Thoughts on efficiency, even more accessible to leaders once ERPs input useful insights and handle repetitive operations

January 11, 2019

Efficiency is a focal concern when it comes to management and leadership, due to being linked to productivity.

Incidentally, at the beginning of 2019 we came across more than one article approaching this very subject and its relevance to the success of any business.

Since there seems to be no unitary definition, nor a generally accepted way to get the best results when it comes to the activity of a team, efficiency is under debate. Is it all about figures? Is it about your people giving 100%? It is about resilience and sustainability? Or do you have to find the right personalized mixture for each group of people working towards a certain goal?

HBR extends the proposal to rethink efficiency – and their article makes a lot of sense.

You will find in what follows a couple of highlights.

 

Getting a competitive advantage is key – but what timeline do you want it for?

 

Turns out that the mindset that sees efficiency as being synonymous with reducing all waste is specific to the Industrial Revolution. It only makes sense that at that stage businesses adopted “process innovations that reduced waste and increased productivity, as it was about the application of new technologies”. This materially-prompted way of thinking crept into less material areas and generated a whole approach of life. No wonder its critics also referred to is as “machinism”, and in this industrial-related view of it, people were seen as cogs in a big machine.

However, we are way past those times – although progress is still a multi-lane road, where some are more advanced, while others, well, aren’t. But in the big picture of things, the Industry 4.0 or the Fourth Industrial Revolution is already on its way. This means that all human and human-relevant activities will evolve towards cyber-physical systems. The way things are designed, produced, delivered and even taken out of circulation is set to become digitized from end to end.

What we find out from the HBR article is that “an excessive focus on efficiency can produce startlingly negative effects, to the extent that superefficient businesses create the potential for social disorder”. The waste-elimination focus in business operations now generated a risky business environment, one that does not support long term thriving. The most efficient competitors consume themselves and tend to wear down the market, with an outcome of gloomy, disruptive future.

To come back to the origins of maximum-efficiency-no-waste-machinism, while the most successful business entities from the First Industrial Revolution era would focus only on maximum productivity, having a huge demand to respond to, their current counterparts need to also consider shaping, (if not even building) such a market, worrying about its well-being and future prospects, and also have in mind an interconnected game that would also vouch for the survival and health of the market they need.

Take the best example in any given economic situation – an average customer. Gone are the days when its main wishes were about quantity. Now the customer not only wants quality, but desperately needs an environment around the concept of quality that would revive its life, via connections, meaning, and sense.

Coming back to efficiency, ideas from other times now become obsolete. Resilience is taking over, and to adjust to this new success paradigm you need a mindset change.

 

Concentrated economies have proven a wrong way to go

 

By letting the survival of the most efficient (in its old sense) rule unfold, many developed states have reached the stage of highly concentrated industries. This means “low levels of competition, high consumer prices, and high profit margins” – and it’s obviously not a good thing.

You will find patterns and explanations in the HBR article. The main idea is that a “superefficient dominant model elevates the risk of catastrophic failure”, economically-speaking. The recommendation (perhaps even push) in the global system is for the opposite of this model. There is a recognized need to reverse efficiency to its goal of “being the long-term maximization of overall societal value”.

The visible image might be deceiving, since the flaws in the no-waste concept have been concealed by making use of extraneous factors. Industry newcomers, as well as less developed markets have been thrown into the game to postpone the moment where change becomes a must.

Postponing might have been a good thing – because it allowed for technology to make significant progress. Businesses have nowadays at their disposal tools they couldn’t even dream of at the moment no-waste efficiency made its way into the economic environment.

With devices and software solutions that provide a baseline of 100% efficient activities, it may be high time for the human members of various teams to start shifting towards resilience, creativity and new work patterns while focusing on what only humans can bring to the table, as opposed to digitized tools.

 

Setting the premises for the future workstyle

 

HBR recommends a few measures for organizations to leave behind the old efficiency strategy.

But first, let’s see how the publication in cause defines resilience:

“Resilience is the ability to recover from difficulties—to spring back into shape after a shock. Think of the difference between being adapted to an existing environment (which is what efficiency delivers) and being adaptable to changes in the environment. Resilient systems are typically characterized by the very features—diversity and redundancy, or slack—that efficiency seeks to destroy”.

To move towards it, organizations should:

  • Limit scale, to avoid market domination
  • Introduce friction, thus reducing the risk of havoc and training to react well & fast when in difficulty
  • Promote patient capital
  • Create good jobs

 

Look at the future when considering winning strategies

 

With the right analytics tools, prediction-based strategies are far more accessible. The modern ERP systems gather data from the entire organization, analyze it and provide valuable insights.

What that data serve for depends on the decision-making panel. But provided they understand that long-term efficiency, streamlined by resilience is indeed specific to the structure of current and future operations – now they have the ensemble image of their company’s operation to start from.

The HBR article is a sensible one. Relevant, insightful data needs the right angle of consideration, and deserves a modern, future oriented strategy in which you would be making the best use of it.

Don’t refuse yourself and your organization the relevant data you need – adopt or upgrade a leading-edge ERP. SAP is what we propose to you – give us a call to find out more about it.

But also, in the light of the above, learn to tailor for the future when making strategies with that data.

Have a great year, you all.

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