February 12, 2016
Another relaxing day in Matagalpa, Nicaragua. After breakfast at the no name café across from the Pali we spent a fair bit of time at the Hotel Villa Hermosa keyboarding. I’m writing about this a few days later and the rest of the day is a bit fuzzy. That’s one of the dangers of retirement. I guess.
I said to remind me to tell you about Peggy’s Diner.
Here goes.
Michael Gerber
writes management books and does management seminars and consulting. His primary thesis is outlined in the E-Myth
. He says there is a myth that businesses are started by entrepreneurs. In his opinion most businesses are started by technicians suffering from an entrepreneurial seizure. Somebody knows how to do something and doesn’t like who they are working for so they start a business doing what they know how to do. Then rather than working on their business they work in their business. They get so busy and stressed, doing it, doing it, doing it that they have gone from working for a jerk to working for a mad man.
His prescription is to step back a bit and approach the business objectively and analyze the business’s needs in a number of areas from customer acquisition and retention to order fulfillment and a bunch of things in between and systematize them much like you have to do if you were creating a franchise model for somebody else to run. You consider all the roles involved and develop job descriptions and training manuals, even if you are, initially, the only employee.
I think it is in the E Myth Manager Seminar
that Gerber tells a story about “Peggy”, an invented character who started “Peggy’s Diner” the same day that Sam Walton started Walmart and there she is twenty years later still mopping the floor and opening the diner and shopping for supplies and doing all the cooking and so on. All she has done for twenty years is work in her business. It’s a living I guess, but that’s all it can be. And when we eat at the no name café that’s what I think of. Survival in their business is not to be sneezed at, but I have a hard time seeing that business ever doing any more than survive and if the owner gets sick then the business grinds to a halt. Unlike Sam’s business where his heirs are still among the wealthier people of the world even after splitting his inheritance between them several times. Sam Walton’s focus was on working on his business and constantly improving business systems. He was interviewed when Walmart served the Northwest corner of Arkansas and said he figured that they would grow to be about statewide and then stop. Years later he was asked about this and he said that at the time that was as big a business as you could have and still know what was going on, but as their business grew the information technology grew faster and he never reached the point where they didn’t have a handle on what was going on.
Gerber’s ideas are anecdotal, based on his observations and his time working with small businesses. A couple of years ago I read a full fledged hard covered management book which was the summary of an extensive formal study of new businesses formed in the United States. Most people who start businesses start a business that is a carbon copy of one they already work in. Rather than meet some discovered unmet need and adding value they tend to do exactly the same thing their former employer did and sell the same products and services to the same customer base. Rather than grow the pie they just try to cut their piece out of the same pie. A guy working in an auto parts store starts an auto parts store. A guy in a muffler shop starts a muffler shop and so on. Seems that Gerber guessed right.
The value of systems thinking cannot be underestimated yet it usually is under appreciated. Several years (decades?) ago I was listening to a couple of junior radio people talking to each other on an afternoon CBC program. They were talking about Ross Perot and what a doofus he was. Why do you know he started a business and had no employees and no money and yet he sat there for a couple of days and worked out a vision statement for his no employee company and a values statement about what his company would and would not do and how it would do business? All they could see was some guy sitting alone at a desk. They refused to see the company that grew out of that exercise and the billions of dollars he parlayed it into and him selling it to GM and ending up with a seat on the board of directors of GM.
Maybe the exercise had nothing to do with his success, but I have noticed in business that there are usually so many demands on your time you need some sort of filter to prevent you from being distracted into working on stuff that has nothing to do with what you should be doing or thinking about. Seems like it would be more efficient to develop the filter ahead of time like Ross did, but if you have a better idea let me know. As Ross Perot would say, I'm all ears.