happy 2012

Happy new year!  I hope your 2012 is off to a great start. :-)

This is going to be an amazing year, and I can't wait to see how it all unfolds.  There is something to be said for making things great, and here we go-- a fresh start and a good chunk of time to make life a little closer to that ideal we strive for.

What are your plans for this year?  There is something powerful about sharing what you plan on doing, so let's go on and make our dreams official.  For me, there is the small new year's resolution to drink more water, and then there are the ambitious goals of making my fledgling little coffee shop a solid business, fixing our fixer-upper, writing a novel by my birthday in April, and having a baby in May.

Phew!  I better get started. :-)

What are your goals, hopes and dreams for 2012?

Let's go make them happen!  Woo hoo!

(running off into the sunset, jumping up to click heels together, throwing hat in the air...)

good to great

Hi, team,

Our Business 101 series continues with highlights from Good to Great: Why Some Companies Make the Leap... and Others Don't, also by Jim Collins, the author of Built to Last (but written many years later).  Again, all of these books are available through the SLO library, should you want to read/learn more.

Collins starts with the premise, "Good is the enemy of great."  A colleague tells him that Built to Last is a good but useless book because all of those (and many other) great companies were great to begin with.  What does one do if they have a good company that they want to bring to greatness?  That is what this book sets out to do.

Again very heavily research-based, the parameters for the companies Collins focuses on in this study are based on a sudden leap from good to great and sustained success for at least fifteen years (versus companies that remained good/never became great and companies that leapt from from good to great but couldn't sustain it).  The researchers then sifted through reams of data to see what the good-to-great companies had in common.

Here's what they found:

Level 5 Leadership

"We were surprised, shocked really, to discover the type of leadership required for turning a good company into a great one. Compared to high-profile leaders with big personalities who make headlines and become celebrities, the good-to-great leaders seem to have come fromMars.  Self-effacing, quiet, reserved, even shy-- these leaders are a paradoxical blend of personal humility and professional will.  They are more like Lincoln and Socrates than Patton or Caesar."

The five levels the book refers to:

Level 1: Highly Capable Individual

Makes contributions through talent, knowledge, skills, and good work habits.

Level 2: Contributing Team Member

Contributes individual capabilities to the achievement of group objectives and works effectively with others in a group setting.

Level 3: Competent Manager

Organizes people and resources toward the effective and efficient pursuit of predetermined objectives.

Level 4: Effective Leader

Catalyzes commitment to and vigorous pursuit of a clear and compelling vision, stimulating higher performance standards. 

Level 5: Level 5 Executive

Builds enduring greatness through a paradoxical blend of personal humility and professional will.

"Level 5 leaders set up their successors for even greater success in the next generation, whereas egocentric Level 4 leaders often set up their successors for failure."

"Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company.  It's not that Level 5 leaders have no ego or self-interest.  Indeed, they are incredibly ambitious-- but their ambition is first and foremost for the institution, not themselves."

"Ten out of eleven good-to-great CEOs came from inside the company, three of them by family inheritance.  The comparison companies turned to outsiders with six times greater frequency-- yet they failed to produce sustained great results."

"Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck).  At the same time, they look in the mirror to apportion responsibility, never blaming bad luck when things go poorly."

"The great irony is that the animus and personal ambition that often drive people to positions of power stand at odds with the humility required for Level 5 leadership.  When you combine that irony with the fact that boards of directors frequently operate under the false belief that they need to hire a larger-than-life, egocentric leader to make an organization great, you can quickly see why Level 5 leaders rarely appear at the top of our institutions."

First Who... Then What

"We expected that good-to-great leaders would begin by setting a new vision and strategy.  We found instead that they first got the right people on the bus, the wrong people off the bus, and the right people in the right seats-- and then they figured out where to drive it.  The old adage 'People are your most important asset' turns out to be wrong.  People are not your most important asset.  The right people are."

"The comparison companies frequently followed the 'genius with a thousand helpers' model-- a genius leader who sets a vision and then enlists a crew of highly capable 'helpers' to make the vision happen.  This model fails when the genius departs."

