Like Clockwork – Designing your biz to grow without you, with Mike Michalowicz

11 Sep Like Clockwork – Designing your biz to grow without you, with Mike Michalowicz

My guest today is Mike Michalowicz, who has just written another great book, and it’s going to disrupt this nasty cycle of the grind. The book is called Clockwork.

Here’s the thing. Mike can be trusted. If you’ve read any of his other bestsellers like Profit First or The Pumpkin Plan, you know he’s hilarious, wildly transparent, and incredibly strategic, especially as he talks about his adventures of building and selling multiple million-dollar businesses as well as helping many entrepreneurs around the world.

I have appreciated his wisdom and strategies, especially in the area of making your business more profitable, so when I heard he was going after the subject of time… I knew I had to get him on the show.

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INTERVIEW:

Mike Michalowicz, welcome to DREAM THINK DO, buddy.

Thank you, Mitch, so much for having me on your show.

Absolutely. All right. The new book is called Clockwork. There’s some timeless wisdom in here, but especially for entrepreneurs, helping them to build a business so that they can actually breathe, so they can actually have more of the life they want, all of that. Why go after time? What was the catalyst for you to say, “All right, it’s time to go after this subject?”

It’s time to go after time.

Right. I just noticed that I did that, right? I was going to break into Time After Time, but nobody wants to hear me sing, so…

Good song.

Yeah, right?

A good song. Anyway, I had a realization when I was reading about Maslow’s hierarchy of needs. Basically, he said there are these foundational needs we have, which are like food and water, and it builds up to shelter, and belonging, and self-actualization, but if we are missing a base function, like if we don’t have any food or water, we will ignore everything else to get that priority. That’s the base need of all of humanity.

Well, I believe there’s this Maslowian hierarchy of needs for business, for entrepreneurs. I think what the base is, the oxygen, if you will, is sales, meaning we need sales coming into our business to sustain. If there is no inbound revenue, nothing else matters because our lives are in jeopardy, our corporate, our business life is in jeopardy. Once we have some degree of sales, then the next level up, what I consider the nutrition, the food, and the water, is profitability.

Sadly, I discovered something about my own business that I think applies to entrepreneurs in general: When I didn’t have profit, meaning there was no money going into my pocket, I thought the solution was more sales, so I’d actually push harder to sell more. In fact, if sales is oxygen and profit is food and water, I was starving to death but instead of getting nutrition, or profit, I was trying to breathe in more air. I was gasping for air, more oxygen, more sales.

What a business needs to move up this hierarchy of needs is sustainable sales. We need predictable profit. That’s the next level up in the hierarchy of needs. Once a business achieves those two, then the next level of needs is time. Many entrepreneurs work simply to sustain the business, and that’s it. It’s a perpetual work. The demands on us are ridiculous. We compromise any form of life. We just work, work, work. Now, once we have sales and profit, now it’s all about capturing time so we can bring back a balance so that we can live life the way we want, and we can work in our business the way we want. Instead of doing everything, we can become selective. That’s why the subtitle for Clockwork is Design Your Business To Run Itself which, in turn, frees you up to do what you want, when you want in life and in business.

That’s beautiful. As I was reading through Clockwork, one of the things that struck me – I’ve seen that in businesses that are struggling, but I’ve also seen that in businesses, in many ways, that are thriving but the owner got into a cycle of habit, and is still treating it like a start-up.

So often, entrepreneurs are exhausted. One of the things that really struck me is to be able to maximize this, to be able to build a business so that, really, it can run without you.

It’s absolutely true. I call it the “I Can Syndrome.” I believe when we start a business, in particular, we are required to do everything. When you’re a raw startup, it’s just you.

Yeah, absolutely.

We use terms like, “I’m the CEO and the chief bottle washer,” right? Which simply means we are required to do everything, and that’s the reality. We start to believe, “I believe I can do everything. I can sell. I can deliver. I can do the accounting. I can do the admin. I can do the HR. I can. I can.” The thing is, we can do it because it’s a necessity. It doesn’t mean we can do it well, but the belief is, “Well, I always did the accounting. I’m the best at it,” and so we continue to do it, and we continue to try to do everything.

When we hire someone, we often get frustrated with them like, “What, are they idiots? They can’t do it the way I did it.” Well, we weren’t even the ones who were necessarily doing it right. We just did it the way we defined it so we say, “Well since this is the way I do it, this is the right way to do it.” There’s a lot of this entrenched habit, and our ego, our entrenched habit, keeps us stuck at this small level of doing all the work.

