E-Myth by Michael E. Gerber:

E-Myth by Michael E. Gerber: Critical Analysis and Evaluation

Widely praised as a foundational book in entrepreneurial research and an essential book for small business owners, E-Myth by Michael E. Gerber tackles the myths of entrepreneurship and attempts to provide a framework of scalability of strategies for startups and small business owners. The first third of the book discusses how technicians whose expertise is in high demand within organizations decide to start their own businesses. Their focus is on benefiting financially from their skill sets and working in the business to cause its growth rather than on the business to get it growing. In this difference of perspective is the premise of the book. Mr. Gerber states that technicians tend to become so myopic in their focus that they lose the larger perspective of treating their business itself as the growth strategy. The book continues with insights into strategies for transforming a business into a platform of growth on its own. The books reads like a manifesto and is impressive in its depth of insight yet the underlying concept of having a technician-entrepreneur change their perspective form excelling in their business vs. On their business is difficult to imagine. The reason many technicians become entrepreneurs is because they want the freedom to make their own decisions. It is difficult to see a technician switching mindsets and leaving that comfort zone, doubly so if they are exceptionally successful as well.

Finding the Need to Change

With financial success comes complacency and if there is no urgent, overwhelming need to change then technicians running successful start-ups will not be willing to make this transition. No matter how brilliant the ephinany if they are making more income than they ever had as employees they will find no reason to change. From this standpoint the book is very aspirational tone and concept and holds a critical assessment of technician-imbalanced companies as an example. The first third of the book also discusses the three stages of growth that companies go through including infancy, expansion and maturity. These are specifically used to communicate who a balance of technician, management and entrepreneurial skills are needed in an organization. Closely paralleling the product lifecycle and business lifecycles, this approach to defining maturation of given businesses makes the core messaging of the book relevant to every small business owner and entrepreneur.

Inherent in this lifecycle concept is one of the differentiating values of the book. It however stops short of making an excellent point and that is the best entrepreneurs globally have the innate sense of when to be transformational vs. transactional leaders, and also have an innate emotional intelligence as well. All of these non-quantifiable, "soft" factors are not really addressed as are the checklists of how to build a scalable business. In that lack of focus on the more complex factors of leadership in a small business is the popuartiy of the book. Reduced to a mindset shift and a series of strategies, the book presents franchising and scalability as attainable by anyone. That is in fact far from the truth. There needs to be a unique mix of transactional and transformational leadership skills, emotional intelligence, appreciation for creative intelligence and above all, a developmental mindset to work at the business instead of in it as the author states. His point of how businesses need to become like a dojo where each person works in their roles to the best of their ability is predicated on leadership that has the skill sets mentioned. Imagining a leader with an exceptional level of dominance or autocracy there is no way this harmonious vision will be realized. This is in fact a serious flaw to the overall book. There must be the appropriate management and leadership styles anchored in emotional intelligence for this entire framework proposed by the author to work.

Scalability of Business Models

Another criticism of the book is the assumption that processes created for the business at start-up can scale over time to be franchised, replicated across multiple locations. This is debatable; consider the role of service and system integrators in the computer industry that have exceptional knowledge of ERP system development and integration yet are competing on price to win deals. The salaries of employees need to scale this enterprise can be easily over $150,000 a year, in fact the best SAP system architects can easily make this. How does this model scale? It certainly can yet the highly specific nature of this skill set and the costs of acquiring it in remote regions do not scale well. Rather, start-ups and small businesses in this arena concentrate on getting their most senior experts to potential clients and customers no matter where they are. Businesses that require an exceptional level of expertise, as the programming and integration of ERP systems does, do not easily and neatly fit into the concepts of the book. Instead the author argues that virtually any business can scale into a franchise structure. True, with unlimited capital yet the skill set to manage ERP integration is exceptionally expensive and cannot scale unless there is an abundance of business first. To win business in enterprise software greater headcount is needed. So the highly focused service businesses do not in fact scale to the level the author discusses. In fact there is an assumption the scalability of process is essential, yet if a company is highly differentiated in their performance the processes will have an order of complexity to them. This is an irony when the model the author discusses is again held up to more advanced examples.