"To be clear, the main point of this chapter is not just about assembling the right team-- that's nothing new.  The main point is to first get the right people on the bus (and the wrong people off the bus) before you figure out where to drive it.  The second key point is the degree of sheer rigor needed in people decisions in order to take a company from good to great."

How to be rigorous:

1.  When in doubt, don't hire-- keep looking.  (Corollary: A company should limit its growth based on its ability to attract enough of the right people.)

2.  When you know you need to make a people change, act.  (Corollary: First be sure you don't simply have someone in the wrong seat.)

3.  Put your best people on your biggest opportunities, not your biggest problems.  (Corollary: If you sell off your problems, don't sell off your best people.)

"Indeed, one of the crucial elements in taking a company from good to great is somewhat paradoxical.  You need executives, on the one hand, who argue and debate-- sometimes violently-- in the pursuit of the best answers, yet, on the other hand, who unify fully behind a decision, regardless of parochial interests."

"Whether someone is the 'right person' has more to do with character traits and innate capabilities than with specific knowledge, background or skills."

Confront the Brutal Facts (Yet Never Lose Faith)

"We learned that a former prisoner of war had more to teach us about what it takes to find a path to greatness than most books on corporate strategy.  Every good-to-great company embraced what we came to call the Stockdale Paradox: You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time have the discipline to confront the most brutal facts of your current reality, whatever they might be."

"When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident.  It is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts."

"The good-to-great companies faced just as much adversity as the comparison companies, but responded to that adversity differently.  They hit the realities of their situation head-on.  As a result, they emerged from their adversity even stronger."

"Leading from good to great does not mean coming up with the answers and then motivating everyone to follow your messianic vision.  It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to the best possible insights."

To create a climate where the truth is heard:

1.  Lead with questions, not answers.

2.  Engage in dialogue and debate, not coercion.

3.  Conduct autopsies, without blame.

4.  Build "red flag" mechanisms.  

(An example of a "red flag" mechanism: Graniterock allows "short pay," where a customer simply circles the offending item on the invoice and deducts it from the total pay.  Bruce Woolpert explained, "You can get a lot of information from customer surveys, but there are always ways of explaining away the data.  With short pay, you absolutely have to pay attention to the data.  You often don't know a customer is upset until you lose the customer entirely.  Short pay acts as an early warning system that forces us to adjust quickly, long before we would lose that customer.)

"Spending time and energy trying to 'motivate' people is a waste of effort.  The real question is not, 'How do we motivate our people?'  If you have the right people, they wil be self-motivated.  The key is to not de-motivate them.  One of the primary ways to de-motivate people is to ignore the brutal facts of reality."

The Stockdale Paradox:

Admiral Jim Stockdale was the highest-ranking U.S. military officer in the "Hanoi Hilton" prisoner-of-war camp during the height of the Vietnam War.  Tortured over twenty times during his eight year imprisonment from 1965 to 1973, Stockdale lived out the war without any prisoner's rights, no set release date, and no certainty as to whether he would even survive to see his family again.  He shouldered the burden of command, doing everything he could to create conditions that would increase the number of prisoners who would survive unbroken, while fighting an internal war against his captors and their attempts to use the prisoners for propaganda.  At one point, he beat himself with a stool and cut himself with a razor, deliberately disfiguring himself, so that he could not be put on videotape as an example of a "well-treated prisoner."  He exchanged secret intelligence information with his wife through their letters, knowing that discovery would mean more torture and perhaps death.  He instituted rules that would help people to deal with torture (no one can resist torture indefinitely, so he created a step-wise system-- after x minutes, you can say certain things-- that gave the men milestones to survive toward).  He instituted an elaborate internal communications system to reduce the sense of isolation that their captors tried to create, which used a five-by-five matrix of tap codes for alpha characters.  (Tap-tap equals the letter a, tap-pause-tap-tap equals the letter b, tap-tap-pause-tap equals the letter f, and so forth, for twenty-five letters, c doubling for k.)  At one point, during an imposed silence, the prisoners mopped and swept the central yard using the code, swish-swashing out "We love you" to Stockdale, on the third anniversary of his being shot down.  After his release, Stockdale became the first three-star officer in the history of the navy to wear both aviator wings and the Congressional Medal of Honor.