We also experience false positives. The more things I do, the longer I do them every single day, it will generate more revenue for a short period of time because I can push through it. But at a certain point, you’ll reach capacity. At a certain point you’re just stretched and exhausted, and then we’re frustrated that things are not working anymore. There’s that saying, “What got you here won’t get you there.” We have to get past that mindset of, “I can do everything.” Instead of asking, “How do I do more?” we need to ask ourselves, “Who can do this?”

I love that. We’ve got a lot of entrepreneurs that listen to DREAM THINK DO.  A lot of people want to be entrepreneurs, and especially people that are in that startup phase where they have to be in the “I can.” Situation. But I think so many, though, are saying, “All right, but I want to position myself so that I can move out of that, so it doesn’t become a syndrome. I want to position myself to build a business that can grow without me, that can hit that million-dollar mark, the $10-million mark, the $100-million mark,” all of that.

Can you give us the two-minute version of the seven steps? I want to dive into a couple of them with more specifics, but can you give us the roadmap that you lay out with the seven steps in a two-minute version?

Yes. The first thing is knowing what’s called the Four D Mix, and the quick bullet point is every business must have elements of each but usually is overemphasizing one of them. The first D is every business must be doing something. The next D is we must be deciding about the work that’s being done. The next level is called delegating. We must figure out how to allocate the requirements or the outcomes of certain tasks to people. That’s different than deciding about tasks or task-rabbiting. Delegation is the assignment of outcomes. The highest level is designing, where we’re making that vision, we’re doing strategic planning and assignment of resources to get us to that vision. Most businesses, especially the entrepreneur themselves, is way too slanted toward doing and not even thinking about designing, so we have to shift through these four Ds and bring about the optimal balance. That’s stage one.

Step two is QBR. The QBR stands for Queen Bee Role. I won’t get into how that name came about, but it is the heart of the business. It is the one thing your business stands on. Basically, what’s your brand promise? What do you want to be known for? Peel that onion back just one layer, and what’s the core function that delivers on what you want to be known for? The example I’ve been using recently is FedEx. Everyone knows that Fed Ex is … their promise is to get your package delivered on time. Well, if you peel back the onion, what function supports that? It’s logistics. The queen bee role, the heart of FedEx is logistics. The day they say, “You know what? Let’s not worry about the movement of packages. Let’s really focus on customer service,” that business is compromised.

Step three is to protect and serve the QBR. Define your brand promise. Peel back the onion, and determine the one core function that supports that, and protect it. That’s actually the next stage. It’s the education of your colleagues and yourself in knowing that heart of your business, the QBR, and protecting it so it’s always being served. It is the primary focus of your business. Every employee, even if they’re not doing the work, needs to know what it is. If they see a problem with the heart of your business, their job is to defend it and protect it.

Step four is the transfer of systems. As your business grows, you need to get systems to other people. Most traditional thinking is you got to write SOPs. I found SOPs are typically a problem. They’re very hard to produce, and they’re very hard to consume, so many SOPs when they’re finally documented, sit on the shelf, buried somewhere in some virtual cloud drive. Instead, we need to capture existing systems.

The beautiful thing is all the systems any business needs have already been developed. The thing is, they’re developed, typically, in people’s minds. They’re just doing it from memory or experience, so it’s a mind extraction what we need to do. How do you do it? You use capture utilities, capture software. If I do something on the computer like doing an invoice, I can record the process as I do it and then transfer that recording to someone else. If I’m moving boxes packaging stuff, you can record it with your iPhone or Android, and you can film it. You can record things. Transfer the recordings to other people. That’s how you capture systems. You record them and transfer them.

Step five is to balance the team. This is where you’re moving, really, to the design work of a business as the business owner is putting the right people in the right places. The key of balancing the team is matching up someone’s trait to a function that needs that trait but not matching people up to job titles. I’ll say, “We need a receptionist, and a receptionist’s job is to be great on the phone, to greet people when they walk in, to do data entry.” Well, someone that’s a great greeter but horrible at data entry, does that mean they can’t be a receptionist? No. They should be the receptionist because they’re so phenomenal at it, but they should only serve the greeting part. The data entry person should be a second person.

Don’t put people in job titles. Match traits to the jobs that need those traits and have them play across the industry. Our own receptionist here is an extraordinary greeter and she’s great customer service, so she actually serves both roles, and the data entry component for tracking stuff, that’s done by someone that is a great number cruncher. They’ve matched their traits. That’s called team balancing.

