Effectiveness Over Efficiency: A Guide to Entrepreneurial Excellence

Entrepreneurs can become more successful by reflecting on their actions continuously, instead of always doing more and working longer.

In this blog post, we will discuss a common mistake entrepreneurs like to make and give you some hints on how you can increase your productivity (while working less).

Be Effective First and Efficient Later

The late U.S. preseident Abraham Lincoln once famously said:

"Give me six hours to chop down a tree, and I will spend the first four sharpening the axe."

Yet, how does sharpening the axe help if you don't even know which tree to chop?

Entrepreneurs often spend a considerable amount of time on becoming efficient at something; for example, sharpening the axe. However, they don’t worry a bit about effectiveness, or in this case, deciding which tree to chop.

The most fundamental flaw with early-stage entrepreneurs is that they get lost in the multitude of daily tasks and forget about their big picture and why they are doing what they do.

This usually leads to superficial rather than holistic progress which leads nowhere and most often to failure.

Effectiveness vs. Efficiency - What is the Difference?

Effectiveness was described by Peter Drucker as, "doing the right thing," while efficiency is "doing the things right."

You should always worry about doing the right thing first and then decide about how you’ll do it right. 

Managing the trade-off between investing one’s time in effectiveness and efficiency is one of the most important skills a young entrepreneur can have.

Questions to Ask Before You Start Executing on Your Business

In order to start in a new market, have a new product, and address a different target group, startup founders have to question their fundamental assumptions deeply and move their thinking towards effectiveness considerations.

Without ever asking, ‘Am I doing the right thing?’, but only ‘Am I doing the things right?’, ‘quick enough’, or ‘in a maximum quantity', you’re likely to work on the wrong things.

There are tons of startup founders focusing on products and perfecting them before asking themselves one question: “Do my customers even appreciate my product?”

People make decisions about effectiveness in a very short time and then focus all of their energy on maximising their output.

However, the complexity of entrepreneurial decision-making is far higher than that of general managerial decision making and such a decision can lead to several problems.

As an entrepreneur you must worry about a wide range of topics:

• Market
• Products
• Competiton
• Investors
• The interplay between all of those dimensions

So, as Peter Drucker noticed, too, making a purely analytical decision is almost impossible:

"When a new venture does succeed, more often than not it is in a market other than the one it was originally intended to serve, with products and services not quite those with which it had set out, bought in large part by customers it did not even think of when it started, and used for a host of purposes besides the ones for which the products were first designed."

If you’ve picked the wrong strategy, you can focus as much as you want on efficiency metrics. Someone with a more effective strategy will always outperform you. 

If you’re an entrepreneur, I urge you to ask the big questions first.

Take a step back and reflect whenever you can, and ask yourself every day:

‘Am I doing the right thing?’

The ability to effectively prioritise will guide you to success better than any improvement on efficiency can.

Effectiveness vs. Efficiency - An Example

To make this concept a little more clear, let’s consider two entrepreneurs.

Both sell productivity software to tech-savvy young high performers.

The first entrepreneur has quickly decided to start with paid ads.

He begins to study Google Ads, Facebook Ads, the difference between search ads and display ads, etc. Then he begins with costs per click of $ 1.50, and through his rigorous optimisation manages to reduce costs per click to $ 0.90 while keeping conversions at the same level. Finally, he can operate profitably as long as he is below $ 0.95, so he now switches to optimising his conversion rate. Efficiency is all that matters to him.

This behaviour is fantastic if paid ads are the best of all possible strategies.

On the other hand, the second entrepreneur looks at all possibilities and respective outcomes first.

She starts interviewing marketing professionals on their most effective methods and prioritises three routes to explore: an organic community growth strategy through Reddit forums and LinkedIn groups, a growth hacking approach via LinkedIn auto-targeting and typical search ads on Google.

Then, she considers effectiveness, so she decides to try all three methods and compares the results.

She notices that her costs per click for ads are $ 1.50.  Her organic growth strategies require one full-time community manager and are thus estimated to be $ 3.50 per click, but may drastically decrease with increasing virality. And lastly, costs per click of LinkedIn automation converge at $ 0.50 at a similar conversion. She begins with LinkedIn automation at $ 0.50 and manages to drive down costs drastically by optimising her messaging, LinkedIn profile, and targeting procedures.

She now has additional profits to invest into the organic community growth strategy.

It is very likely that she’ll eventually outperform the first entrepreneur given superior costs of customer acquisition. 

While this is one specific example in marketing, considerations of effectiveness vs. efficiency are present in every discipline.

How to Become More Effective in 3 Simple Steps

Consider the three following tips to become more effective:

1. Do a Weekly Review

An entrepreneur should regularly zoom out, see the big picture, and make high-level decisions. One three-hour slot every week is usually enough, but this differs among different people and ventures.

Most people undervalue the importance of having a “sense-making” period in their calendars.

A myriad of tasks is crammed into one day, while one is blind to see that one is moving in the wrong direction.

People react. But in my opinion, people should (pro)act. Regular reflection makes it possible.

2. Prioritise Your Week

Set 5 main goals for your week and finish those before anything else.

Your goal should be to always work on one of your five priorities first.

Make sure to set difficult to accomplish, but doable, priorities.

Make sure those five priorities are in line with your one-year goals.

By setting these five goals every single week, you’ll practice both goal setting and executing your priorities. You'll be effective at reaching your long-term goals in no time.

3. Ask Yourself "Why?" at the End of Every Day

At the end of every day, look at the tasks you have done and ask yourself: “Why?” Ask yourself ‘why’ as often as possible to go as deep as possible.

The 80% Rule: Did 80% of the tasks you completed during your working day actually move you closer to your yearly goal?

This not only helps you check how many of your tasks are actually aligned with your long-term vision, but it also helps you gain a deep understanding of how every task you do is connected to your major goals.

Thinking about your tasks on a daily basis will sharpen your judgement of how any task you do relates to the big picture. This is one of the most powerful skills an entrepreneur can have.

That's a Wrap

Entrepreneurs often put a lot of effort into ‘doing the things right’ while they should be more focused on ‘doing the right things’ first.

To avoid this mistake you can introduce a weekly review, prioritise your week and ask yourself 'why' at the end of every day.

If you read through this post, but you are still not sure how you can find out what is the 'right thing to do' for your business or you want to get more entrepreneurship education, we at EWOR are here to help and guide you along your entrepreneur journey. Just sign-up through our newsletter and never miss any further content.  

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