When Collins met with Stockdale, he asked how he could have survived such depressing conditions, not knowing whether he'd even make it out, and Stockdale said, "I never lost faith in the end of the story.  I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade."

When Collins asked who didn't make it out, Stockdale said, "Oh, that's easy.  The optimists."

"The optimists?  I don't understand."

"The optimists.  Oh, they were the ones who said, 'We're going to be out by Christmas.'  And Christmas would come, and Christmas would go.  Then, they'd say, 'We're going to be out by Easter.'  And Easter would come, and Easter would go.  And then Thanksgiving, and then it would be Christmas again.  And they died of a broken heart."  Stockdale stopped, turned to Collins and continued.  "This is a very important lesson.  You must never confuse faith that you will prevail in the end-- which you can never afford to lose-- with the discipline to confront the most brutal facts of your current reality, whatever they might be."

The Hedgehog Concept (Simplicity within the Three Circles)

"To go from good to great requires transcending the curse of competence.  Just because something is your core business-- just because you've been doing it for years or perhaps even decades-- does not necessarily mean you can be the best in the world at it.  And if you cannot be the best in the world at your core business, then your core business absolutely cannot form the basis of a great company.  It must be replaced with a simple concept that reflects deep understanding of three intersecting circles."

The three circles seen in Venn Diagram formation are:

- What you are deeply passionate about

- What you can be the best in the world at

- What drives your economic engine

"The good-to-great companies did not say 'Okay, folks, let's get passionate about what we do.'  Sensibly, they went the other way entirely: We should only do those things that we can get passionate about."

"This doesn't mean, however, that you have to be passionate about the mechanics of the business per se (although you might be).  The passion circle can be focused equally on what the company stands for."

On the economic engine:

Each good-to-great company attained a deep understanding of the key drivers in its economic engine and built its system in accordance with this understanding: the "economic denominator."  Think about it in terms of the following question: If you could pick one and only one ratio-- profit per x -- to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?  

Walgreens switched its focus from profit per store to profit per customer visit.  Convenient locations are expensive, but by increasing profit per customer visit, Walgreens was able to increase convenience (nine stores in a mile!) and simultaneously increase profitability across its entire system.  The standard metric of profit per store would have run contrary to the convenience concept.  (The quickest way to increase profit per store is the decrease the number of stores and put them in less expensive locations.  This would have destroyed the convenience concept.)

Or consider Wells Fargo.  When the Wells team confronted the brutal fact that deregulation would transform banking into a commodity, they realized that standard baker metrics, like profit per loan and profit per deposit, would no longer be the key drivers.  Instead, they grasped a new denominator: profit per employee.  Following this logic, Wells Fargo became one of the first banks to change its distribution system to rely primarily on stripped-down branches and ATMs.

The key is to understand what your organization can be the best in the world at (and equally important what it cannot be the best at), not what it wants to be the best at.  The Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best.  It is an understanding of what you can be the best at.  The distinction is absolutely crucial.

Unexpected Findings

- The good-to-great companies are more like hedgehogs-- simple, dowdy creatures that know "one big thing" and stick to it.  The comparison companies are more like foxes-- crafty, cunning creatures that know many things but lack consistency.

- It took four years on average for the good-to-great companies to get a Hedgehog Concept.

- Strategy per se did not separate the good-to-great companies from the comparison companies.  Both sets had strategies, and there is no evidence that the good-to-great companies spent more time on strategic planning than the comparison companies.

- You absolutely do not need to be in a great industry to produce sustained great results.  No matter how bad the industry, every good-to-great company figured out how to produce truly superior economic returns.

A Culture of Discipline

"All companies have a culture, some companies have discipline, but few companies have a culture of discipline.  When you have disciplined people, you don't need hierarchy.  When you have disciplined thought, you don't need bureaucracy.  When you have disciplined action, you don't need excessive controls.  When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance."

"The good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system.  They hired self-disciplined people who didn't need to be managed, and then managed the system, not the people."

Technology Accelerators

"Good-to-great companies think differently about the role of technology.  They never use technology as the primary means of igniting a transformation.  Yet, paradoxically, they are pioneers in the application of carefully selected technologies.  We learned that technology by itself is never a primary, root cause of either greatness or decline."