The sixth step is the commitment to delivering your offering to customers. It sounds totally backward to start thinking about the customer in stage six. The customer comes first. What I have found is businesses that are extremely efficient and successful first determine their natural talent, then they pick the customer who benefits from it. When you take an athlete, and you see that athlete can catch a ball on a sprint, that means they might be good for football but maybe not good for tennis, right? You don’t pick the platform of tennis and then say, “Let’s use their talents and match them to it.” You say, “What are they talented at?” What’s our corporate talent? Then match it to who would benefit from this. We first figure out your corporate talent, and then we say, “Here’s the customer base that we can drive this in,” and now you’ve positioned yourself for extraordinary success.

Step seven is what I call “business on automatic.” This is where you, as the owner, are finally now extracting yourself from the business in its entirety. That’s the key to a business that can scale is when we can extract you out. You are not a parent of your business. A lot of people say it’s a parent-child relationship. You are not a parent to your business. You are conjoined twins. As business goes, so do you. Healthy business, you’re healthy. Struggling business, you’re struggling. We need to surgically extract you. We need to separate those critical organs. We need to give you both your independent legs. You will always share a soul. The final stage is this surgical extraction from you from the business so the business can have independence and you can too.

Absolutely. Okay. I love it. We could spend hours on each one of those. One that I wanted to dive into was the queen bee role. I’m guessing, for some people, it’s kind of a scary process because, probably, they feel like their business has multiple children, and you’re asking them to just pick one, like, “Who’s your favorite kid?”

Right.

How do you help an organization narrow down to that queen bee role? Because, especially a lot of startups, they’re trying everything to see what works, see what sticks, and so they may have a lot of balls up in the air. How do you take them through that process?

The key is first understanding the importance of the queen bee role. This is the heart of your organization, and it is what you hinge your company’s success on. That’s how important it is. It is your brand promise, what you want or intend your business to be known for. The example I shared was FedEx. FedEx is known to deliver your packages on time. That’s their brand promise. If we peel the onion back one layer, we then look at the function that delivers on that brand promise. That’s the queen bee role, the most critical function that is serving that brand promise.

Let’s look at my business as an author. As an author, my promise is to free entrepreneurs up to deliver on their promises, to bring efficiency to businesses, to what I call eradicate entrepreneurial poverty, so they’re not depleted. They’re delivering on their promise. How do I help them do that? Well, I write books. You and I are enjoying this podcast experience together. Podcasts, I’m a speaker, all these different things, all those functions support it. The natural tendency is to say, “Well, all that’s important.”

I put it on sticky notes. This is the process I use to find it. Make six or seven sticky notes. Write down all of the important things you do that deliver on your brand promise. Then, by deductive reasoning, we start removing things. We say, “Well, if I couldn’t do six, what if I ditched two?” and I said, “Well, I have my own podcast. If I never did that again …” I get enjoyment out of that, but is that really serving the function? Is that really allowing people, entrepreneurs, to be freed up to do their most important work? No. My books are definitely more important than that, and my public speaking is more impactful in the moment, so I’ll keep those two. I remove the one. I tear it up.

Well, I keep doing this deductive reasoning. In my case, as I went through my own business, I said, really, it’s two things. It’s public speaking or it’s writing books, and I had to get to the one. I said, “You know what? If I could do only one thing again, it’s writing books.” I can write books that will outlive my own lifetime if they’re really good. That is the most critical function I do, so that’s my queen bee role.

The next step, then, is to educate my team saying, “Listen, if I’m not writing books that are wildly impactful, I am failing us. We are hinging our success on this. Everything else is benefiting from wildly good books, so I need the time available to do this. If you see me being distracted by other things, defend the writing. If you are scheduling speaking engagements and they compromise my time to write, I need to skip that speaking engagement, as painful as it is. So the organization defends the queen bee function. They actually defend it, and the better and better that my books become, the better it serves the organization.

That’s what every company needs to do, rewind to that one most important function and defend it with all you have. Make sure it’s being delivered. As that one tide rises, so will all boats.

I love that, and I appreciate that you narrowed it down. For you, it is book writing. At the same time, you’re still doing speaking, right? You’re still doing some consulting work, but you know what the core business is. You’re protecting that, and so that these other things can exist as long as you’re not compromising the queen bee.

Right, right. That’s exactly right, as long as my time to write books is not being deprived. I could try to write books eight hours a day every day, but that would also drive me mad, right? There has to be this balance.

