Strategic efficiency is key to success.

Efficiency—probably the most used word in any conversation about business processes and procedures.  Everyone wants increased efficiency defined by decreased costs, decreased cycle times, and/or decreased overall waste.  Efficiency, however, is only part of the equation when determining the effectiveness of a process.  In fact, I submit, efficiency is the least important part of this equation.  The ultimate determination of the effectiveness of a process improvement is how that improvement affects the competitive position of the firm.

Organizations are organisms.  No single process, department, or division exists in a vacuum.  As such, every decision from process improvements to vendor selections must be not only weighed against efficiency benchmarks but also analyzed within the context of an overall business strategy.  Take these examples:

  • A service company can make an invoicing procedure super-efficient by only producing one format, sending invoices via email only, and ignoring client requests and complaints.  This would drastically reduce preparation time, development costs, and process errors.  Yet, if the firm’s competitive strategy is to differentiate itself from the competition by providing an exceptional customer experience, this process improvement has failed.

  • A consulting firm catering to local startups could save a few hundred dollars a month going with a big box supply vendor instead of a smaller local supplier.  Yet, if this consulting firm touts its support of local businesses as parts of its competitive positioning, a decrease in office supply costs would be a failed improvement.

  • A manufacturing firm can decrease production times by reducing redundant quality checks.  However, if this firm’s differentiation strategy is to provide the highest quality products, this process improvement has failed.

As you can see from these examples, there are situations where a process change can improve KPIs but hurt the organization.  As operations professionals, it is our responsibility to take business strategy into consideration when improving a process.  An “improvement” that saves $1,000/month but weakens business is not a real improvement.

Your billing procedures may be more labor intensive than is optimal, your factory output may be a little lower than you would like it to be, and/or your office supply costs may be a little higher than they could be.  However, if this is the cost of keeping your processes and procedures in line with the firm’s strategic vision, it is probably worth it.

Efficiency contrary to strategy is equal to waste.  Embrace strategic efficiency.

Best Regards,