Paul Kennedy weighs in on Effectiveness vs. Efficiency debate

As a follow-up to our blog post on Was Drucker Wrong About Knowledge Workers, senior fellow Paul Kennedy sent me his "brain dump" on the topic.As usual, Paul contributes a more holistic view of this topic by introducing the concept of positioning.In this short essay, Paul explains why you can only be more effective in the context of an objective.

Michael Gerber distinguishes efficiency and effectiveness with "what" and "how" questions so:Efficiency—How do we do this faster? How do I do this with less waste?Effectiveness—What should we be doing?But other than that I think definitions as you present them work.If the challenge is to "how to create and capture value through knowledge workers" then there may be another step in the chain (can you have a step in a chain?)—positioning.Calling things by their proper name is a big part of the problem. To confuse terminology, Michael Porter in his famous HBR article "What is Strategy?" distinguishes between Operational Effectiveness (OE) and strategic positioning. He defines OE as "performing similar activities better than rivals"—nearer our definition of efficiency.He goes to explain "OE includes but is not limited to efficiency. It refers to any number of practices that allow a company to better utilize its inputs, by for example, reducing defects in products or developing better products faster" (still sounds like our definition of efficiency!). He goes on to write "In contrast strategic positioning means performing different activities from rivals’, or performing similar activities in different ways." This sounds more like our definition of effectiveness!Porter goes on to explain that improvements in OE do not create sustainable advantage as such improvements are quickly copied. Porter points to rapid diffusion of best practice, the outsourcing of some activities often to the same organisations competitors use and role of consultants in ensuring that advantage is at best temporary. OE effectively shifts the bar for everyone but relatively for no one. Becoming more efficient is just a hygiene factor.Has tax software made the accounting profession more profitable? No, because it has merely raised the bar. It has become a table stake.Porter argues that to create and capture value in any organisation (including organisations of KWs) in the long term strategic positioning is the only way. My understanding of his theory of strategic positioning is that it is about alignment (he uses the term fit). I think that for a KW to be effective a KW's capabilities need to be aligned to the needs of the organisation's customers and the customers need to be chosen to optimise this chance. I think this optimisation of alignment goes beyond effectiveness.Jim Collins talks about putting people in the right seat of the bus and Kaplan and Norton seek to align intangible assets to financial objectives through the use of strategy maps. These maps articulate an organisation's theory of value creation and capture through a series of cause and effect links. They make explicit how it is hoped intangible assets are developed, orchestrated and aligned to target customer needs and how this value creation is then captured to meet overall (often financial) objectives.It seems to me that you can only be more effective in the context of an objective and these cause and effect diagrams we call Strategy maps, go some way to articulate an organisation's plan for being more effective in the context of an overriding objective. In my experience this is a good way of getting KW alignment to organisational objective and thereby enhancing effectiveness.But understanding a theory of value creation does not give you a better way of measuring KWs nor, in my opinion, does it matter. Even Kaplan and Norton for all their preoccupation with scorecards don't try to measure this stuff!

Thanks, Paul, as always your comments are extremely cogent and logical. I missed the topic of positioning, taking it as a given.Yet as you and Paul O'Bryne teach everyone so well, you can't value price the wrong customer—hence, positioning and strategy is crucial to this topic.