What is the commonest problem we face today? Too much efficiency and not enough effectiveness.

Efficiency is based on doing what you already do — only faster and cheaper. Effectiveness comes from doing whatever you need to do to be a success. Since that is often something new and different, you’re usually not that efficient (at least at first). That’s why efficiency is what keeps dying businesses (and careers) afloat, while effectiveness is what launches new ones into the stratosphere.

Macho management is all about efficiency. Successful management is derived from effectiveness. Efficiency is rigid, repetitive, conventional, and typically based on imitation. Effectiveness is creative, often unconventional, and always responsive to change.

How to be efficient

To be efficient often means shutting down on communication (wastes time); ignoring customer ideas (wastes energy on trying to respond when doing the same, standard thing all the time is so much more efficient); and squashing new ideas or research (not interesting, unless it produces ways of doing what you already do more cheaply, faster, or with greater profitability).

Efficiency is a dead end. It fixes you where you are today and leads towards the law of diminishing returns. It reduces you to working on commoditizing your business — and everyone knows that commodity businesses are neither profitable nor sustainable over the long-term. There’s always someone willing to undercut you — especially today, when low-wage economies see the easiest route to growth as providing a place to out-source work that’s cheaper than anywhere else.

How to be effective

To be effective, you need to listen, think, and explore. Because effectiveness requires finding better ways of doing business, it keeps you at the forefront of ideas.

Unlike efficiency, which typically requires little more than compliance and attention to detail, to be effective normally requires you to be creative and open-minded. Coming up with a better product, system, or business model is hard work — but a different kind of hard work than that involved in paring a dollar here, a few cents there, and a minute or so somewhere else.

The effective business is constantly seeking to improve what it does, not just how it does it. It’s trying all the time to offer its customers things they will value more, because they work better and provide better results in the customer’s own terms.

The effective manager is the one who seeks to do better things, not just be better at doing what he or she (and everyone else) has been doing for some time. Efficiency sticks to what already works, and can be made to do so more cheaply and swiftly; effectiveness takes risks.

Consider this statement by Jeff Bezos, CEO and founder of Amazon.com, quoted in Business Week:

Companies get skills-focused, instead of customer-needs focused. When [companies] think about extending their business into some new area, the first question is ‘why should we do that—we don’t have any skills in that area.’ That approach puts a finite lifetime on a company, because the world changes, and what used to be cutting-edge skills have turned into something your customers may not need anymore. A much more stable strategy is to start with ‘what do my customers need?’ Then do an inventory of the gaps in your skills. . . . Also, people who want to pioneer and find new ways of doing things know there are going to be ups and downs, that there will be profound moments of success and failure. And that’s O.K. It’s not an experiment if you know it’s going to work.

Efficiency kills in the end

Today, much US and European business is extremely efficient — and slowly dying through rigidity and lack of competitiveness in the consumer’s mind. Those that are prospering are always working to be more effective: to improve quality, introduce new products and services, find new areas in which to do business. Once a product or service becomes so standard that the only way to wring any more from it is through increased efficiency, they often leave it behind.

Efficiency is always subject to the law of diminishing returns. Effectiveness never is, since you can always decide it is more effective to stop working on what cannot be improved without spending more than you stand to gain, and try something else.

Building effectiveness into your life

Look at your own life and work. Are you fixated on being more efficient: on doing more and more of what you already do (though perhaps more easily, cheaply, and with less effort)? Or are you looking to make yourself more effective: to learn new skills, add new experiences, become more creative, and follow your ideas wherever they may take you?

Many people rush about being efficient while strangling their effectiveness. They follow the latest fads in time management and personal productivity, yet cannot spare a moment to discover if what they are getting done so much faster and more easily is worth doing at all.

Here’s the fundamental difference: efficiency tries to save time to do more of the same. Effectiveness uses time to avoid doing only what you have done before, in favor of working out how to do something better. And since time cannot be saved — you can’t store it somewhere to use later — only redirected, saving time to do more of the same is no saving at all. Only by choosing to use your time in new and different ways can you let go of the past to find what the future will offer you.

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