Digital business needs to be effective more than efficient

One response to a changing economy, whether global or digital, is to pursue efficiency. Cut costs, overheads, staff and anything else you can to make your company as efficient as possible.

I’m quite obviously not Umair Haque, but I’ve been in companies or known friends and associates who have all been part of this drive at various times. And I’ve got a theory that even if it worked in the past, it’s not going to work for companies in the global digital world.

Rather than becoming ruthlessly efficient, companies now need to be incredibly effective. For starters, efficiency only gives you an advantage if you’re either going to use the excess cash somewhere else, or your main rivals are going to go bust first. And anyone that does invest is going to grab a big advantage – in a global digital world, there’s going to be someone somewhere that has a bit of cash available.

Instead, the focus needs to be on effectiveness – for consumers as well as your business. It’s efficient to deal with everyone in 20 seconds and move on. It’s effective to take the time to ensure good service and a repeat customer for life.

For example – somewhere like the retailer Argos would be seen as efficient. Give consumers a catalogue, and distribute from big warehouses without investing in floor space to display everything or salespeople to demonstrate it.

Meanwhile I’d say Zappos has always been incredibly effective – there’s a huge level of interest in the UK even though they don’t sell here. Offering new starters money to quit, or spending time on Twitter and Facebook providing great customer service probably isn’t the most efficient thing to do. But it’s damn effective.

• Combining digital and offline teams is definitely efficient. But only in some circumstances is it effective.
• Cutting back on digital to focus on traditional revenue generators is efficient. But it’s not going to be effective over time in what are declining markets for everyone.
• Using a social network to broadcast out your messages to everyone is efficient. But if people see it and don’t act on it to generate any revenue, it’s not effective.
• Running everything from a centralised template is efficient – but when people see it as a lack of effort, or get bored, it’s not efficient.
• Running the least amounts of resource is efficient. But it isn’t effective if people leave/get ill/rivals staff up to provide better service etc.
• Providing free drinks to staff or other benefits isn’t efficient. But if can be very effective.

I’m not saying you should, or shouldn’t do any of the examples above. I totally believe that utilising the digital world, particularly innovation, social networking and customer/vendor relationships etc will give you a huge advantage over rivals which either don’t use them, or use them badly.

But whether you’re using digital or offline, internal changes or external, or trying to improve social media marketing, the essential thing for 2010 is to look for the most effective route to a return, not the most efficient.