers.
The primary purpose of your business is to serve your life (not vice-versa)
Make a perfect prototype for 5000 more just like it. Exactly like it, not just similar.
Franchise model:
1. provides consistent value to customers, employees, etc - beyond what they expect
2. operated by people with the lowest possible skill
3. a place of impecable order
4. all work documented in operations manuals
5. provides uniformly predictable service to the customer
6. uses uniform color, dress, facilities code

Lowest possible level of skill necessary to fulfill the functions for which each is intended. Of course, in a legal firm you need attorneys, medical, physicians. But you don't need to hire brilliant attorneys or physicians.
Create the very best system through which good attorneys and good physicians can be leveraged to produce exquisite results.

How can I give my customer the results he wants systematically rather than personally?
How can I create a business whose results are systems-dependent rather than people-dependent or expert-dependent?
How can I create an expert system rather than hire one?

Great business are not built by extraordinary people, but by ordinary people doing extraordinary things.

Develop those tools and teach your people how to use them.
People's job is to use the tools you've developed and recommend improvements based on their experience with them.

NO : Typical owner of a small business prefers highly skilled people because he believes they make his job easier - he can simply leave the work to them.
Unfortunately then the business grows to depend on the whims and moods of its people.
If they're in the mood, the job gets done. If they're not, it doesn't.
In this kind of business, "How do I motivate my people?" comes up : "How do I keep them in the mood?"
It is literally impossible to create a consistent result in a business that depends on extraordinary people.
When you intentionally build your business around the skills of ordinary people, you will be forced to ask the difficult questions about how to produce a result without the extraordinary ones.
You will be forced to find a system that leverages your ordinary people to the point where they can produce extraordinary results over and over again.
You will be forced to invent innovative system solutions to the people problems that plague businesses.
You will be forced to build a business that works.

Documentation says, "This is how we do it here."
Without documentation, all routinized work turns into exceptions.
Designates the purpose of the work, specifies the steps needed to be taken while doing that work, and summarizes the standards associated with both the process and result.

BARBER story : He was constantly and arbitrarily changing my experience for me. He was in control of my experience, not I. Running the business for him, not me. Deprived me of the experience of making a decision to patronize his business for my own reasons. It didn't matter what I wanted.
What you do in your model is not as important as doing what you do the same way, each and every time.

* How can I get my business to work without me?
* How can I get my people to work without my interference?
* How can I systematize my business so it could be replicated thousands of times?
* How can I own my business, and still be free of it?
* How can I spend my time doing the work I love to do rather than the work I have to do?


== BUSINESS DEVELOPMENT PROCESS

People constantly asking, "What is the best way to do this?" - knowing we'll never discover the best way, but by asking we discover a better way.
Innovation is the "best way" skill. It produces a high level of energy in every company.

Quantification : numbers related to the impact an innovation makes.
Quantify EVERYTHING related to how you do business.
Eventually, you and your people will think of your entire business in terms of the numbers.
Read your business' health chart by the flow of the numbers.
Know which numbers are critical and which aren't.
Become as familiar with your business' numbers as a doctor is with blood pressure / pulse rates.
Without the numbers, you don't know where you are or where you're going.
With the numbers, your business will take on a totally new meaning.

Orchestration is the elimination of discretion or choice at the operating level of your business.
Without orchestration, nothing could be planned or anticipated by you or your customer.
If you're doing everything differently every time you do it, if everyone is doing it at their own discretion, you're creating chaos, not order.
If you haven't orchestrated it, you don't own it.
If you don't own it, you can't depend on it.
Unless your unique way of doing business can be replicated every single time, you don't own it.
Unless your customer gets everything he wants every time, he'll go someplace else to get it.
The business development process is not static - it's not something you do and then are done with - it's something you do all the time.

Innovation, Quantification, Orchestration are the backbone of a business - the Business Development Process.


== BUSINESS DEVELOPMENT PROGRAM

Your...
1. Primary Aim
2. Strategic Objective
3. Organizational Strategy
4. Management Strategy
5. People Strategy
6. Marketing Strategy
7. Systems Strategy

== PRIMARY AIM:
What do I value most?
What kind of life do I want?
What do I want my life to look like, to feel like?
How do I wish my day-to-day to be?
What would I like to be able to say I truly know in my life, about my life?
Who do I wish to be?
How would I like to be with other people in my life : my family, friends, business associates, customers, employees?
How would I like people to think about me?
2 years from now? 10? 20? End of life?
What specifically would I like to learn during my life : spiritually, physically, financially, technically, intellectually, about relationships?

Begin living your life as if it were important. Take it seriously. Create it intentionally.

== STRATEGIC OBJECTIVE:

Your strategic objective is a very clear statement of what your business has to ultimately do for you to achieve your primary aim.

The first standard is gross revenues. How big will your company be when it's finally done? Know your gross profits, pretax profits, after-tax profits.
You can't know all this, but any standards are better than no standards.
Does the business I have in mind alleviate a frustration experienced by a large enough group of consumers to make it worth my while?
Central demographic model : a most probable customer.