The Flywheel and the Doom Loop

"Those who launch revolutions, dramatic change programs, and wrenching restructurings will almost certainly fail to make the leap from good to great.  No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop.  There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment.  Rather, the process resembled relentlessly pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough and beyond."

"When you let the flywheel do the talking, you don't need to fervently communicate your goals.  People can just extrapolate from the momentum of the flywheel for themselves: 'Hey, if we just keep doing this, look at where we can go!'  As people decide among themselves to turn the fact of potential into the fact of results, the goal almost sets itself."

"The comparison companies followed a different pattern, the doom loop.  Rather than accumulating momentum-- turn by turn of the flywheel-- they tried to skip buildup and jump immediately to breakthrough.  Then, with disappointing results, they'd lurch back and forth, failing to maintain a consistent direction." 

From Good to Great to Built to Last

"In an ironic twist, I now see Good to Great not as a sequel to Built to Last, but more as a prequel.  This book is about how to turn a good organization into one that produces sustained great results.  Built to Last is about how you take a company with great results and turn it into an enduring great company of iconic stature.  To make that final shift requires core values and a purpose beyond just making money combined with the key dynamic of preserve the core/stimulate progress."

Good to Great Concepts --> Sustained Great Results + Built to Last Concepts --> Enduring Great Company

"Enduring great companies preserve their core values and purpose while their business strategies and operating practices endlessly adapt to a changing world.  This is the magical combination of 'preserve the core and stimulate progress.'"

"Enduring great companies don't exist merely to deliver returns to shareholders.  Indeed, in a truly great company, profits and cash flow become like blood and water to a healthy body: They are absolutely essential for life, but they are not the very point of life."

"Indeed, the point of this entire book is not that we should 'add' these findings to what we are already doing and make ourselves even more overworked.  No, the point is to realize that much of what we're doing is at best a waste of energy.  If we organized the majority of our work time around applying these principles, and pretty much ignored or stopped doing everything else, our lives would be simpler and our results vastly improved."

Okay, I know this was long, but I hope you've gained some insight from it.

J :-)

built to last

This is the second installment of our unofficial Business 101 series, and I feel it has good applications to all facets of professional life, whether you're an entrepreneur or an artist representing yourself.  I hope you find something of use in it.

_________________________________________________________________________

Hi, team,

This book by James (later Jim) Collins and Jerry Porras is considered one of the bibles of business literature for good reason.  I should also mention that I got all of the books from the SLO library (including the inter-library system), so you can find any/all of them there, if you're interested in reading more.  

This book focuses on "visionary companies" and how they differ from other also very successful companies (like American Express vs. Wells Fargo, Citicorp vs. Chase) and debunks the following twelve myths:

Myth 1.  It takes a great idea to start a great company.

Reality: "Few of the visionary companies began life with a great idea.  In fact, some began life without any specific idea and a few even began with outright failures... Visionary companies were significantly less likely to have early entrepreneurial success than the comparison companies in our study.  Like the parable of the tortoise and the hare, visionary companies often get off to a slow start, but win the long race."

Myth 2.  Visionary companies require great and charismatic visionary leaders.

Reality: "A charismatic visionary leader is absolutely not required for a visionary company and, in fact, can be detrimental to a company's long-term prospects... Like the founders of the United States and the Constitutional Convention, they concentrated more on architecting an enduring institution than on being a great individual leader."

Myth 3.  The most successful companies exist first and foremost to maximize profits.

Reality: "Contrary to business school doctrine, 'maximizing shareholder wealth' or 'profit maximization' has not been the dominant driving force of primary objective through the history of the visionary companies... Yes, they seek profits, but they're equally guided by a core ideology-- core values and sense of purpose beyond just making money.  Yet, paradoxically, the visionary companies make more money than the more purely profit-driven comparison companies."

Myth 4.  Visionary companies share a common subset of "correct" core values.

Reality: "There is no 'right' set of core values for being a visionary company... The crucial variable is not the content of a company's ideology, but how deeply it believes its ideology and how consistently it lives, breathes and expresses it in all that it does.  Visionary companies do not ask, 'What should we value?'  They ask, 'What do we actually value deep down to our toes?'" 

Myth 5.  The only constant is change.

