This article is part of a series that deals with social, economic, and technological dynamics and highlights the consequences for people, brands, and organizations.
Overview of the Article Series
- Why yesterday's business success and today's operational hecticness put your company at risk
- System optimization vs. system overcoming: why continuous improvement stands in the way of real innovations
- How system overcoming succeeds: from the obsession with optimization to strategic conviction
- The success criteria of every entrepreneurial bet: Relevance, Resonance, Acceptance
Effectiveness and Efficiency: Between Continuity and Transformation
For individuals and organizations, the constant question is: do we continue as before, or must we change something to remain successful today and tomorrow? At the latest, when we are confronted with surprises, this question lands right at our feet.
A worldwide lockdown. An employee who resigns unexpectedly. An order thought to be secure that falls through after all. A sudden case of damage that no one could have predicted. Surprises lurk around every corner.
These are events that give us cause to re-think, because the utility of previous constants is called into question, at least for a short time.
Often, it is enough to optimize what exists and improve it step-by-step to meet environmental changes. In such cases, the problem can be solved with knowledge. Knowledge originates from people or machines.
Principles, tools, and methods such as the PDCA cycle (Plan, Do, Check, Act), Lean Management, or Kaizen utilize, among other things, the power of small steps to increase efficiency in action: starting from what already works, all participants strive for the continuous improvement of value creation. This is primarily about the question: What can be omitted, reduced, or ignored?
But what if more or less of the same does not solve the problem, but actually intensifies it? What if the only solution is to do something entirely different than before? – Then new ideas are needed. Ideas always come from people and cannot be replaced by knowledge, though they can be supported and inspired by it.
The continuous improvement mindset can systematically contribute to increasing efficiency and effectiveness and thus make an important contribution to the healthy development of the organization. At the same time, it regularly stands in the way of new ideas and thus innovations if the optimization of the system takes center stage and blocks the view of something entirely new.
In complex-dynamic times, the quality of what we believe we know decides success or failure. The requirements for the robustness of our theories have risen just as much as the requirements for our ability to learn and adapt. Reflecting on and questioning existing relations and constants gains importance.
Transformation: Radical Change Instead of Continuous Improvement
If the goal is to discover unknown options and design novel solutions, it helps to use the distinction between efficiency and effectiveness. First, the focus should not be on efficiency ("doing things right"), but primarily on effectiveness ("doing the right things").
Only if we can first detach ourselves from the ways of thinking and behaving that, according to our current knowledge, lead to the best result, can new ideas emerge on how the result could be even better.
Both terms are two sides of the same coin and must therefore always be considered in context. Complexity and dynamics require a better understanding of this connection than before, in order not to fall into one of the typical patterns:
- Some business owners think for too long about what the right things are. They are overwhelmed by the complexity of the decisions to be made and thus succumb to the dynamics of their environment. The difficult-to-answer question of effectiveness drives efficiency—and thus effectiveness—toward zero. This manifests in missed opportunities, inflated risks, and a lack of implementation.
- Even more frequently, especially in successful companies, the focus is exclusively on improving efficiency. This is easier to track and measure and is therefore usually given preference. Decisions are insufficiently prepared and reviewed. Long-term impact and interactions are not adequately considered. In these cases, the overwhelming dynamics tempt one to reduce or even trivialize complexity. This manifests in activism and in the overvaluation of technologies as simple solutions to complex problems.
Wanting to do things better that one knows will lead to the desired result is useful as long as one is right with that knowledge. However, to make effective decisions in complex-dynamic times, it is necessary to regularly question and expand one's own theories of "God, man, and the world." Only then is there a chance that the ideas that seem sensible to us will also be accepted by the world.
"Effectiveness is evaluated efficiency."– Russel Ackoff
If the goal is to unlock new degrees of freedom and impact, previous constants must be radically questioned while proven methods are continuously optimized. Then, the challenge is not just the optimization of the system, but also the overcoming of what previously ensured success but now stands in the way of future success. Otherwise, as the past has sufficiently shown, the ongoing success of a company can quickly become its own undoing.
Contrary to the optimization question, the innovation question cannot be answered with (new) knowledge, but only with (new) ideas. Ideas always come from people whose talents are awakened in specific contexts.
Ernst Weichselbaum writes in his book "In jedem Unternehmen steckt ein besseres" (In every company there is a better one):
"In system optimization, previous constants are retained. System overcoming is recognized by the change of constants—or constant-change."
Every development, every change, every transformation requires a considerable amount of energy due to our natural stabilization mechanisms and the self-preserving forces of the systems surrounding us. System overcoming requires changing conditions and breaking patterns that have previously provided stability. This is always accompanied by a shift in identity, for which we must have sufficient resources so as not to succumb to the fear of uncertainty.
The Fear of Uncertainty: The Barriers to Transformation
Many companies shy away from this and try to produce innovations with knowledge. Others give up entirely on creating novel utility for customers, employees, partners, and society. They dedicate themselves only to the optimization and preservation of what exists.
This carries the risk that weak but significant signals are missed and necessary adjustments cannot take place. Under certain circumstances, they lose the acceptance, relevance, or resonance of their services in the market.
The fear of uncertainty and the lack of awareness of the risks and opportunities of (digital) transformation stand in the way of the healthy development of many companies.
But also, the overwhelm in dealing with digital possibilities and the high dynamics of our time lead either to activism or resignation.
In many cases, it is operational hecticness and yesterday's success that stand in the way of transformation.
Continuous Work on the System as the Key to Transformation
On the one hand, in times of great uncertainty, it is certainly not a foolish idea to continue and, ideally, improve what has proven effective. On the other hand, an excessive focus on optimizing the proven prevents new perspectives and opportunities from opening up.
As is so often the case, both are needed: the continuous improvement of what already creates impact, as well as the continuous questioning of the effectiveness of previous and future decisions. The Genius of the AND.
For many companies, this requires a paradigm shift that is linked not only to reviewing the business and organizational model, but also to reviewing the underlying image of humanity. Decisive here is, above all, the overcoming of the still widespread idea of 'homo oeconomicus'.
This is accompanied by questions of identity that must be (re)answered with a view to internal and external dynamics. Every paradigm shift is therefore dependent on both resilient individuals and dynamic-robust systems.
The innate but mostly unlearned abilities to deal with complexity in a value-creating way and to generate dynamics must be promoted through individual and collective learning. In this process, the psychological and sociological perspectives are directly related: it is about the interplay between inner-psychological tensions and social coexistence. Both systems, the psychological and the social, are environments for one another and influence each other. The exact interplay of individual and collective dynamics must therefore be viewed in a differentiated manner to understand change in its essence and guide it into meaningful channels.
An organization cannot evaluate the quality of its own development. It is dependent on the members introducing their evaluation into communication. Collective reflection and decision-making for the design and further development of the organization is therefore of great importance. An external perspective from the outside can help create clarity. Blind spots can be better recognized, new relations can be worked out more quickly, and hindering blockages can be dissolved.
A bad system will beat a good person every time.– W. Edwards Deming
The quote points to what the next article in this series will illuminate in more detail: work on the system must become a strategic conviction in order to utilize increasing complexity and dynamics in a value-creating way.
