E-Myth Blog

Why do some companies grow and thrive, while others wither and die? What do successful companies know that others don't? At E-Myth, we believe that one key to succeeding in business is through analyzing and improving business development systems. According to Michael Gerber, business development occurs through a cycle of "innovation, quantification, and orchestration." Systems innovation, then, is the starting point of the cycle.

"Improvement" is the Objective of Innovation

Innovation is about creating new systems, enhancing existing systems, and doing things in a better way. In your efforts to create a world-class organization, you must strive to innovate everything your business does, because the goal of innovation is improvement.

Clearly, you can't innovate everything at once, so which of your systems should you focus on now, and which ones will have to wait a while? It all comes down to the question of need - your customers' needs and the needs of your business. For example, perhaps your primary need is to focus on economics - minimizing costs, maximizing profits, and ultimately increasing the value of your business, or perhaps it is to focus on "quality of life" issues - increasing personal satisfaction for both you and your employees. To begin to evaluate and optimize your systems, select the one that is most important to you, and then follow the process outlined below.

The Systems Innovation Process

A system consists of a series of steps, or "benchmarks" that work together within the system to produce a desired result. Let's look at this in a more practical way. At E-Myth, we propose a seven-step innovation system which will provide you with the means to evaluate your current performance, as well as an objective viewpoint on what you need to change or improve, and how:

• Step one is to select a system that you would like to improve
• Step two is to observe exactly how that system is currently operating
• Step three is to move beyond observation and actually diagram how effectively the current system is, or is not, working
• Step four is to quantify and measure input/output costs, which will be the baseline against how you will measure future performance
• Step five is to analyze the system's work flow to improve or change whatever systems aren't working, or aren't producing the needed results
• Step six is to implement new techniques for improving the work flow. This will necessitate re-drafting the current system to encompass the new changes
• Step seven is to quantify the newly revised system

If, at the end of this process, the newly "innovated" system doesn't exceed the performance of the "old" system, go back through the steps and try again. Keep cycling through the steps until you have developed an innovated system that's worth implementing in your business.

Continuous Innovation

Let me share a quick story with you about an E-Myth client who took an ordinary business and turned it into something quite exceptional. Our client was a man with a dream. He was a man who wished to take his small, humble health food store and grow it to realize extraordinary owner's equity. He closely followed the systems innovation process, and patiently and tirelessly focused on all the systems he had implemented - he observed them, measured them, analyzed them, and quantified them - again and again and again. He took this responsibility very seriously, and even the smallest of systems were hugely important to him, such as how to stock and display the produce, and how to bolster the store's image and brand with eye-catching staff uniforms and displaying the company name and logo on the grocery bags. Over time the business grew, he opened a second store, and he continued to practice the systems innovation process.

The outcome? He later sold his small organization to one of the world's largest and fastest growing health food stores - Whole Foods. The reason for his great success was that he never stopped innovating, and therefore he never stopped improving.

Effective Systems Keep Your Business Healthy

Innovation allows you to continually improve the organization because, without it, you are leading by random assumptions, rather than by objective reasoning. It is important that you don’t rush the process, or jump to premature conclusions. Discipline yourself to thoroughly understand the complete system. Get the whole picture, and THEN move on to the innovation work. That way you’ll avoid creating only partially effective solutions to problems.

Remember, effective systems are at the heart of successful businesses. Systems innovation is the first step in a cycle aimed at keeping your business healthy and thriving, year after year.

Now it’s Your Turn!

We’d like to hear from you! What systems have you innovated in your business? What prompted you to action? What outcomes have you seen? What advice can you give on best practices or lessons learned? Please click on the "Post Comment" button below and share your experiences with the E-Myth Community!

Check back next week for the second article in this three-part series: "Quantification"