Should a startup be effective or efficient?

Which comes first?

If you understand the difference between efficient and effective, you understand the mistake most early-stage founders make

What is the difference?

• Effective is the extent to which you reach your goal

  • A medication that successfully treats a disease is considered effective because it achieves the desired health outcome.

• Efficient is related to resources used to meet that goal

  • A machine that produces the same number of products as another but uses less energy or time is more efficient.

• Summary

  • Effective is about getting the job done.

  • Efficient is about getting the job done in the best way possible.

Where should a early-stage founder go?

Early-stage startups: please focus on effectiveness!

• Effectiveness comes before efficiency, for early-stage startups

  • First, try to meet the goal

    • It took me 10 weeks to land my first customer

    • My solution works, but is expensive

  • Next, try to be more efficient.

    • It took me 4 weeks to land my next 2 customers

    • My solution works, and is affordable

Why, why why!?

• This is another angle to:

  • Do things that don’t scale

  • Build the right thing vs Build the thing right

• Why not the other way around?

  • Focusing on efficiency before effectiveness will lead to being less effective

    • It cuts the wiggle room you need to be creative and find new solutions

  • Examples of startups that wanted to be too efficient, resulting in being ineffective

    • Create an MVP with a database system so advanced it can handle 100M users, where we didn’t have 10. This advanced db postponed development and therefore user onboarding for weeks.

    • A founder set up an entire CRM system with Hubspot before even have manually called 10 potential customers with a spreadsheet. Instead of cold calling on Monday, this took a week to setup. The startup was killed 3 weeks later due to lack of market demand.

• Why do people focus on efficiency?

  • Overconfidence: They believe they know what they are about to do upfront.

  • Ignoring setup costs: They think they longer setup costs will pay themselves back. But in a startup, you might abandon a thin in two weeks. Is it still worth it?

  • Education: Univeristies, especially management focused ones, focus on large organisations. Within large organisations, efficiency is a big cost.

    • Think about supply chain management, that’s all about efficiency

    • Are you educated to be effective or efficient?