Effectively Efficient
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Effectively Efficient for Operational Excellence
Operational Excellence is a term utilized for an overarching business strategy that aims to improve the overall performance of an organization. Operational Excellence cannot be achieved without the consideration of effectiveness and efficiency in association with the performance of the organization’s business operations.
Effective and Efficient
Peter Drucker proclaimed in his book, The Effective Executive, that “Efficiency is doing things right, effectiveness is doing the right thing.” Success in business requires an operational structure, consisting of work process and people who execute that work, that’s both efficient and effective, after all, everyone wants to do the right things right. Right?
There is an important difference between the meaning of the words effective and efficient:
- Effective involves "producing a result that is wanted."
- Efficient involves "producing desired results without wasting materials, time, or energy."
The word effective puts more attention on the actual ability to produce a desired result. The word efficient puts more attention on the lack of waste in producing that desired result.
A business process can be considered effective if it produces a result even if it utilizes some unnecessary resources to do so. However, when a business process is additionally considered to be efficient, not only does it produce the requisite result(s), but it also does so while utilizing the minimal resources that are necessary to obtain the requisite result(s).
OpEx Business Strategy
Operational Excellence (OpEx) is a business strategy that aims to improve the overall performance of an organization. OpEx is best achieved when leaders* provide a structured approach for translating a company’s strategic mission into a concrete tactical plan that enables the organizational capability to achieve the operational results that are required for success.
* Leadership is about inspiring motivating people towards a common goal, where management is about instructing people what to do based on a plan.
The term ‘startup’ refers to a company in the beginning stages of operations. Startups are founded by entrepreneurs who want to develop a product or service for which they believe there is demand. These companies typically don't have a fully developed business model and, more crucially, lack adequate capital to move onto the next phase of business. Most of these companies are initially funded by their founders.
Business operations are typically never vertically integrated at ‘start-up’, by necessity. It is for that reason alone that business leaders readily develop tactical partners, without hesitation, as a means to operate and scale. Over time and with growth, business leaders eventually begin to take control over the most important aspects of their business operations to eliminate the need/risk of relying upon those outside entities that had supported them at ‘start-up’ by developing the capability of the Enterprise to do what those tactical ‘start-up’ partners were able to previously provide for them.
Eventually, when a company can circumvent/replace their ‘start-up’ suppliers, it can also create certain ‘economies of scale’ because those suppliers were able to dictate the terms, pricing, etc. However, it must be understood that there is also a significant cost to vertical integration that comes in the form of high costs associated with acquiring and managing internal resources, less flexibility, and loss of organizational focus on those capabilities that are ‘core’ to the success of the business. The decision as to how much an organization should become ‘vertically oriented’ should be aligned with the organization’s business strategy associated with operational performance. A business typically cannot be ‘efficiently effective’ if it must be proficient at doing everything itself, prior to achieving operational excellence in its core operations.
The ‘quality’ of Business Operations
What is ‘quality’? The word ‘quality’ has so many meanings and interpretations to different people. David Crosby (Quality is Free) states: “Quality is conformance to carefully thought-out requirements.” It is widely understood and accepted that the capability for a ‘quality’ outcome is created with intention, it won’t just happen on accident, or automagically. The aspect of managing the ‘quality’ is written with a capital "Q", such as Quality Management, referring to the process of ensuring that a product or service that has the distinguishing characteristic(s) that meet stakeholder needs. A ‘quality’ outcome isn’t achieved automagically…
“Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction, and skillful execution; it represents the wise choice of many alternatives.” - origin unknown
It is crucial that ‘quality’ is built into the organizational capabilities that are crucial for the fulfillment of the Mission of the Enterprise because ‘quality’ is a proven creator of sustained competitive advantage and market value. Businesses must strategically create a business infrastructure plan to effectively and efficiently sustain and/or improve business performance as a ‘quality’ outcome.