Here’s an example. In Clockwork, I was studying hospitals, and I found this one hospital in Cape Cod which, coincidentally, I was just visiting, and they are arguably one of the most efficient hospitals in the world. You can go to their website. They post their wait times, which is usually near zero time. How do they make an emergency room that’s packed flow so quickly when the typical emergency room, if you show up with a nosebleed, I’m sorry, but you’re going to wait two, three hours while more important cases come through? They see the nosebleed within a minute or two. What they realized is the most critical function of an emergency room is the preliminary examination. They said a doctor needs to see a patient immediately. This person can get a bandage and wait for further evaluation. This person needs to be escorted immediately to an emergency room.”

Yeah, triage.

They triage, right? They defend the doctors. Those doctors aren’t doing insurance claims. All they do is pre-exam, pre-exam. They have more doctors than necessary to do pre-exams so they can avail time for those doctors that are recharging and resting. That’s what we need too. Once you identify your QBR, it doesn’t mean that you have to go all guns, all the time blazing at it, because that can be exhausting. We want to actually over-service that QBR and protect it, allowing the people that are serving it time to breathe again and recharge.

Right. Well, and I love this. I think I’m even thinking back to your FedEx example. We use them almost daily.

Logistics is at the core, right? But you can tell they also spend time on customer service. It’s not like you’re saying they only focus on logistics. It’s that they protect the logistics and then also still take time to work on those other areas of the business, but everything’s around protecting that core.

Exactly, exactly. It’s the one thing you elevate all the time. The funny this is, if we look at FedEx, if they have a customer service lapse for a month, maybe wait times are 30 minutes or an hour as opposed to five minutes, will people complain? Yeah, but will that devastate the business? By no stretch of the imagination. But if, for a month, they didn’t deliver a single package on time, they can close down the business.

The thing is, we all have something that important. Most small businesses make the fatal flaw of saying everything’s important, and that’s not true. One thing is elevated over everything else. The beautiful thing is you determine what that one thing is. This does not have to be discovered as much as it’s declared.

Absolutely. I’ve got a follow-up question to that. Here’s the thing. As authors, I know we tend to write books that we want to write, that we feel compelled to write, that we feel called to write, but at the same time, we also tend to write books that we need to read, right?

Right.

One of the things I want to ask you is, of these seven steps, which was a step that maybe came at least … it was the hardest for you to employ? You knew you needed to do it, but what came least naturally for you?

You’ve got these seven steps, each one important, each one building on the last. For you, maybe as you were writing it or as you saw it in other organizations you were working with, which one was the hardest for you personally?

It came down to a four-week vacation. When I wrote this book, what I discovered is the ultimate test for a business and its sustainability is to extract the owner from the business entirely. Remove that owner. I found a four-week period, straight four weeks, is necessary because most businesses go through every element of the business within a four-week period: collections, acquiring a new customer, hiring an employee, or firing, or whatever.

Now, you don’t just run off immediately. You plan it out so the mind shift happens. You could actually do this as a solo practitioner. You can rely on your contractors, so one thing I did was call one of my contractors who does our social media and started preparing him for this. There’s a transfer of systems.

My next one is happening three months from now. I’m heading out for a month. As you get closer to it, you have to run tests, so I would remove myself from the business for a week or two, and I’ll never forget. One of my tests was a two-week test. I headed to Australia, I had some speaking obligations down there and then disconnected from the office. Then I woke up one day, connected to email, and there was not a single email to me, and my ego … This was my dream. Whatever was happening in the office, it was either they were wiped out, and they were gone or-

Right. Something exploded.

Yeah, something exploded, or they didn’t need me. My ego got so bruised, I thought, “Holy cow. They don’t … What’s going on here? Is something wrong?” I reinserted myself in the business. I started to ask unnecessary questions, really throwing monkey wrenches into my own business so that they would need me again. Sure enough, the emails started coming in, “Well, what did you want here, and how do we need to change this?” I made impossible requests where now I had to answer it. Then I woke up a few days later. I said, “Holy cannoli. I am destroying my own company. I literally am the roadblock, and I need to get my fat, stinking ego out of there.”

That’s right. Yeah.

Mitch, it was really hard for me to deal with that ego bruise. I hope I am now over that and realize that I am not necessary to my business. While that’s my dream, I also have to come to terms with it that I have to play a different role, maybe a more important role, a new role.

