Efficient or Effective?

Tony Hsieh of Zappos.com:

“We run our warehouses 24/7 which is actually not the most efficient way to run a warehouse, but it gets the shoes out to the customer as quickly as possible.”

Effective doesn’t necessarily mean efficient. Efficiency tries to use the momentum of the status quo, but make it faster or cheaper. Effective tries to produce an effect (a change or disruption) to the status quo to make it better.

That’s why Zappos.com runs their warehouse 24/7, Rackspace answers their telephone by a live person in one ring, and busy Seth Godin personally answers every e-mail sent to him (and in my experience, usually within a hour or two).

Are you being efficient or effective?

BTW, why do we say something is “cost effective” when what we really mean is that it’s efficient?

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6 Responses

  1. Great point – brands that stand out are definitely being effective!

  2. Good clarification. Efficient is driven by the VP of finance who’s not rewarded on quality of product & service and so on. Effective is driven by the VP of business.
    A friend just shares with me a looong story about his shopping experience to replace his washing machine and, at the end, his disappointment is in the service. A bad service experience is bad for business because we’ll have a bad feeling about it and feelings don’t go away. paying 5$ more for a pair of shoes is quickly forgotten.

  3. @ Susan – thanks for weighing in.

    @ ecairn – I think, like your friends experience, often times efficiency leapfrogs people and focuses on profits. That’s too bad. The fact that your friend’s story is now on its fourth ripple (friend -> you -> me -> blogosphere) is testament to effectiveness.

  4. I guess it’s all about having a good balance of the two. If you have one you may do well for a while or in certain markets or situations but if you can find a true balance, for example the Amazon.com business model then I feel you’ve developed a perfect system.

    Now that you got me thinking, recently my business work has been much more effective but can’t give myself as high points on the efficiency side, gotta work on this!

    Sam

  5. @ Sam

    Some good thoughts here.

    I think you’re right about Amazon’s business model reaching a balance between efficient and effective. I think that Google Ads have done the same and some companies that center around community reach the same level – threadless.com and squidoo.com, for example.

    My question to you (and everyone) is, can you have a business model that is effective and efficient that does not have at least some online or component? Examples?

  6. Just dropping by.Btw, you website have great content!

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