In the preceding 4 Parts of this topic we have laid out the reasons why most small business owners are working too hard, exhausted and the business is not delivering the lifestyle ownersoriginally set out to achieve.
In Part 5 we now look at the Mature phase of business and the revolution that brought a phenomenon that is applicable to your small business. This is where it gets exciting for us all….
The Entrepreneurial Perspective
It is not the commodity or the work itself that is important. What’s important is the business: how it looks, acts, and does what it is intended to do. And that the owner has a passion for the enterprise itself.
The Entrepreneurial Perspective asks: “How must the business work?” and sees the business a system for producing outside results – for the customer – resulting in profits. It starts with a picture of a well-defined future, and then comes back to the present with the intention of changing it to match the vision. This perspective envisions the business in its entirety, from which is derived its parts. To the Entrepreneur, the present-day world is modelled after his vision.
The Entrepreneurial Perspective adopts a wider, more expansive scale, viewing the business as a network of seamlessly integrated components, each contributing so some larger pattern that comes together in such a way as to produce a specifically planned result, a systematic way of doing business. Each step in the business is measurable, there is a standard, it operates according to articulated rules and principles.
The Entrepreneurial Model
The Entrepreneurial Model looks at business as if it were a product, sitting on as shelf and competing for the customer’s attention against a whole shelf of competing products (or businesses). It has less to do with what’s done in a business and more to do with how it’s done – or delivered.
The Entrepreneur creates the model after surveying and asking, “Where is the opportunity?” The solution (in the form or a business) he constructs answers, “How will my business look to the customer?” and “How will my business stand out from all the rest?”
The Entrepreneurial Model starts with a clear picture of the customer, not the business.
To The Entrepreneur, the customer is always an opportunity. He knows within the customer is a continuous parade of wants begging to be satisfied. All he has to do is find out what those wants are and what will be in the future. So the world becomes a continuing surprise, or treasure hunt.
The problem is, one cannot introduce the entrepreneurial model to the Technician, because he isn’t interested. What we must do then, is stimulate and excite our inner entrepreneur – or innovative side – with a model of business that works, to break free of the Technician’s bonds once and for all.
However, for this business model to work, it must be balanced and inclusive so that the Entrepreneur, the Manager and the Technician all find the right work to do, as each has his own needs.
To find such a model, let us examine a revolution that has transformed American small business in an astonishing way – “The Turn-Key Revolution”, a new view of business.
THE TURN-KEY REVOLUTION
The Turn-Key Revolution is little recognized, however its impact on the present and inferences on the future are as profound as the Industrial and Technological Revolutions and Information Explosion.
At the heart of the Turn-Key Revolution is a way of doing business that has the power to dramatically transform any small business from a condition of chaos and disease to order, excitement, and continuous growth.
The Franchise Phenomenon
It all started in 1952, when a 52-year old salesman, Ray Kroc, walked into a hamburger stand, to sell the two brothers who owned it a milkshake machine. What a wonder! It worked like a Swiss watch!
Hamburgers were produced in a way he’d never seen before – quickly, efficiently, inexpensively, and identically. Best of all, anyone could do it.
It was apparent to Ray Kroc that what the brothers had created was in fact a money machine! Soon after his first visit and more passionate than he had ever felt before, Ray convinced Mac and Jim MacDonald to let him franchise their method.
Twelve years and several million hamburgers later, he bought them out and went on to create the largest retail prepared food distribution system in the world. “The Most Successful Small Business in the World”, McDonalds, a truly staggering success. In roughly 60 years Ray Kroc’s McDonalds has become a 40-billion-a-year business, with well over 35,000 restaurants worldwide – and growing every minute.
What Ray created was a model upon which an entire generation of entrepreneurs have since built their fortunes – the genesis of the franchise phenomenon.
However, the true genius is the Business Format Franchise. Not only incredibly successful, but with less than 5% terminated on an annual basis, or 25% in five years. Compare that to the 80% failure rate of independently owned businesses, and understand the power of The Turn-Key Revolution.
Turning the Key: The Business Format Franchise
The Business Format Franchise moves a step beyond what already existed – trade name franchise. It also provides the franchisee with an entire system of doing business.
It was born of a belief that runs counter to what most business founders believe – that the value of the franchise lies in the success of the product it sells, or of the brand name that is licensing. In a world where brand names proliferate like sand in a dust-storm, this has become infinitely more difficult, and expensive.
As a result, trade name franchises have been declining over the same period that franchising in general has been exploding at an unprecedented rate. This explosion – in the Business Format Franchise – is built on the belief that the true product of a business is not what it sells but how it sells it.
Ray Kroc understood that at McDonalds the hamburger wasn’t his product, but that McDonalds was.
With a huge dream and very little money, the franchisee became the vehicle for Ray Kroc to realize his dream – as the franchisee was interested in the business.
Because the franchisee only wanted to know, “Does it work?”, Ray’s most important concern then became how to make certain his businesses would work better than any other, and better than any other business product around.
To be a predictable success, the business would have to work, because the franchisee, if left to his own devices, surely wouldn’t! Understanding this, Ray’s problem now became his opportunity.
He set about creating a fool-proof, predictable business: a systems-dependent business, one which could work without him. He began to think about this business like an engineer working on a pre-production prototype of a mass-producible product. He began to re-engineer McDonalds.
Ray began to think about it just like Henry Ford must have thought about the Model T. How could the components of the prototype be constructed so it could be assembled at a very low cost with totally interchangeable parts? How could the components be structured so that the resulting business system could be replicated over and over again, each business working as reliably as the thousands preceding it?
What Ray Kroc did was apply the thinking behind the Industrial Revolution to the process of Business Development. The secret of the stunning success is the Franchise Prototype. And this is the model you need, to make your business work. Even with the advent of internet and a more demanding customer profile that has triggered product innovation, McDonalds still thrives on the same system.
As surely as a person could love making pies, Ray Kroc fell in love with McDonalds. The sight, smell, the taste. He looked at their food preparation with loving devotion and passion. And McDonalds, the love of Ray Kroc’s life, still keeps its promises long after Ray has gone. That is what integrity is all about.
Above all, McDonalds has created an extraordinary way to create an extraordinary business. And the profound impact of this on our economies over the past six decades is beyond our comprehension.
Part 6 climaxes this topic and shows you how it can become your story. The impact of the Franchise Prototype cannot be overestimated. It went far beyond the big business of McDonalds to homes everywhere through the Direct Selling model, and is the Entrepreneurial Perspective small businesses everywhere can grow from. I love John Farnham’s words: “We’ll turn the pages over”.
(Notes originally taken and adapted from ‘The E-Myth Revisited, by Michael E. Gerber)