Saturday, February 10, 2007

The Franchise Model Is Not The Only Model For Growth

I am currently about half way through The E Myth Revisited by Micheal Gerber. The book published in 1995 is considered a classic read for the entrepreneur, and while I have found many concepts in the book to be right on, I feel that others are showing their age and/or don't work as well in the new economy.

One of these items is his concept of the turn key revolution, and franchise model to grow your small business. In the (only) presented model the goal of course is to design repeatable processes and procedures for the lowest common denominator. Yes, this has worked well for companies like MacDonald's, but these concepts do not apply as well for business in the new economy. Yes, if you are trying to create and grow yet another fast food business, grow a carpet installation business or other manual labor based business this book will provide you some decent guidance, but unfortunately the running dialog with a woman who is trying to grow a pie baking business just doesn't ring home to me and likely any other entrepreneurs building thought/knowledge-based businesses.

Profitability does not have to mean growth in numbers, and being forced to build a business that can be executed by the lowest common denominator. Remember that small is the new big in the new economy and business model innovation is what is propelling the next wave of profitable companies. Think about ways you can grow without having to create a huge unskilled labor force following procedure manuals. You don't have to look at technology companies - think about successful companies such as Southwest Airlines. Yes, there are procedures, but the employees are taught to be entrepreneurial, and solve problems on the front lines that satisfy and create value for their customers. Even in our startup we selectively implement process and procedures in certain cases as we grow and depending on the skill of the people doing the work, but the goal is not to build a turn key/franchise. It is to create efficiencies and build business value with the smallest team possible - not create a monotone business model that can be 'stamped'.

Seth Godin blogs about a concept he calls sheepwalking. I think of it as the lemming effect. If you hire people to just follow the procedures thats all you get. If that is all it takes for your business to be successful, great, but in the new economy I would like to find a company starting up that will be successful with this model. Compliance doesn't alway create exceptional customer server and definitely does not create new innovative business value for your company. Gerber states that the franchise model is how you as a small business owner/entrepreneur get away from having to do the work yourself, but in times when innovation is what is driving successful companies and you have built a shop or franchises full of lemmings, ultimately you are still stuck in the driver seat forced to be the one that helps the business grow. No you aren't doing the physical work, but if everyone is taught to follow the manual, who is left to innovate to take the business to the next level?

Growth doesn't have to always come from adding bodies, and building to the lowest common denominator so you can expand a business of flat thinkers that follow the status quo. Look for rhythmic thinkers. Those that eb and flow with the melody of business. Those that don't get frazzled with a sudden change in tone or pitch, and quickly adjust if they fall out of key. Those that can beat to your drum, but also know how to adjust when the song changes.

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