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.
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.
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:
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.
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.
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.
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!
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Submitted Apr 4, 2006 2:45 PM
Hi Helen, I'll see if my situation can clarify a little bit for you. I own a hardware store and recently began the process of streamlining my stocking system. Originally every single item had to be hand stickered checked off the packing list and placed on the shelves or hooks. This cost me roughly 2 full days of labor or 18 man hours. So at $10 an hour my order cost me $180 to put away each week, plus the cost of price stickers. The system works but it's slow and time consuming, plus I was losing sales b/c I would sometimes run out of stock before getting items on the shelf.
By redesigning the system and putting the prices on the shelves and peghooks, rather than stickering each individual item, I significantly cut the time it takes to put items away. This required investing in new peg hooks and label holders for the shelves of about $1000. My order is now put away in about 8 hours, reducing my labor to $80 per week. So after only 10 weeks my investment is paid off and I save $100 per week in overhead costs, plus I lose less sales by having more stock on the shelves.
Submitted Aug 11, 2008 8:06 AM
I inherited a insurance agency and had no knowledge how to operate an office I observed the one gentleman who stuck around for 3 months to show me the ropes. this agency had one telephone and did not use e-mail to either communicate or send quotes to clients they did'nt even know how to use the scanner and computer when I asked does this scanner scans in to this computer, he said I don't know. the reason I mention this is that I observed that he would mail out letters, several of them daily at a cost of 37cents per piece, I knew if we e-mailed the letters. it would be free. I quickly figured out how to scan a doc and or create a doc and e-mail it to clients, of course we did not have any e-mail addresses for clients why would we they did not use that system, so I made a deal with one of my insurance co reps that if I aquired x amount of e-mails he would have to buy me a new lighted sign for my business and he agreed and we hit the phones calling are current clients and explaining how we were making inprovments to better serve them and most gladly gave us their e-mail addresses and I was able talk to them and to introduce myself as the new owner of the agency, killed two birds with one stone and I won that lighted sign for my business. now every quote we take the 3rd question we ask after name and number is what is your e-mail address so we can e-mail you the quotes and we can talk when you have the quotes in front of you. that is the first system I ever put in place and not only did it work to save money but we now can market new products to those clients or use it just to keep in touch several times a year with those clients not to mention it leaves a trail for liability protection. much more accurate than memory of a phone call.
Submitted May 19, 2009 5:34 AM
I agree with the notion of "systems" (I'm a big fan of Sam Carpenter's www.workthesystem.com)--the problem for me comes in identifying what a system is, and how to address the process of improving them systematically and with a long-range vision in mind. I have an electrical contracting business, in business full-time for 17 years now, but it is really just a job, not at true business as such. Electrical work by its nature is non-repetitive and non-recurring--if you do your job correctly, you shouldn't be being called back! So it has to be based on referrals, new business, customer satisfaction resulting in being called back when additional needs arise, etc.
Also, I need help developing a long-range vision and strategy while managing to build along the way. It's difficult to hire employees when there is not consistent work--I've always been very conscientious of benefiting those whose services make my business successful. That lack of consistent work in turn makes it difficult to find good people when there IS work--they have gone on to better jobs!
Still, I like being in business for myself. Overall, it is one of the best decisions I made. I enjoy serving people, customers and workers alike. And I like having accomplishments I can look back on with satisfaction--"We did that!"
Submitted Feb 14, 2010 8:23 AM
Thank you for sharing your ideas.
I will be conducting a leadership seminar for school principals. Surely, I will be able to use your ideas.
Thank you.
Submitted Sep 19, 2010 5:12 AM