Innovation Vs. Systems: Seth Godin’s Linchpin & Michael Gerber’s E-Myth

Two fantastic books, two very divergent views. And I believe the key to massive success is to apply them both.

Gerber’s approach has revolutionized many a business in the past couple of decades, encouraging entrepreneurs to think big, create businesses they can grow and scale easily. It’s the McDonald-ization effect, creating operations that provide adequate–not exceptional–products or services, at the lowest possible cost to the business owner. The goal is to standardize everything, use solid systems, and then let other people run the show while you’re off on vacation or working on other aspects of your business empire.

Godin has been very critical of this model. In his book Linchpin, he quotes Gerber as saying:

“The Model Will Be Operated by People with the Lowest Possible Level of Skill. Yes, I said lowest possible level of skill. Because if your model depends on highly skilled people, it’s going to be impossible to replicate. Such people are at a premium in the marketplace. They’re also expensive, thus raising the price you will have to charge for your product or service. By lowest level of skill I mean the lowest possible level necessary to fulfill the functions for which each is intended. Obviously, if yours is a legal firm, you must have attorneys. If yours is a medical firm, you must have physicians. But you don’t need to hire brilliant attorneys or brilliant physicians. You need to create the very best system through which good attorneys and good physicians can be leveraged to produce exquisite results.”

Godin’s response:

“Here’s the problem…If you make your business possible to replicate, you’re not going to be the one to replicate it. Others will. If you build a business filled with rules and procedures that are designed to allow you to hire cheap labor, you will have to produce a product without humanity or personalization or connection. Which means that you’ll have to lower your prices to compete. Which leads to a race to the bottom. Indispensable businesses race to the top instead.”

I love both of these books, and feel you can gain a lot from both theories. My own approach is a hybrid: I believe wholeheartedly in the power of great systems, and I hire amazing people with leadership skills and unique personalities to inject heart and soul into those systems. As I said in my last post, I tell my staff we don’t have an “insert smile here” policy. I want them to use their own warmth and friendliness to make customers feel welcome and appreciated, and I encourage them to use their own judgment when situations arise that aren’t covered in our training manual. But I also work hard to make sure our training is comprehensive, and that we have well-written procedures and policies to cover the majority of our daily operations.

I absolutely believe that you want to avoid a business that competes on cost alone, leading to a “race to the bottom” as Godin puts it. Compete with quality, integrity, character, values, uniqueness and commitment to fantastic service.

Have you read either of these books? Which approach makes more sense to you?

12 Responses to Innovation Vs. Systems: Seth Godin’s Linchpin & Michael Gerber’s E-Myth
  1. Tony Gnau
    January 6, 2012 | 6:54 am

    I’ve read Linchpin and love the ideas Godin brings to the table. As a small business owner working in a creative field (video production), his approach is a good fit for us.

    Also, note to self… don’t ever visit one of Gerber’s medical or legal firms. :-)

  2. admin
    January 6, 2012 | 1:30 pm

    Ha! Thanks for the laugh, Tony :)

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    January 6, 2012 | 8:28 pm

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  4. Josef Shapiro
    January 7, 2012 | 9:15 am

    Godin was quoted here, “If you build a business filled with rules and procedures that are designed to allow you to hire cheap labor, you will have to produce a product without humanity or personalization or connection. ”

    What is being pointed to here is the important distinction between creating a mediocre bureaucracy and a business enlivened, rather than deadened by its systems and management. Godin is correct that creating a business based on cheap labor and controlling systems will be a race to the bottom, and this is one possible interpretation of the E-Myth Point of View; however, it is incorrect.

    This paragraph from E-Myth Revisited is often misinterpreted and misapplied. E-Myth does not advocate for hiring cheap, inexperienced labor who cannot think for themselves. The point is only that the more systems the business has the more the business can support less skilled people to become more skilled and produce extraordinary results. The business owner is the one who decides, very intentionally, what kind of people they want to hire to move toward what vision. It depends entirely on the Vision for the business.

    So back to Godin’s quote at the top of my comment. What he says can happen when this idea is misapplied, but it is not a certainty, nor a flaw in the E-Myth model. Starbucks, for example, is highly systematized and seems to have alive, caring, personal people. McDonalds, on the other hand, is just as systematized but lacks the same care and engagement. It is not a matter of systemization or not. It is a matter of how the systems are related to, crafted, and utilized. You can feel how Starbucks employees care about the product in a way McDonalds employees do not. What are the systems that produce that result? Hiring? Training? Continuing education? Management? Many different systems contribute there.

    So it is important to note that many people equate “systems” with procedures for doing tasks. This is also an oversimplification of E-Myth’s philosophy. It’s not just about rules and procedures. It can’t be. A Vision is a system to create inspiration and direction. An org chart is a system for creating clarity of accountability. A good story can be a system for communicating the spirit of a business.

    In summary, when the E-Myth Point of View is followed accurately and truly, the dichotomy presented in this article is a false one. But given how often E-Myth is misinterpreted this way, an important subject. Thank you for the opportunity to discuss.

