Beware of the Efficiency Trap

Do NOT confuse motion with progress!

Sometimes we need a disruption to look for insights beyond our immediate context. When we are busy as individuals working through our to-do list, or as teams working down our backlog items, or as organizations through the items on our operational list of responsibilities it is quite easy to miss seeing the forest for the trees. Imagine we are so busy with cutting the trees and entirely focused on doing things right to maximize the number of trees cut per day that we miss entirely asking ourselves whether we are actually doing the right thing, i.e. are we even cutting the trees within the right forest?

The former concern is about efficiency, the latter about effectiveness. Note that we would have a hard time being effective without being efficient. However, we could very well be efficient without being effective; in the context of our trees cutting example, this would mean cutting trees of the wrong forest, even though cutting them rapidly. Please note that this is the first flavor of the efficiency trap.

Photo by Shivendu Shukla on Unsplash

Unfortunately, this is not the only problem I have observed frequently about organizations that strongly focus on efficiency. Even if the emphasis on efficiency is balanced with attention to effectiveness, you may still find the outcome that they achieve and the impact they create degrading over time. What could be the reason for this?

Staying with our tree cutting example: What determines your lasting impact is not only whether you cut the right trees in the right way, i.e. fast enough or whether you cut the right trees. As any experienced forest maintenance worker should be able to tell you, from time to time you must sharpen the saw to be able to cut the trees faster or at least maintain the pace.

Hence the second flavor of the efficiency trap is captured best by this quote:

“I don’t have time to sharpen the saw, I’m too busy sawing!”

Stephen Covey

Contrast this with the following guidance from a famous leader:

“If I had six hours to chop down a tree, I’d spend the first four hours sharpening the axe.”

Abraham Lincoln

Photo by Malte Wingen on Unsplash

You may be asking – how does this relate to your business? How do you spot patterns where organization get too narrowly focused on optimizing for efficiency, often also promoted as operational excellence? Just to be clear: we have no objection to focus on improving how an organization operates and implements the execution of the company strategy. What we are emphasizing though, is the need to balance improving efficiency with improving effectiveness and sustainability to avoid running the risk of the Innovator’s Dilemma.

Many large and medium size companies have developed expertise and are proud of their focus on optimizing operations which – particularly in times of change and insecurity – often is driven by the need to reduce costs. Obviously, there is nothing wrong with using available financial resources carefully. However, when needing to reduce costs, it easily happens that organizations cut functions with highly valuable and deep domain understanding of the customer business problem that are necessary for discovery and delivery of innovate products providing the customer value that drive profitable revenue growth.

How does this happen? I have observed a common leadership preference to favor output measures very strongly. The notion “you can’t manage what you can’t measure” can mislead an organization to look for easily measurable metrics rather than for truly meaningful metrics.

Let us briefly discuss the different types of metrics to understand the distinction between input, output and outcome measures so that we can better inform the discussion about how to measure progress.

  1. Input metrics describe what gets put into a process or iteration, e.g. the number of people allocated to an effort, the number of training sessions attended, the number of user stories written; Input metrics are often used as leading indicator.
  2. Output metrics capture the immediate output that the effort produces, e.g. number of units produced, number of features implemented, tests executed, number of clients served; output metrics are often used as real time indicator.
  3. Outcome metrics capture the business outcome, consequences or achievements of the effort, e.g. the number of new customers with revenue, total number of deployed customers using our services or product in production, workforce engagement, customer net promotor score (NPS), change failure rate (i.e. how often did software need to be fixed after it was delivered to customers); outcome metrics are often trailing indicator.
  4. The impact describers the ultimate business objective or intended effect of the effort such as satisfied customers that continuously ask for buying more of our products or services, an engaged workforce, and a financially healthy business overall.

The output – e.g. how many lines of code did you write? how many features did you deliver? how many bugs did you fix? – maybe easy to measure. However, if the lines of code or the features created do not serve the needs of the customer then the business outcome will be less than satisfactory – despite seemingly positive development of the output measures. Hence, be careful not to be mislead by output metrics; even though they could indicate a positive trend – the intended outcome could be missed or even contradicted by too strong output emphasis. If, for example, developers get incentivized to increase the number of bugs fixed – how should they be motivated to invest in improving their way of working to minimize the number of defects that get even created in the first place?

Another example of output metrics I have observed that were less than meaningful: A business is trying to promote the use of their platform and focusses on tracking the number of third-party developers signed up on their website for the platform. However, unless they have a solid understanding of what these developers are doing with the platform – this can be quite misleading. Some questions to ask to better understand the context – and the eventually the outcome: Have the developers just downloaded the devkit for this platform? Have they actually started using it? For example, have they already built a solution with it? Have they had success turning their solution into productive use? What do we know about their experience with our platform? Are they satisfied? Did they encounter problems? How long did they take from initial engagement to having created value based on the platform? Will they continue using this platform? Would they recommend it to other developers? Are they starting to generate income on top of our platform?

The conclusion is that we need to target outcome metrics if we want to drive the right behavior and optimizations. These considerations are critical to get us started. However, there is more to consider. Even if the features that we provide to our customers do meet their needs, many companies fall into the trap of overstretching their capacity to deliver. Common symptoms are frequent delay of deliveries, quality problems discovered late in the game, morale issues of the delivery teams, outdated product architecture making it hard to change or extend the product, fragmented, outdated or otherwise incomplete toolset supporting development, testing and operations (“DevOps toolchain”), etc. Often short-term optimizations drive using short cuts and the accumulation of technical debt that will inhibit the future product delivery capabilities. Both are topics for separate discussions.

We have not even touched the topic of resource efficiency or utilization vs. flow efficiency within a system such as a software product discovery and delivery system. Like the concerns above, this will be topic for a separate discussion.

What is crucial to understand though is that for a successful and sustainable operation, any business that wants to become and remain able to adapt to market needs rapidly and with minimal pain, will need to keep explore and investing in improving both the products or services they discover and deliver as well as the system with which they deliver them. We will discuss these in more detail in a future post.

In summary, we need to understand the difference between efficiency, effectiveness, and sustainability and how to optimize the balance of attention, effort, and investments between them. In other words, any business leader is well advised to be concerned about building the right thing (product), building things right and at the right – sustainable – pace.

Holistic, Competing Metrics to strike Balance

Striking the right balance of this set of comprehensive, sometimes competing goals is the sweet spot that every business will need to find individually based on the context and state of their business.

Further related posts:

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