Absolutely. I think that is huge. It was in your blind spot, and I’m guessing it would be in most people’s blind spot. Here’s something you were working towards, to be able to remove yourself from an organization. I have interviewed so many different entrepreneurs. Either on the mic or off the mic afterward or whatever, they would talk about this is that final thing that then caused exponential growth within their business, and it is hard, but it’s that removing of themselves. Once the business was no longer dependent on them on a day-to-day basis, that’s when the business could truly grow and expand at an exponential level. But letting go is huge.

It’s huge. I don’t know if it’s the best analogy, but it’s kind of like a chess board. We can be a pawn on the chessboard, or the king, or the queen, or whatever. You can be one of the pieces on the chessboard, or you can be the chess player. I was trying to keep on putting myself in the king position, the most critical one. The king’s out, the whole game ends. But I realize as a king I can only do one move at a time. I wasn’t advancing us, and I couldn’t move the business strategically. Once I realized that my responsibility is to play the chess game, to put all of the players in the best position for us to win, my whole perspective changed. I think my ego was bruised because I wasn’t the king piece anymore. I think I fulfilled my ego in a new way by saying, “You know what? My job is now to be a chess master.” That has become fulfilling, and you’re right. The growth of the business is phenomenal once you remove yourself from the business.

Absolutely. Well, and it’s funny because I remember reading The E-Myth and hearing the advice from Michael Gerber that, any business, the goal should be to be able to sell your business. I remember reading that in my first couple of years of being an entrepreneur thinking, “I never want to sell my business. That’s crazy,” But like you said, if the business is dependent on you, it can only grow so much. If it’s no longer dependent on you, then it can grow exponentially, and I love how you’re giving people a roadmap to actually be able to do that.

I had a dinner with Michael Gerber. I had the privilege to keynote an event down in Monterey, Mexico with him back to back, and so, afterward, we’re like, “Hey, let’s grab dinner.” He is a notably eccentric guy.

One realization that came out of our conversation was it’s really a throttle. Or like I was saying earlier, I need to surgically remove myself, that conjoined twin concept.

Yeah, that is a visual that’s going to stick with me a long time, Mike.

Right, right, but we need to slowly throttle our ways out of the business, and that’s why I wrote Clockwork. I hope Michael and everyone that reads it sees it as a complement to the beautiful theory proposed in The E-Myth, and Clockwork is a complementary kind of execution guide on how to throttle out of our business so we can throttle up our business.

As I was reading Clockwork, that’s exactly what struck me; The E-Myth lays out the mindset I need to have. I so appreciated that, but there wasn’t a lot of tactical how-tos, whereas this, Clockwork, for me, is the tangible how-to to build a business so that I really can have the business and the life that I want. Entrepreneurs need practical steps and Clockwork, I think, is that. It really does lay out a plan that people can use.

Thank you.

I think it also creates a common language, so this isn’t just for the entrepreneur. A lot of the books that you read, you’re like, “Oh, this is just for the entrepreneur,” which is not terrible, but this also allows for common language so that the entrepreneur can then go to the organization and say, “Hey, this is what I’m doing. This is what I’m working on, and this is what I want to do,” and it invites people into the process so that, like you said, everybody could be protecting the queen bee function.

Thank you so much.

Absolutely. All right, so let’s tell people where they can go. I know that the book itself is going to be available. It’s not available when we’re recording this but through the magic of time travel …

When this podcast is live, it will be available, so go get it, Clockwork, but I know you’re also being super generous and providing a whole lot of free tools for people as well in complement to the book, so tell us about that and where people can get it.

Yeah. Thank you. The one spot to go, for sure, is http://clockwork.life/ This site has all the resources for the book, available for free.

I started this manuscript six years ago and started testing out the principles and actually rewrote the entire book three years ago when I threw out the original manuscript. A lot of the concepts were good, but the execution just wasn’t there. As I started giving it to readers starting three years ago to start digesting and playing with, it became clear that not only the entrepreneur needs to understand these principles, but so do the team of vendors, contractors, part-time employees, virtual assistants – everyone. They need to understand the concepts too, and so we set up http://clockwork.life/ that have all the complementary resources for the entire team. The reader of the book, the entrepreneur, the leader will benefit, but so will the team. They have easy, executable resources right there on the site, all for free, at clockwork.life.

I love it. All right, gang. Go grab the book. Mike, thanks for writing the book. We appreciate you, my man.

Mitch, I appreciate you, brother. Thank you so much for having me on.

Alright, DREAM THINK DO-er. What stood out to you? Leave a comment and let me know!

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