    -Josef Shapiro
    Director of E-Myth Academy

    • admin
      January 12, 2012 | 5:51 pm

      Hi Josef,

      thank you so much for your thoughtful contribution to this discussion. As I mentioned in this post, I’m an admirer of Gerber (as well as Godin) and in fact, The E Myth informed much of my journey to entrepreneurship.

      However, I do think the original E Myth book focuses a lot more on systems than people. I think Gerber’s approach has evolved since then, and I give him credit for that. But for me, it’s important to bring up Godin’s insight because I’ve seen first-hand how crucial it is to not only have great systems in place, but hire inspired people to make the systems come to life.

      As you point out, having a great story and inspiring your team is a major key to business success these days. I didn’t get that message from the original E Myth book, but I’m glad that Gerber seems to recognize the value of this approach now.

  5. Shallie Bey (Smarter Small Business Blog)
    January 7, 2012 | 11:07 am

    Thank you for an excellent post. Seth Godin and Michael Gerber are two of my business authors as well. Like you, I struggle when they appear to be contradicting one another. Most often, I discover they are approaching a business principle from opposite perspectives and actually saying the same thing.

    For example, Gerber is often considered to be about rigid systems. My experience of him is that he is about consistency. He encourages workers to follow systems so that they can listen for the customer need that is outside the system. That frees up the worker to become the Lynchpin that Godin suggests.
    Shallie Bey (Smarter Small Business Blog) recently posted..What The Mint Taught Me About MarketingMy Profile

    • admin
      January 12, 2012 | 5:57 pm

      Hi Shallie –

      thank you! And I like your statement “that frees up the worker to become the Linchpin that Godin suggests” – well said!

  6. Dobes Vandermeer
    January 10, 2012 | 4:40 am

    I just finished reading Built to Last by Jim Collins.

    In that book he shows examples of how embedding the vision and values into the systems of an organization you can have extraordinary products and innovation.

    The system that are put in place are an essential piece of the puzzle. However, the systems shown in Built to Last allow a lot of autonomy for employees within a bigger framework.

    I think the common interpretation of E-Myth is in fact to spell out all the details of each job in the operations manual such that almost anyone can do that job by just reading the manual.

    This may seem to limit creativity but in reality I think it works well for many places, as long as you’re willing to update the manual and make judicious exceptions. Our initial reaction to some of these ideas isn’t always right.

    Seth isn’t always right, either, despite being terribly smart. :-)

  7. admin
    January 12, 2012 | 6:13 pm

    Hi Dobes,

    I’m a big fan of Jim Collins too–especially since, as you say, he advocates ‘embedding the vision and values into the systems of an organization’ – allowing for employees to have autonomy while working towards the common goals of the organization.

    And yes, updating the operations manual is key, because it’s all about evolution!

  8. Rick
    February 18, 2012 | 3:28 pm

    Two of my favorite authors on entrepreneurship and business. How surprised I was to see them here discussed on the same page.

    I am an example of Gerber’s “technician” turned entrepreneur-businessman and the struggle that process entails. At the time I found E-myth I was struggling as a highly trained and experienced, but unemployed engineer looking for another client and another project. Gerber’s E-myth book gave me inspiration to leave the circle of giving myself another job and to create goals for the business of my trade. But it’s Godin’s writings of becoming that “lynchpin” of giving my “tribe” extraordinary service and value that give me inspiration to seek innovative Gerber-esque “systems.”
    Rick recently posted..Feb 16, Prince Engineering, PLC. Civil engineering you can build on.My Profile

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  10. Andrew Wright
    April 16, 2012 | 7:54 pm

    Hi there – great article and some great comments as well. I also agree with the comment that systems ‘free up the worker to become the Lynchpin that Godin suggests.’

    Gerry McGovern has coined a term (which I cannot find unfortunately!) along the lines of ‘innovative time V operational time’. Roughly translated, this is a ratio of the time that staff spend doing Seth Godin type thinking work and Michael Gerber type process work. Gerry argues that due to poor systems and lack of procedures, many people spend a lot of unecessary time doing tasks inefficiently, rather than adding the real value that Godin talks about. For example, within many organisations, booking travel can be a nightmare, taking hours to get approvals, sign-offs, etc.

    Gerry also quotes Hernando De Soto’s groundbreaking book, The Mystery of Capital, where he explains that there is a direct relationship between time management and prosperity. The less sophisticated, the less advanced, the less prosperous a society is, the less important time is.

    I thing Gerry makes a lot of sense. I also think that Godin in his book deliberately challenges our conventional thinking to make his point (and some controversy would surely help book sales!). My take-away from Linchpin, is that to add real value to organisations, people need to spend a greater proporation of time on innovative, ‘artistic like’ thinking. To me this supports the need for systems to free up this time. Imagine if it’s a 1 minute task to organise travel. And Google of course is well known for allowing staff to spend 20% of their time of new projects.

    It’s wortwhile reading Gerry’s article about time and productivity:
    Increasing employee productivity in a networked world
    http://www.customercarewords.com/Intranet-productivity.html
    Andrew Wright recently posted..From innovation to operation: the role of the intranetMy Profile

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