Reality: "Core values in a visionary company form a rock-solid foundation and do not drift with the trends and fashions of the day; in some cases, the core values have remained intact for well over one hundred years... Yet, while keeping their core ideologies tightly fixed, visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals."

Myth 6.  Blue-chip companies play it safe.

Reality: "Visionary companies may appear straitlaced and conservative to outsiders, but they're not afraid to make bold commitments to 'Big Hairy Audacious Goals' (BHAGs).  Like climbing a big mountain or going to the moon, a BHAG may be daunting and perhaps risky, but the adventure, excitement, and challenge of it grabs people in the gut, gets their juices flowing, and creates immense forward momentum.  Visionary companies have judiciously used BHAGs to stimulate progress and blast past the comparison companies at crucial points in history."

Myth 7.  Visionary companies are great places to work, for everyone.

Reality: "Only those who 'fit' extremely well with the core ideology and demanding standards of a visionary company will find it a great place to work.  If you go work at a visionary company, you will either fit and flourish-- probably couldn't be happier-- or you will likely be expunged like a virus.  It's binary.  There's no middle ground.  It's almost cult-like.  Visionary companies are so clear about what they stand for and what they're trying to achieve that they simply don't have room for those unwilling or unable to fit their exacting standards."

Myth 8.  Highly successful companies make their best moves by brilliant and complex strategic planning.

Reality: "Visionary companies make some of their best moves by experimentation, trial and error, opportunism, and-- quite literally-- accident.  What looks in retrospect like brilliant foresight and preplanning was often the result of 'Let's just try a lot of stuff and keep what works.'  In this sense, visionary companies mimic the biological evolution of species.  We found the concepts in Charles Darwin's Origin of Species to be more helpful for replicating the success of certain visionary companies than any textbook on corporate strategic planning."

Myth 9.  Companies should hire outside CEOs to stimulate fundamental change.

Reality: "In seventeen hundred years of combined life spans across the visionary companies, we found only four individual incidents of going outside for a CEO-- and those in only two companies.  Home-grown management rules at the visionary companies to a far greater degree than at the comparison companies (by a factor of six).  Time and again, they have dashed to bits the conventional wisdom that significant change and fresh ideas cannot come from insiders."

Myth 10.  The most successful companies focus primarily on beating the competition.

Reality: "Visionary companies focus primarily on beating themselves.  Success and beating the competitors come to the visionary companies not so much as the end goal, but as a residual result of relentlessly asking the question 'How can we improve ourselves to do better tomorrow than we did today?'  And they have asked this question day in and day out-- as a disciplined way of life-- in some cases for over 150 years.  No matter how much they achieve-- no matter how far in front of their competitors they pull-- they never think they've done 'good enough.'"

Myth 11.  You can't have your cake and eat it, too.

Reality: "Visionary companies do not brutalize themselves with the 'Tyranny of the OR'-- the purely rational view that you says you can have either A OR B, but not both.  They reject having to make a choice between stability OR progress; cult-like cultures OR individual autonomy; home-grown managers OR fundamental change; conservative practices OR Big Hairy Audacious Goals; making money OR living according to values and purpose.  Instead, they embrace the 'Genius of the AND'-- and the paradoxical view that allows them to pursue both A AND B at the same time."

Myth 12.  Companies become visionary primarily through "vision statements."

Reality: "The visionary companies attained their stature not so much because they made visionary pronouncements (although they often did make such pronouncements).  Nor did they rise to greatness because they wrote one of the vision, values, purpose, mission, or aspiration statements that have become popular in management today (although they wrote such statements more frequently tan the comparison companies and decades before it became fashionable).  Creating a statement can be a helpful step in building a visionary company, but it is only one of thousands of steps in a never-ending process of expressing the fundamental characteristics we identified across the visionary companies."

Core ideology = core values + purpose

Core values: the organization's essential and enduring tenets-- a small set of general guiding principles; not to be confused with specific cultural or operating practices; not to be compromised for financial gain or short-term expediency.

Purpose: the organization's fundamental reasons for existence beyond just making money-- a perpetual guiding star on the horizon; not to be confused with specific goals or business strategies.

