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The library of essays of Proakatemia

Systematic Approach in business in two different angles



Kirjoittanut: Thais Santos Araujo - tiimistä SYNTRE.

Esseen tyyppi: Yksilöessee / 2 esseepistettä.

KIRJALÄHTEET
KIRJA KIRJAILIJA
The E-Myth Revisited
The Lean Startup
Michael E. Gerber
Eric Ries
Esseen arvioitu lukuaika on 6 minuuttia.

Introduction

 

During one of my works shifts this summer I had a nice conversation with a friend about leadership challenges and the foundation for healthy first steps of a new company. My friend not only recommended, but also gave me as gift the book E-Myth Revisited supporting my learning journey and presenting me a new systematic approach in business. As my background is in technology, I learned by hard the book The Lean Startup back in 2013 during my first graduation when startups started to be a “hot term” that everyone wanted to understand and to be on top of things.

 

To my luck, the learning was not in vain. The Lean Startup book is still a reference in business talks and now I have the opportunity of comparing the systematic approach of these two books. My goal is to learn about different ways of looking at a business and decide which one would work better applying to a study case.

 

Background on “The E-Myth Revisited”

 

In E-Myth Revisited, Gerber underscores the importance of creating and implementing systems to ensure consistent and efficient operations. He emphasizes the need for documented processes that allow a business to function effectively even in the absence of the founder. This overview comes from the following concepts:

 

The Entrepreneurial Myth (E-Myth): Gerber argues that most small business owners are not true entrepreneurs but rather technicians suffering from an entrepreneurial myth. They often start businesses based on their technical skills but lack the necessary entrepreneurial mindset.

 

Three Personas: Technician, Manager, Entrepreneur. The book introduces three personas essential for a successful business – the Technician (does the work), the Manager (handles day-to-day operations), and the Entrepreneur (innovates and focuses on the future). The author not only divide these roles, but also emphasizes the need to balance them for a business to succeed.

 

Working On vs. In the Business: Gerber advocates for the importance of working on the business rather than solely working in the business. Business owners should take the time to develop systems, processes, and strategies to ensure the long-term success of their ventures.

 

The Importance of Systems: The book stresses the significance of creating and implementing systems within a business. Well-defined systems help standardize processes, reduce dependence on individual skills, and enhance efficiency. This allows the business to run smoothly and consistently.

 

Franchise Prototype: Gerber introduces the concept of the “Franchise Prototype,” which involves creating a business model that can be replicated like a franchise. This helps in establishing consistency, predictability, and scalability in the business.

 

Working Toward a Clear Vision: The book continues emphasizing the importance of having a clear vision for the business. Entrepreneurs should define their goals, values, and long-term objectives, providing a roadmap for decision-making and growth.

 

Understanding the Customer’s Experience: Gerber talks about the importance of understanding and managing the customer’s experience. A focus on customer satisfaction and creating a memorable experience contributes to repeat business and positive word-of-mouth.

 

Personal Growth and Development: The book suggests that personal growth and development are essential for business success. Entrepreneurs need to continuously improve their skills, adapt to change, and embrace innovation to stay ahead in a competitive market.

 

Background on “The Lean Startup”

 

The Lean Startup: Ries introduces the concept of lean methodologies, advocating for a systematic and iterative approach to product development. This involves continuous testing, learning, and adapting to minimize waste and maximize efficiency. In resume, a framework for entrepreneurs. Here are the main points tackled in the book:

 

Build-Measure-Learn: The core concept of “The Lean Startup” is the Build-Measure-Learn loop. It emphasizes the iterative process of quickly building a minimum viable product (MVP), measuring its performance, learning from the data, and then applying those lessons to improve the product or pivot the business strategy.

 

Validated Learning: Ries emphasizes the importance of validated learning. Instead of making assumptions and developing products based on guesses, entrepreneurs should conduct experiments to validate or invalidate their hypotheses. This approach minimizes wasted resources on ideas that may not resonate with the market.

 

Minimum Viable Product (MVP): The book introduces the concept of the MVP, which is the smallest version of a product that allows a team to collect the maximum amount of validated learning with the least effort. This enables startups to test their ideas quickly and efficiently.

 

Pivot and Persevere: Ries discusses the need for startups to be flexible and willing to pivot if the initial product or strategy doesn’t gain traction. A pivot involves a fundamental change to one or more components of the business model based on validated learning. On the other hand, perseverance is crucial for sticking with a strategy that is working.

 

Continuous Deployment: The Lean Startup advocates for continuous deployment, which involves releasing new features or updates to a product as soon as they are ready. This allows startups to gather real-world data and feedback more rapidly, facilitating quicker iterations and improvements.

