Your Business Is the Product: How to Create a Unique Business That Works

“The Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important — the way it’s delivered is.”

Michael Gerber, The E-Myth Revisited

The best businesses do not make their business only about the commodity they sell. A commodity is a house, a car, a meal, an oil change, or a root canal. Instead, the best businesses emphasize their business itself as the real product. Yes, their customers end up with the commodity after the purchase, but the customers’ buying decisions are really about the experience of getting the commodity from this particular business.

If your business only sells a commodity, it’s the same as all of your competitors. In that case, the lowest price wins. Despite what you hear about Wal-Mart and Amazon.com, winning on low price is not an easy recipe for success. If, instead, you sell a unique and valuable experience, you are rare. Rare commodities are valuable and make a business very profitable and successful.

Warren Buffett, who knows a good business when he sees one, spends a lot of time in his annual letters to shareholders talking about the importance of this concept of a non-commodity business. Here is a quote from his 1991 letter to shareholders:

“An economic franchise arises from a product or service that:

1. is needed or desired,
2. is thought by its customers to have no close substitute, and
3. is not subject to price regulation.

The existence of all three conditions will be demonstrated by a company’s ability to regularly price its product or service aggressively and thereby to earn high rates of return on capital.

So, as a big business or a tiny one (like mine), the main job of the CEO is to create a business that acts like Mr. Buffett’s definition of a franchise.  Every system, process, and person must work towards delivering that valuable experience to the customer. This approach allows the business to make the most profit and stay competitive for a long time.

The idea of a unique, non-commodity businesses is great, but literally the million-dollar question is how do we create such a business and how do we get it to work well over and over again?

In one of my favorite business books, The E-myth Revisited by Michael Gerber, the main theme is work on your business, not just in it, so that you can create just such a successful business prototype. Most of the book is spent explaining a very helpful 3-step process to create and to continually renew your own unique business franchise.

The Business Development Process: Innovation, Quantification, & Orchestration

“Building the prototype of your business is a continuous process, a Business Development Process. Its foundation is three distinct yet thoroughly integrated activities through which your business can pursue its natural evolution. They are Innovation, Quantification, and Orchestration.”

Michael Gerber, The E-Myth Revisited

Innovation:

Innovation is the heart of working on your business and not in it. It means standing back from every part of your business and asking, “What’s the best way to do this?” Michael Gerber quotes Harvard Professor Theodore Levitt as saying, “Creativity thinks up new things. Innovation does new things.”

You don’t necessarily have to be a pioneering, original thinker to create an innovative business. You just need to get very good at recognizing and applying the good ideas of others. Remember, Ray Kroc didn’t invent McDonald’s, he just recognized and bought the idea and then ran with it.

Some of my own best business innovations have come from paying attention to seminars, books, my own customers, and my competition. Innovations have also come from transferring ideas or best practices from another industry or a different part of the country into my own.

So, keep your eyes and ears open everywhere you go. If you notice that a business or person is doing something that works well, write it down and figure out how you can then implement that innovation into your own business.

Some very specific examples of innovations that we discovered and then implemented in our own business have been practices like staging houses before selling or renting, using lockboxes to show rental houses over the phone, and allowing payment of rent online. All of these made our customer experience and business operation work better.

Importantly, however, for every innovation we tried that worked, there were at least a couple we tried that did not work. Business innovation is best described as a never-ending experiment. The best innovators, like Thomas Edison who invented the light bulb, were ok with failure. Failure isn’t trying an idea that does not work. Failure is not trying the idea in the first place!

Quantification

“On its own, Innovation leads nowhere. To be at all effective, all Innovations need to be quantified. Without Quantification, how would you know whether the Innovation worked?”

Michael Gerber, The E-Myth Revisited

Quantification has everything to do with translating innovations into numbers. You must be able to measure the success or failure of tweaks to any part of your business. Just like a scientist meticulously tracking an experiment, an entrepreneur must quantify each step so that the successful innovation can be recognized and then repeated.

From the very beginning of my business (after reading this book) I have tracked the important parts of my business. For example, in marketing to buy, sell, or rent properties I tracked the number of leads, sources of leads, number of appointments with prospects, number of applications or offers, and number of closed deals.

I then went back and compared these key stats with the innovations and tweaks I made within my marketing or sales efforts. I was often stunned to find out that the changes I thought would be most effective were not (and vice versa).

Ideally your entire business would be quantified. The goal is to have reports and objective statistics to reflect the pulse of every major business activity. If this is not done, there is no real way to know what caused the desired end result. This also means you can’t repeat it!

Even if you think you know what’s going on in your business, I challenge you to start quantifying processes. I’m sure you’ll be amazed at the clarity and improved decisions you’ll be able to make.

Orchestration:

“Orchestration is the elimination of discretion, or choice, at the operating level of the business … If you’re doing everything differently each time you do it, if everyone in your company is doing it either by their own discretion, their own choice, rather than creating order, you’re creating chaos.”

Michael Gerber, The E-Myth Revisited

The entire point of creating systems and innovations is to deliver a consistent product or service to your customer. This also frees up your mind from continually having to remember or create to-do lists each time you do a job.

A perfect example of this is the process of closing the purchase of a piece of real estate. There are many steps and details that need attention before and during a closing.  I could try to wing the process and remember to do everything, or I could create a checklist that I and others in my business follow to ensure every detail is accounted for.  Every time I forget something or discover a better process, I change the checklist (an innovation). 

Orchestration is creating and using these checklists or other systems over and over, and requiring everyone in the company to use them so that the business works consistently no matter who’s piloting the ship.

For some people, particularly those who are independent or creative-minded, orchestration sounds too robotic. Doing the same thing over and over would be incredibly boring, right?

But, in reality this process is more like learning to do a skill for the first time. As a beginner musician, for example, the student does best to copy and mimic the teacher. The student learns by doing the motions and chords over and over and over. Eventually after hours, months, and years of practice, the student can break away from the model and start innovating herself!

This is the same as business orchestration. An employee who uses the checklist or script over and over will eventually figure out “Hey, there is a better way to do this.” That better way will be the next innovation, the script will be updated, and the process goes on and on.

The Joy of Business Creation 

This article has been all about the idea that the actual end product of your entrepreneurship is a unique business that works. It works because it adds value to your customers, and it works because it creates wealth for you, the owner.

This unique business can certainly be created by following the process of innovation, quantification, and orchestration, but I’ll warn you that the end result will not come easily. In fact, it may be one of the most difficult challenges of your life.

But, I think the boldness of this challenge is what either attracts you, the true entrepreneur, or scares you away if your motivation is only luke-warm. True entrepreneurs treasure the joy of creation, the sweat of the climb, and the inner satisfaction of the personal growth required to overcome worthy challenges.

In this way entrepreneurs are a lot like artists (Seth Godin agrees) who see a vision and turn it into reality. A painter observes the world and puts that vision onto a canvas in a unique way. An entrepreneur observes the world and creates business systems and a team of people who change the lives of people.

I hope you, like me, receive great wealth and also great joy in this entrepreneurial process of creation and contribution.

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What do you think? Is a business more than just the commodity it sells?  How can you use the process of innovation, quantification, and orchestration in your business? I’d love to hear from you in the comments below.