== ORGANIZATIONAL STRATEGY

The organizational development reflected in the Organizational Chart can have a more profound impact on a small company than any other single business development step.
More companies organize around personalities rather than around functions. (& the result is chaos)
Make a chart of positions : COO, VP Marketing, VP Operations, VP Finance, Sales manager, Advertising/Research manager, Production manager, Service manager, Facilities manager, Accounts receivable manager, Accounts payable manager. (clear tree of who reports to who)
A position contract : a summary of the results to be achieved by each position in the company, the work that position is accountable for, a list of standards by which results are to be evaluated. Sign off on it. Not a job description, it is a contract between the company, employee, and a summary of the rules of the game. It provides each person with a sense of commitment and accountability.

Look at each position as a franchise prototype of its own.
When one goes to work in a position, one goes to work ON a position, implementing the business development process of innovation, quantification, orchestration.

Don't hire someone with experience. Not a master technician. A novice, a beginner, an apprentice. Someone eager to learn how to do it right. Willing to learn what you've spent so much time and energy discovering. Someone who is open to the possibility of learning skills not developed yet, skills he/she wants to learn.

If you don't obey the rules, honor them, extol them, why should you expect anyone else to take your game seriously?


== MANAGEMENT STRATEGY

You may think your plan depends on highly skilled people. It doesn't. You don't need such people. You can't afford them. They will become the bane of your existence.
What you need is a mangement system.
The system will become your management strategy, and produces the results you want.
The system will become your solution to the problems of unpredictable people, by orchestrating the process by which management decisions are made, while eliminating the need for such decisions whenever possible.

A management system is a system designed into your prototype to produce a marketing result.
The more automatic that system is, the more effective your franchise prototype will be.
Management development - the process through which you create your management system, and teach up-and-upcoming managers to use it, isn't a management tool - it's a marketing tool.
Its purpose is not just to create an efficient prototype but an effective one : one that finds and keeps customers, profitably, better than any other.
(HOTEL STORY HERE)


== PEOPLE STRATEGY

"How do I get my people to do what I want?"
You can't get your people to do anything.
If you want it done, create an environment where "doing it" is more important to them than not doing it. Where "doing it" well becomes a way of life.
The work we do is a reflection of who we are. If we're sloppy at it, it's because we're sloppy inside. If we're late, it's because we're late inside. If we're bored, we're bored inside.
The most menial work can be a piece of art when done by an artist.
So the job here is not outside of ourselves, but inside of ourselves.
Make sure they understand the idea behind the work they're being asked to do. An idea more important than the work itself.
Everyone who works here is expected to work towards being the best he can possibly be at the tasks he's accountable for. When he can't do that, he should act like he is. If unwilling to act, leave.
A business is like a martial arts practice hall - a dojo - a place you go to practice being the best you can be.
A game to be played in which the rules symbolize the idea you, the owner, have about the world.
The degree to which they buy into your game doesn't depend on them but on how well you communicate the game to them - at the outset of the relationship - not after it's begun.
Your People Strategy is the way you communicate your idea.

1. Never try to make a game out of what you want your people to do. The game has to come first, what your people do comes second. (?)
2. Never create a game you're unwilling to play yourself.
3. Make sure there are ways of winning the game without ending it. (never actually end it, but give occasional victories)
4. Change the game from time to time : the tactics, not the strategy. (any game can become boring, no matter how extraordinary it was. anticipate the end before anyone else does, and change it by executive action)
5. Remind people of the game, constantly. Once a week, have a meeting about the game. Once a day, make some kind of issue about an exception to the way the game has been played, and make certain everyone knows about it.
6. The game has to make sense.
7. The game needs to be fun from time to time. (not all the time)
8. If you can't think of a good game, steal one.

The hiring process is the first and most essential medium for communicating the Boss' idea.
HIRING:
1. scripted presentation communicating the Boss' idea in a group meeting to all the applicants at once. describe the idea, history, successful experience implementing the idea, attributes required of the successful candidate for the position.
2. meeting with each applicant individually to discuss reactions and feelings about the idea, as well as his background and experience. ask why they feel they're great for the role in implementing the idea.
3. notify successful candidate by phone.
4. notify unsuccessful applicants, thanking for their interest.
5. first day of training:
- reviewing boss' idea
- summarizing the system
- take a tour of facilities, highlighting people at work, systems at work, to demonstrate the interdependence of systems on people and people on systems
- answering employee's questions fully
- give operations manual
- review operations manual
- completing employment papers

Don't hire experienced managers, because they'll manage by standards they learned somewhere else.
You must take full accountability for what's going on in your business. You must lead the company in the direction you intend it to go.
You must set the standard.
The Management System : all managers and future-managers are expected to produce results.
You don't need professional managers to manage to those standards : just people who wish to learn how to manage them. People who are personally committed to those standards as you are.

You need people who want to play your game. Not people who believe they have a better one.

Hierarchy of systems: (where the "it" is the stated purpose of your business.)
1 : how we do it here
2 : how we recruit, hire, and train people to do it here
3 : how we manage it here
4 : how we change it here


== MARKETING STRATEGY:

When it comes to marketing, what you want is unimportant. It's what your customer wants that matters.
What your customer wants is probably different that what he thinks he wants.
Make a promise the customer wants to hear, then deliver on that promise better than anyone else on the block.
The COO is the driver of all of this. The COO connects each part of the business process. The COO maintains the integrity of the whole.


== SYSTEMS STRATEGY:

A system is a set of things, actions, ideas, and information that interact with eachother, and in so doing, alter other systems. (?)

Information is the glue that holds your system strategy together. It tells you when and why you need to change.