Move from efficiency to effectiveness

 

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Two terms that have been overused among technologists and businessmen alike are efficiency and effectiveness. These words are often (and incorrectly) used interchangeably. The objective of this post is to tease out their differences, and their implications to business in today’s world.

Let us start with the similarities. Both efficiency and effectiveness pertain to outputs based on a given input. High efficiency and effectiveness alike refer to getting more for less. The difference is that efficiency deals purely with quantitative measures, while effectiveness is qualitative. Efficiency is calculated. It is a science.  Effectiveness is perceived. It remains an art.

We can choose to play the efficiency game in the market – launching a product whose benefits can be quantified. The speed of an internet connection, the fuel-efficiency of a car, or the rate at which a particular machine can manufacture widgets are all efficiency measures. The advantage here is that your value can be clearly communicated. On the flip side, your competitor can do the same thing. Moreover, this value can, at best, only scale linearly with performance. A car that is twice as fuel efficient can only run two times the distance for the same amount of fuel. This is regardless of how much harder it is to actually develop and manufacture something twice as efficient. Value that is pegged on efficiency can diminish rapidly.

Value can also be based on effectiveness. The job market is a perfect example. Most companies are looking for “effective” employees – a vague description that can only be supported by adjectives like creative, open-minded, empathetic and so on. Value is communicated not in numbers, but based on feelings and satisfaction of the user. This property also makes it hard to compete against, because the value of effectiveness is subjective, and highly biased towards familiarity and existing relationships. Additionally, value can scale non-linearly. An executive who is perceived to be twice as effective as another, can demand 5 times the salary.

As the world becomes a smaller place, comparison becomes easier. Consequently, a value proposition based on efficiency faces enormous competition, which can rapidly diminish returns. It can turn the best products in the market into commodities. The only way to guard against this threat is to position ourselves based on effectiveness.

Empty notebooks lose their value as soon as a competitor can print them more efficiently. A well written book can stay effective for centuries. Seesaw plain

2 thoughts on “Move from efficiency to effectiveness

  1. Well, if you look closely both efficiency and effectiveness are related. By definition effectiveness is about choosing or doing the right things, which should always be the first goal. Efficiency on the other hand can be defined as “Doing things right ” which in turn depends, on the inputs that are used, to generate a degree of effectiveness. For example, efficiency increases, when we reduce waste or minimize cost, along with maintaining throughput(A certain amount of throughput can always be called a effective measure). In essence a more efficient process will have a higher degree of effectiveness.

    Effectiveness is always about the thought process. Like i can always be a effective comedian, who churns out material every two years. On the other hand, an effective as well as a efficient comedian will churn out new material every six months. Again comedy is such an subjective area to focus here

    Liked by 1 person

  2. Dear Minz,

    Firstly, thanks a ton for your comment! It certainly got me thinking 🙂

    Effectiveness is the degree to which something something has a desirable “effect” on its audience. Efficiency is a measure of the least amount of input – time, manpower, resources, raw materials etc. it takes for us to get there.

    And yes. Efficiency and effectiveness can be related, only when the efficiency itself has a bearing on the effectiveness. This can often happen. When we arrive at a restaurant, we would rather have pizza that tastes good enough in 15 minutes than excellent pizza that has a waiting time of two hours. But if I can pre-order the pizzas at 5 PM to be delivered to my party at 8 PM, I would sure as hell order the excellent ones.

    Like

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