Efficiency slowed profit deterioration

Effectiveness will replace efficiency as the main strategic goal of UAE companies in 2018. At least, it will for the successful companies. 2017 was the year of efficiency, as companies learnt to do what they used to do with less. Less money, less time, fewer people. Efficiency cut costs and slowed down profit deterioration. As important a step as that was, it was a stepping stone to the important strategic goal of effectiveness. In simple terms, efficiency is getting things done whereas effectiveness is getting the right things done. After all, there’s no point finding cheaper ways to reach a goal if it is the wrong goal.

Effectiveness leads to profit growth

Effectiveness looks at where new revenue, and profit, are going to come from as, opposed to efficiency’s focus on costs. There is nothing wrong with working to achieve efficiency first, as it gives the company time to understand the new external environment. But there comes a time when cutting costs no longer works. In the end, sustainable profit growth is driven by increases in revenue, not decreases in cost. So how do companies become effective? What does it even mean? It means evolving, even transforming if necessary, so as to adapt to the new realities of the economy.

Executives might ask what can they do to generate revenues in a challenging economy? A simple example, just to make a point, is this: take advantage of all the efficiency initiatives. Cost cutting means downsizing, so moving companies will thrive. But what else can happen? Property management companies might provide a discounted rent during the time a client is unemployed. Continue reading →