Efficiency vs. Effectiveness and the Circular Economy
During my professional years in the Japanese corporate world in the early 2000s, I learned a lot about efficiency – trying to become highly efficient at designing and developing products. Years later, I brought the concept of high efficiency with me to build teams in China, innovating for global clients. And I certainly always tried to increase my efficiency. But at some point, I noticed that the results did not necessarily become any more impactful or successful while becoming ever more efficient.
Investigating the issue, I discovered that effectiveness might be the answer, yet efficiency and effectiveness are often used interchangeably. Looking into the differences between efficiency vs. effectiveness, one must look at common definitions of the two:
- Efficiency is the ability to achieve an end goal with little to no waste, effort, or energy.
- Effectiveness is the ability to produce a desired result or output.
It was back in 2012 when I came across the work of the US management consultant Peter F. Drucker (1909-2005), who defined the two terms simply as “Efficiency is doing the things right. Effectiveness is doing the right things.”
Becoming highly efficient at not being effective
So, by increasing my focus on the wrong goal, I became highly efficient at not being effective— or in Drucker’s definition, I was extremely good at doing the wrong things. I changed my approach, trying to put effectiveness before efficiency, focusing on the right things before doing things right.
Fast-forwarding to 2022, most Circular Economy initiatives focus on efficiency. No matter if OECD, G20, EU Parliament, or G7 in Germany this year, most strategies for the Circular Economy are widely centered around ‘Resource Efficiency’ — targeting a sustainable use of existing resources while reducing the impact on the environment.
I get it; optimizing and tracking efficiencies within existing systems is the low-hanging fruit and is much more accessible than investigating and investing in effectiveness. Where effectiveness would require innovating very new technologies and developing unique ecosystems. But focusing on efficiency will preoccupy decision-makers, and we will miss the opportunity leading to an impactful Circular Economy, one where we are doing the right things.
The quality of being successful in producing an intended result
Let’s do a rough lingo check: What’s the ‘eco’ part of the Circular Economy?
- Eco-efficiency has been well-known and practiced in industries since the 1990s, increasing value while reducing resource use and environmental impact. Throughout the life of a product or service, it is a concept from a past era of cradle-to-grave development and the linear economy.
- On the other hand, Eco-effectiveness is all about cradle-to-cradle development, where ‘waste equals food’, a Circular Economy principle based on an ecosystem approach. Still, it is not yet widely practiced throughout the various industries today.
Right now, the world is looking toward (respectively back on) the 2022 United Nations Climate Change Conference (COP27, due to wrap on November 18th). Efficiency is still part of the common narrative in the most polluting nations to combat the climate crisis. Yet, glimmers of hope are already emerging, for example, the series of moves on climate finance.
We all must take this as inspiration and look at how we can embed these moves toward effectiveness by policymakers. It is up to all of us to get effectiveness into product and service development processes — focusing on the right things and driving the right impact into a sustainable Circularity for our future. Once there, we will have enough time to go back to tracking efficiencies and doing things right.
The ultimate target is always to become efficiently effective — doing the right things right.
Let’s get it on.
Gerhard Seizer
Strategic Innovation
