Are You Stuck in the Yellow Hat? Why It's Killing Your Business (and How to Break Free).

Do you sometimes (or often!)?feel as a SME Owner/Founder?that you are still seeking the 'right' balance between the 3 ‘characters’?that you must embody at various times to successfully lead your business to achieve your?Big Dream (y'know the one that sparked your choice to embark on your Entrepreneurial Journey way back when)?

Understanding these characters, your preference for each, and your level of capability at embodying and moving between all three, fundamentally determines your likely long-term success as an Owner/Founder.

Let’s meet the 3 characters (and their hats), and see if you recognise any of them.?Each has a different colour hat (see picture above), and when you wear a hat (which you do at all times) your beliefs and behaviours are?as follows:

• The Technicians?(Yellow Hat) live in the PRESENT: Hands-on, specialised, they are the doers and excel in their chosen area of expertise. They generally start a business to do more of what they love, on their own terms (no boss, freedom, make more money than when in a job etc). Their ethos is captured by the statement “you want it done right, do it yourself”.

• The Managers?(White Hat) live in the PAST: Pragmatic in nature, they love to plan, organise and set up the systems and processes that ensure smooth, efficient day-to-day operations in the business (budgeting, resource allocation, performance reviews). They look at past performance as a basis to create more predictability going forwards.

• The Entrepreneurs?(Blue Hat) live in the FUTURE: They are the visionaries and strategists. They set direction, create long-term goals and lead change. They are risk-takers, innovators and pathfinders. Focused on the bigger picture, they are constantly scanning for new opportunities to improve and develop the business.

Do you recognise any or all of these characters? Maybe your Manager (White) hat has fallen down the 'back of a cupboard' (though you once wore it briefly)? Have you ever tried on your Entrepreneur (Blue) hat? Did it make your head 'hurt'?

Michael E. Gerber’s influential book “The E-Myth Revisited” makes the crucial point that, to be successful in business, Owner/Founders need to develop better capability in the two (less prevalent) characters of?the Manager and the? Entrepreneur.

Do you have all 3 Hats? Do you wear them all??What are the risks if you don't???

It may not surprise you that most Owner/Founders are essentially Technicians. It may also not surprise you that most SME businesses fail BECAUSE of the Owner/Founder mostly wearing the Technician hat (it may even be the only one of the 3 hats they possess). Over-reliance on the Yellow hat brings several common pitfalls:

• Owner dependence: hindering growth, continuity and limiting potential business valuation (should you ever wish to sell)
• Inability to delegate: preventing the business from accessing the collective strengths and experience of the team
• Missing opportunities: their dominant “head down” way of working means you don’t see potential growth opportunities for expansion and diversification

Neglecting the Manager (White) hat generally leads to chaotic, haphazard daily operations. Not having a plan or a system is ‘still’ a plan .... just not a very good one! Common pitfalls:

• Micromanagement: we all hate this! Without a White hat, Technicians tend towards this behaviour; it stifles employee autonomy and de-motivates the whole team. Your best people will leave you if you do this, and good people won't choose to join you either!
• Poor systems / processes: inefficient and inconsistent customer service delivery and operations
• Reactive management: constantly being in fire-fighting mode stops people focusing on long-term growth and improvement. Interestingly, some people (you might know someone like this?) enjoy putting out fires so much that they ‘start’ more fires so they can then rush in and save everyone! It’s exhausting though, even to watch. It also prevents predictable performance and profitability, which is the very essence of high-value businesses.

Neglecting the Entrepreneur (Blue) hat is the most?limiting to the potential for your business. Common pitfalls:

• Lack of vision: the business will struggle through lack of direction (like a?cork bobbing in the sea) and to positively differentiate itself in the market
• Poor/zero innovation: leading to stagnation and a loss of competitiveness
• Poor long-term goals &?planning: leading to poor decision-making and inadequate preparation for future challenges – be that growth, scaling-up or maximising an exit value.

Getting comfortable?wearing the Manager & Entrepreneur hats

It takes a bit of patience and application so do this (no surprise I'm sure), and?it won't happen until AFTER you start to wear them regularly!

The Manager's (White) key skill is to REFLECT & REVIEW. To start doing this put regular time in schedule to do just that. Weekly, monthly, quarterly as best fits your business. Ask a few consistent questions: what was the plan for the period under review? how did we perform vs plan? what did we learn? what will we change for the next period?. That's all you need to start.

The Entrepreneur's (Blue) key skill is to REIMAGINE. Again, just start by putting some dedicated time in your schedule. I would suggest half a day monthly and a full day quarterly. Then ask a few future-oriented?questions. For example:?look at the external environment (threats?, opportunities?), the competition (who is changing things up? what? why?), your customers (what more can you do for them to add maximum value?), your team (what skills and capabilities do you need next in the mix? how to better develop the culture?). You get the idea.

These are summarised in the picture below ??

Finding your balance with the 3 Hats

To be a successful leader of a business you need to be capable when wearing each hat, know when to put each one on, and also the (potentially deadly) risks of the ‘comfort blanket’ of wearing the Technician (Yellow) hat too much.

Be conscious of your natural tendencies or biases towards being a Technician, Manager or Entrepreneur. Challenge yourself to perform when wearing the Hats that you do not have a natural affection for. Remember, you have to be fully capable when wearing all of these 3 hats.

The regular discipline of wearing all 3 hats (as practising REFLECT & REVIEW and REIMAGINE as?suggested above) will give you much more information about your true capability level to successfully lead your business and achieve your Big Dream. From this insight you can then focus on a development agenda to strengthen your Manager and Entrepreneur 'muscles'??, perhaps including a mentorship element to de-risk and accelerate your progress. ??

I hope that this '3 Hats' piece has prompted you to think about yourself and your business, and to reflect on practical next steps you can take to improve your game.

Of course, you are invited to get in touch and claim my gift to you of a 1 hour Business Review call with me that could change your life and accelerate your progress. In your call, we'll talk about?your unique situation and needs,?how the mentorship relationship works, and (if you wish) discuss how I can tailor my expertise to?help you get your business truly serving you. At the very least, I promise that you'll get some actionable insights and pointers to power your 2024 success. If of interest the book here >> calendly.com/stevedrake-ukbm

With warm regards,

Steve

PS: If you are not a SME Business Owner, but know someone who you feel would benefit from this article, then please pass it on for their attention. Thanks.