An example of a culture committed to customer service and excellence is Nordstrom's, whose employee handbook is a 5"x8" card that reads in its entirety:

Welcome to Nordstrom

We're glad to have you with our Company.

Our number one goal is to provide 

outstanding customer service.

Set both your personal and professional goals high.

We have great confidence in your ability to achieve them.

Nordstrom Rules:

Rule #1: Use your good 

judgment in all situations.

There will be no additional rules.

Please feel free to ask your department manager,

store manager or division general manager

any question at any time.

Jim Nordstrom said, "We view our people as sales professionals.  They don't need rules.  They need basic guideposts, but not rules.  You can do anything you need to at Nordstrom to get the job done, just so long as you live up to our basic values and standards."

Applying Darwin's theory of evolution to visionary companies: "branching & pruning"

If you add enough branches to a tree (variation) and intelligently prune the deadwood (selection), then you'll likely evolve into a collection of healthy branches well positioned to prosper in an ever-changing environment.

Jack Welch of General Electric used "planful opportunism" (excerpted from Tichy/Sherman's Control Your Own Destiny or Someone Else Will):

"Instead of directing a business according to a detailed... strategic plan, Welch believed in setting only a few clear, overarching goals.  Then, on an ad hoc basis, his people were free to seize any opportunities they saw to further those goals...[Planful opportunism] crystallized in his mind...after he read Johannes von Moltke, a nineteenth century Prussian general influenced by the renowned military theorist Karl von Clausewitz [who] argued that detailed plans usually fail, because circumstances inevitably change."

3M's philosophy:

- Hire good people, and leave them alone.

- Listen to anyone with an original idea, no matter how absurd it might sound at first.

- Encourage; don't nitpick.  Let people run with an idea.

- If you put fences around people, you get sheep.  Give people the room they need.

- Give it a try-- and quick!

Lesson learned from 3M:
"When in doubt, vary, change, solve the problem, seize the opportunity, experiment, try something new (consistent, of course, with the core ideology)-- even if you can't predict precisely how things will turn out.  Do something.  If one thing fails, try another.  Fix.  Try.  Do.  Adjust.  Move.  Act.  No matter what, don't sit still.  Vigorous action-- especially in response to unexpected opportunities or specific customer problems-- creates variation."

Good Enough Never Is

"There is no finish line in a highly visionary company.  There is no 'having made it.'  There is no point where they feel they can coast the rest of the way, living off the fruits of their labor.  Visionary companies... attain their extraordinary position not so much because of superior insight or special 'secrets' of success, but largely because of the simple fact that they are so terribly demanding of themselves.  Becoming and remaining a visionary company requires oodles of plain old-fashioned discipline, hard work and a visceral revulsion to any tendency toward smug self-satisfaction."

Okay!  I'll stop here.  If you have any questions or want to know more about any of this (without necessarily reading the book), feel free to ask me anytime.

Hope you found this useful.

J :-)

the e-myth

I've been learning everything I can about business, and I'm starting to type up summaries for my team.  In case it can benefit you, too, I'll include my email here:

Hi, team,

I want you to learn everything I learn, and I'm going to start sending you highlights of books I find useful as our own informal Business 101 course. :-)  

This is obviously not an urgent email you need to read right now, and yes, it's quite lengthy, but I hope it enriches your own experience of starting up a business with me. :-)  I've plowed through a lot of business books, and I especially wanted to share this book to start, as it seems the most relevant to us now.  I don't love everything the author, Michael E. Gerber, says or how he says it, but he brings up a lot of interesting points.  Namely:

- What he refers to as the "E-Myth" (the entrepreneurial myth) is this dreamy idea that people (especially Americans) look up to, the hero beating all odds to start his/her own business.  The reality is very different-- hard, never-ending work and very little reward.  It's no wonder most start-ups fail.  About 400,000 businesses per year in the U.S.

- There are three personalities needed to start a successful business: the Entrepreneur, the Technician and the Manager.  The entrepreneur is the dreamer, the one who pounces on opportunity and combines it with a vision to create something new-- but this is usually fleeting.

