Starting a business is relatively easy against scaling up the business. After years of struggle, business become successful and reach certain level of growth. It is important that the business then should continue to succeed. It means that the business has to shift gears and get into the next orbit of growth. Unfortunately, many businesses fail to take that leap and instead stay stagnated at certain level.
I always wonder, what is that secret that lets you scale up? And most of the time the answer takes me back to the four type of decisions that the business owners should take.
Business decisions can be classified into effectiveness decisions and efficiency decisions. But what is effectiveness and efficiency? Is there any difference in their meaning; as we use these words in our everyday conversation to convey the same thing.
“Effectiveness is Doing Right things”; while “Efficiency is Doing things Right”. Now the definition is also interchange of words.
To make things simple, I put it this way – Effectiveness is when you do activities focusing on the end results; while Efficiency deals with specifications and standardizing the activities by following a sequential predefined process. We take all kind of short cuts when we are effective, while we are bound to follow the steps when we are efficient. Effectiveness does not consider the cost of obtaining the result, while in efficiency you get a cost effective and consistent output within the specified time.
The Effectiveness and Efficiency decision fall in two time zones – Short term and Long term. If we put it in matrix, it will be:
To illustrate, in the early years, business is customer focused and makes an all-out effort to meet the customer needs and to get more and more customer orders. As the order starts pouring in, internally the situation gets messy, and there is need to get the activities in proper order. To deliver consistent results, the business starts defining the specifications, process flow and turnaround time. The objective is to make optimum utilization of resources and get a cost-effective output in a realistic timeline.
Business owners are very good in taking short term effectiveness decisions, and once the business starts growing rapidly, they work in a disciplined way to manage the work volume and optimize costs.
The next stage is to focus on the long-term effectiveness, which is to understand the market dynamics, customer preferences, business landscape and plan for the future to decide – How the business will continue to operate? How it will continue to enjoy advantage over the competitors and remain relevant?
Many businesses make a very good effort at this long-term decision making; but to implement this plan is a very challenging task as it calls for change at multiple levels like the customer profile, business systems, people skills for key positions. The business needs to develop various matrix to measure performance. The process calls for a critical relook at the entire business and making structural changes in terms of people and processes. This is a time consuming and a slow process which needs chunk of business owners time. The objective is to align the stakeholders to the long-term business vision, so they can own up the vision and take initiatives to work in that direction.
These four types of decisions require different skills, and the business owner needs to onboard people with those skills, so the business can continue to scale and sustain.