"After decades of working with small businesses, I've witnessed a troubling pattern: the harder entrepreneurs try to maximize efficiency, the less efficient they become. This efficiency paradox plagues businesses of all sizes, but it's devastating for small companies where every resource counts. McKinsey research shows that small and medium businesses operate at 50% of the productivity of large firms - a gap that stems from misguided efficiency efforts. Understanding and resolving this paradox can transform how you operate."
"Here's a concept from the Lean methodology that changed how I think about business operations. There are two approaches to efficiency: resource efficiency and flow efficiency. Resource efficiency focuses on maximizing the utilization of your resources. You build a queue of work to ensure your resources are busy. It's like having a writer with articles to write, ensuring they're productive for all eight hours of their workday."
"The healthcare system provides a stark illustration of this. In Canada, we optimize for resource efficiency. Specialists are fully booked, CT machines run at maximum capacity and patients wait months for diagnoses. I've seen cancer treatment systems operate differently - where patients can see specialists, get scans and receive diagnoses in one day. Their CT machines sit idle sometimes, but patients get answers immediately."
Small and medium businesses frequently lag behind large firms in productivity, with a McKinsey finding of about 50% productivity linked to misguided efficiency efforts. Two distinct efficiency approaches exist: resource efficiency, which maximizes utilization and builds queues to keep resources busy, and flow efficiency, which optimizes speed to move work through systems quickly. Resource-focused strategies can create long customer wait times despite high utilization, while flow-focused strategies may leave equipment idle but deliver faster outcomes. Recognizing and resolving this efficiency paradox can improve small business performance and customer experience.
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