 The technician has the operational know-how but no business sense or organization, and the manager is the one who keeps everything orderly and running systematically.  The problem is that most of the time, only the technician is present.  (The hairdresser starts a salon, the mechanic starts a body shop, the baker starts a baker-- you get the idea.)  They become a slave to their business and end up resenting it-- instead of the freedom they imagined in "working for themselves," they are now even more of a slave to their work.   

So, what to do?  Gerber outlines the stages of growth in a business.

- Infancy is when the owner and the business are one in the same.  The baker bakes everything, watches every detail and the business starts to grow.  But then, you have more business than you can handle, and quality starts to slip.  You're juggling more balls, working more hours, but you just can't handle everything.  This is the problem of the technician running the show alone-- caught up in the day-to-day, there is no time, space or vision for the business to grow, and many businesses either close at this point or are forced to grow into the next stage.

- Adolescence is when the owner hires help, usually someone who can do something the owner is struggling with-- a bookkeeper, for example, or a manager, who hires people to help you.  But again, quality starts to slip, and the owner either wants to do everything him/herself again (stay small, revert to infancy), the business grows too quickly and crashes and burns, or the Manager needs to step in and create systems and order.

- Maturity is seen in the companies that have stood the test of time: Disney, FedEx, McDonald's.  What makes them stand apart is that they were started with long-term perspectives; the Technician, Entrepreneur and Manager work harmoniously within a smoothly flowing system.  The Entrepreneur finds opportunities and constantly improves the product, the service and the overall experience of the customers; the Technician focuses on executing the day-to-day perfectly and fine-tuning and improving the details of the operation; and the Manager creates and maintains systems for the whole organization to work smoothly together-- everyone knows what they're supposed to be doing within the framework of the business, what their responsibilities are and how to keep growing within the system.  

Gerber then describes the "turn-key revolution" or the process by which franchises have taken over the country-- McDonald's doesn't sell its products; it's selling its business (the systems they have in place-- so all a franchisee has to do is learn their method of doing everything).  This is why 80% of new businesses fail within five years but 75% of all franchises succeed. 

So, if we do not aspire to be McDonald's, what is our takeaway lesson?  

- The owner must step back from the day-to-day operations, separate him/herself from the business in order to clearly see where the business is and figure out the proper business model, the financials and the long-term goals.

- The Manager needs to create order.  You need to have such detailed systems in place that everyone in your organization is on the same page in offering your customers a consistent product.  People want to know what to expect, and you should be able to deliver the exact same experience for your customers each time they come to your business.  Your operations manual should describe every detail of every process you carry out, and it should be accessible and easy to understand.

Now, to create a successful, working small business:

- What is the goal of your business?  Knowing where you want to go gives you the road map (and the incremental steps needed) to get there.

- Know the difference between your commodity (coffee) and your product (how people feel about your business).  How do you want people to feel when they walk out of your shop?  Gerber says people aren't interested in the commodity; they're buying the feelings associated with it.

- Who is your customer?  Making our coffee the cheapest in town, for example, to appeal to college students doesn't work for us if our clientele is 45-60-years-old and value quality and service above price.

- What is your timeline?  Having goals is good-- having deadlines makes them concrete and tangible.  

And now, for our next step: the organizational chart. 

Yes, we are a tiny group, but I can see now how this will be useful for us.  If everyone does everything, not everything gets done, no one is responsible for specific tasks, and things get missed.  So, Gerber recommends creating a structure as if you were already a large organization.  Right now, I'm wearing many hats (HR, bookkeeper, inventory supplier, etc.)-- but other people can and should begin to fill in those spots, too.  Here's the example from the book:

Ideally, there are standards and responsibilities for each position, and a clear system/training is created for each role.

- People strategy: respect them, teach them, let them fly (this is my own more than the author's take).  Have something greater than simply making money as your driving force.  Know what's important.

"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 at it, it's because we're late inside.  If we're bored with it, it's because we're bored inside, with ourselves, not with the work.  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.  How we do our work becomes a mirror of how we are inside."

"The idea behind the work is more important than the work itself.  The first says that the customer is not always right, but whether he is or not, it is our job to make him feel that way.  The second says that everyone who works here is expected to work toward being the best he can possibly be at the the tasks he's accountable for.  When he can't do that, he should act like he is until he gets around to it.  And if he's unwilling to act like it, he should leave.  The third says that the business is a place where everything we know how to do is tested by what we don't know how to do, and that the conflict between the two is what creates growth, what creates meaning."