 

Innovative Accounting: Ries introduces a new way of accounting for startups, focusing on actionable metrics rather than traditional financial metrics. Actionable metrics provide insights into customer behavior and help guide decision-making, contributing to the startup’s learning process.

 

Lean Thinking and Waste Reduction: The book applies principles of lean manufacturing to startup processes, emphasizing the elimination of waste. Entrepreneurs are encouraged to avoid unnecessary work, build only what is required to test hypotheses, and focus on creating value for customers.

 

Continuous Innovation: “The Lean Startup” encourages a culture of continuous innovation. This involves fostering an environment where employees are empowered to suggest and implement improvements, and where the company is always striving to learn, adapt, and evolve.

 

Comparative Analysis

 

While both books share the mindset of promoting entrepreneurship and productivity, they were not necessarily a good pair of concepts to be compared. “The E-Myth Revisited” and “The Lean Startup” tackle different stages of a business development and offer very different methodologies.

 

Comparison:

  1. Entrepreneurial Mindset:
    • Similarity: Both books acknowledge the importance of adopting an entrepreneurial mindset for business success. “The E-Myth Revisited” emphasizes balancing the roles of Technician, Manager, and Entrepreneur, while “The Lean Startup” promotes a culture of innovation and adaptation.
  2. Iterative Process:
    • Similarity: Both books advocate for an iterative approach to business development. “The E-Myth Revisited” encourages working on the business through continuous improvement, while “The Lean Startup” introduces the Build-Measure-Learn loop, emphasizing rapid iterations based on validated learning.
  3. Customer-Centric Approach:
    • Similarity: Both books underscore the importance of understanding and satisfying customer needs. “The E-Myth Revisited” stresses creating a positive customer experience, while “The Lean Startup” encourages startups to build products that customers actually want, using validated learning from customer feedback.
  4. Efficiency and Waste Reduction:
    • Similarity: Both books incorporate principles of efficiency and waste reduction. “The E-Myth Revisited” emphasizes the importance of systems to streamline processes, while “The Lean Startup” advocates for lean thinking, eliminating unnecessary work and focusing on creating value for customers.

Contrast:

  1. Business Stage:
    • Difference: “The E-Myth Revisited” primarily targets small business owners and focuses on systematizing and scaling existing businesses. In contrast, “The Lean Startup” is geared towards entrepreneurs starting new ventures, providing a methodology for efficiently discovering a viable and scalable business model.
  2. Mindset vs. Methodology:
    • Difference: “The E-Myth Revisited” is more focused on changing the entrepreneur’s mindset and understanding the different roles within a business. On the other hand, “The Lean Startup” offers a specific methodology with actionable steps, particularly centered around product development and market validation.
  3. Systems vs. Lean Thinking:
    • Difference: While both books advocate for efficiency, the emphasis differs. “The E-Myth Revisited” places a strong emphasis on creating and implementing systems to organize and run the business smoothly. In contrast, “The Lean Startup” applies the principles of lean manufacturing to eliminate waste and optimize the product development process.
  4. Approach to Failure:
    • Difference: “The E-Myth Revisited” doesn’t explicitly address the concept of embracing failure but rather focuses on preventing failure through systematization. In contrast, “The Lean Startup” encourages a more proactive approach to failure by viewing it as a natural part of the learning process and a source of valuable insights.

 

Case Study And Conclusion

I used the project Pikku-Brasilia as a case study to play around with these learnings and try to decidewhich systematic methodology would apply better to this example.

The E-Myth Revisited offers valuable insights into creating systems and balancing roles within a business, its emphasis on scaling and systematizing might be more applicable to businesses that have already established a certain level of stability. “The Lean Startup,” with its startup-focused principles, is better suited for the dynamic and resource-constrained environment of a small kiosk business in its early stages. Meanwhile, important learnings from The Lean Startup such as efficient resource utilization, quick adaptation, customer-centric approach, pivots and the lean thinking in general would be a better book for a beginning stage business.

 

The E-Myth Revisited book learnings and systematic approach would be better applied to a business that is already established and trying to understand how to escalate your solutions. My main take away is that they are not necessarily competing philosophies but rather complementary strategies addressing diverse business needs. The exercise taught me not only understanding these frameworks but also recognizing when and how to use them effectively.

 

It was also good revisit The Lean Startup book in a newer edition. It’s again a learning for me that books are reviewed for a reason, and it’s worth to go through them again even if it’s only through skimming.

 

References

 

Gerber, M.E. (2001) The E-myth revisited: Why most small businesses don’t work and what to do about it. New York: HarperCollins.

Ries, E. (2017) The Lean Startup: How Today’s entrepreneurs use continuous innovation to create radically successful businesses. New York: Currency.

 

 

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