Why can the pursuit of efficiency in early stage startups be fatal? – News Couple
ENTREPRENEUR

Why can the pursuit of efficiency in early stage startups be fatal?


Certainly, getting the maximum amount of work done per unit of time, effort, and capital you put into a project is a good thing.

While on the surface this statement appears to be a no-brainer, it bears a false premise. Yes, for highly predictable systems, efficiency is very useful. The concept comes from engineering, so it is not surprising that it applies directly to repetitive mechanical tasks or to projects that live in a very stable environment.

However, a startup is by definition innovative, which means that it lives in an environment the opposite of predictable.

Thus, rather than thinking of a startup venture as a machine, it is more appropriate to think of startups as biological beings searching for a niche in a volatile ecosystem.

Efficiency vs. Standby Capacity

Unlike a machine, most living things are not designed to be highly efficient. Usually, they have a lot of spare energy.

For example, it would be more effective if the people were not warm-blooded. The lack of an internal system to maintain a constant body temperature will allow us to work on fewer resources (that is, we will have to eat less). This would be perfectly fine if the outside temperature was constant. However, since the weather is somewhat fickle, being warm-blooded pays more than itself.

Most of the time you don’t use your thermoregulation system to its full potential, but sometimes, having enough spare capacity is a matter of life and death.

This is true for almost all other capabilities of your body. The fact that you walk most of the time doesn’t mean that you won’t desperately need to be able to run every now and then.

Efficiency = fragility

Fully efficient systems are fragile – because they do not have spare capacity, they are not able to handle external stress well.

For example, if you’re splitting the minute in the name of productivity and efficiency and your calendar is full meeting after meeting, one thing that doesn’t go as planned could cause a chain reaction and system failure.

The same is true for your startup project as a whole. Trying to split every penny in search of efficiency will leave you with little wiggle room when the environment presents you with an opportunity or a problem.

Having the energy and spare resources to deal with unforeseen circumstances is critical to a startup because when it goes down an undefeated path (i.e. when it innovates), most circumstances are unpredictable.

Of course, spare capacity doesn’t come for free. The opportunity costs of startups are high, which means you need to find the right balance between efficient use of resources and excess capacity.

In the case of living things, this balance has been set by evolution.

In the case of startup projects, you are the one who needs to find the right niche. Too much efficiency will not allow you to deal with fluctuations in the environment (both opportunities and problems), and too little will prevent you from obtaining the work output required to be competitive.

A good rule of thumb is to err on the side of spare capacity when swimming in uncharted waters (eg when doing validation experiments), and on the side of efficiency when doing tasks you are familiar with.



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