"A business is like a martial arts practice hall, a dojo, a place you go to practice being the best you can be.  But the true combat in a dojo is not between one person and another as most people believe it to be.  The true combat in a martial arts practice hall is between the people within ourselves."

- Systems should cover: 

  - How We Do It Here

  - How We Recruit, Hire and Train People to Do It Here

  - How We Manage It Here

  - How We Change It here

- The "It" is your product, your "best way" and what you truly value as a business.  If "caring" is what you're selling, how do you express caring when you answer the phone?  When you greet customers?  How you take their money?  When you prepare their drink/treat?

- Marketing strategy: it doesn't matter what we want, it only matter what the customer wants.  People are irrational, but they take everything in, whether consciously or not-- so what does our business communicate?  When people walk into our shop, what do they feel we are telling them with our physical space?  Is it clean?  Cluttered?  Calm?  Vibrant?  What does our music communicate?  What do our clothes and presentation communicate about us and our business?  What does our food display communicate?  Why do men make more sales when they wear blue suits rather than brown?  It's unconscious-- and people decide in a snap whether our place agrees with them or not.  

  - Ask questions like "Have you been here before?" (which enables you to have a "script" for both yes and no answers) instead of "May I help you?"  

  - Every interaction you have with a guest is an opportunity to show who we are, how we are different from everyone else and that we care about them and making them happy. :-)

  - The key to long-term success is repeat business.  Take good care of your regulars, and your business will grow.  Exceed their expectations every time, and they will tell/bring their friends.

From Joe Hyams' Zen in the Martial Arts:  

"A dojo is a miniature cosmos where we make contact with ourselves-- our fears, anxieties, reactions, and habits.  It is an arena of confined conflict where we confront an opponent who is not an opponent but rather a partner engaged in helping us understand ourselves more fully.  It is a place where we can learn a great deal in a short time about who we are and how we react in the world.  The conflicts that take place inside the dojo help us handle conflicts that take place outside.  The total concentration and discipline required to study martial arts carries over to daily life.  The activity in the dojo calls on us to constantly attempt new things, so it is also a source of learning-- in Zen terminology, a source of self-enlightenment."

  Gerber continues:

"And that is exactly what a small business is!  A small business is a place that responds instantly to any action we take.  A place where we can practice implementing ideas in a way that changes lives.  A place where we can begin to test all of the assumptions we have about ourselves.  It is a place where questions are at least as important as answers, if not more so."

Hope you found this useful.

J :-) 

for the love of work

Confession: sometimes, my partner and I go to social events and whisper to each other on our way out, "I wish I had just stayed home to work."  You'd think this was an attack on the company we keep, but it's just our shared love of work.

Yes, I need to work on my work-life balance, but I also think there is great value in always thinking of ways to improve.  (This is also why I've been MIA for the past month or two.  Sorry.  I'm starting to see light at the proverbial end of the tunnel, and I've got tons of lessons learned to share with you.) :-)

Put another way, my friend, Peter, and I were recently talking about happiness, and he said his happiness stemmed from having self-respect.  I agreed that people who didn't respect or like themselves would have a tough time feeling happy, but upon mulling it over a bit more, I decided peace for me comes from having self-respect, but happiness requires a bit more.

My happiness comes in two primary ways: connecting with someone in a meaningful way or doing work that I feel contributes to society.  Which brings us back to work. 

People complain about work, avoid it and generally don't have a very positive view of it.  But work can also be seen as an opportunity to put your skills, passion and experience to use.  If you're a musician or an artist, it's your duty to share your talent with others.  If you're a problem solver, a whiz with languages or a natural educator, you can help people build bridges, further understanding and improve their quality of life. 

Whatever your passion and ability, work for me is the expression of that potential.  It's the kinetic, put to use.  And that is what makes me feel alive-- when I am creating or doing something that can improve life for even one person.

What greater gift is there?  For me, it's the opportunity to put all of my varied experiences to use to help others.  And the exhaustion felt at the end of a long day of serving others makes me feel useful and that my life is purposeful.  And that, to me, is happiness.