Effectiveness = 'Doing the right things'

'Doing the right things' is critical to the success or survival of any organisation: commercial and not for profit. Strategy is the key. Not just any strategy, but one that is well constructed and then executed. See notes below on what this is in practice. 

Efficiency = 'Doing things right'

Doing things the right way means doing them better and quicker. 

A powerful force pushing or pulling a business in the WRONG strategic direction can quickly lead to severe problems. Back in the late 1990's, Marconi's strategic decision to buy into the US telecommunications equipment market, just prior to to the global collapse of telecoms stocks, was efficiently executed, but wrong. Farm owner X's (This is a true story) decision to pour all his cash into developing an outbuilding into a state of the art recording studio was pursued with great enthusiasm. Unfortunately the business model for the new venture was based on a 'lifestyle dream' rather than thought through. No decent market research or objective financial modelling of potential business outcomes under different future scenarios was conducted. Marconi is no longer the cash-rich global player it once was. X has lost his wealth and no longer involved with either farming or the music business.

Those getting the strategy right have given us Carphone Warehouse (up to recent problems with its Talk-Talk service) and Tesco's global retail operations. Barely 20% of the SME ventures backed by venture capitalists will prove good investments and just a handful, each year, will skyrocket in value. Year after year, even during economic downturns, there will always be business people that accumulating great wealth on the back of a well executed, timely strategy.

 
Effective & Efficient = 'Thrive'

Organisations that pursue the right strategy efficiently thrive. Sometimes they are so effective and efficient that they rapidly outgrow strategies, by meeting strategic targets earlier than planned. The best then simply go on to set and achieve yet more challenging strategic targets, so as to sustain their ability to thrive.

Effective & Inefficient = 'Survive'

Many organisations get by, 'surviving', forever showing potential, but never meeting their growth targets. Such organisations include public sector services agencies, operating to a clear brief, that never quite achieve the service levels that others feel the amount invested in them should lead to. Many commercial organisations fall into this camp also, through poor management or inefficient practices. Typical examples include family businesses that, by chance, have found themselves in a growth or stable sector, such as accountancy or specialty retail, that never fulfil their growth potential because of ongoing family feuds, or inappropriate, dictatorial management styles.

Ineffective & Inefficient = 'Die Slowly'

Public sector examples include the UK Child Support Agency and possibly also the UK Strategic Rail Authority. Private sector examples possibly include Rover Cars and Corus, the steel makers. These organisations seem to lack a cohesive compelling vision of what they are aiming to become and in turn, deliver, several years down the line. They also, for various reasons, appear, relatively inefficient. Masses of family-run SME's also occupy this quadrant. These are family business, often established for generations that have forever been poorly managed and now, having lost their way, exist in stately decline.

Ineffective & Efficient = 'Die Quickly'

To be highly efficient at doing the wrong thing is to fail heroically. When businesses fall into this quadrant, unless urgent remedial action is taken to get them out again, such as emergence from administration or Chapter 11, or some radical pre-emptive measure that avoids these, they die quickly. Many, many technology firms fall into this quadrant, never to emerge, but so too do restaurants and a whole host of other products and services organisations. What they have all shared is a lack of management awareness that they are headed for danger: that the 'big vision' driving their strategy, does not tie up with the realities of the marketplace.
 

Most businesses exist with a poor to good, not brilliant strategy and pursue this in a poor to good, not brilliant fashion. Those businesses or organisations that experience brilliance in either their strategies or the pursuit of them often do so, only temporarily. The dynamics of businesses' internal structures are rarely in-step with the dynamics of the environments in which they operate. This is just as true for small businesses as it is for large. Not so many years ago Jessops and Richer Sounds were fairly small UK retail operations. Both businesses are now (At the time this paragraph was written in 2005) large, but are locked into business models that have been overtaken by the Internet and the digital revolution. They need to reinvent themselves with an appropriately revised strategy that propagates down from the top into the rest of their businesses, so that everybody and all their assets work to take the businesses forward into a new direction, appropriate to the changed market circumstances.

These paragraphs were reviewed in 2007, just as it was announced that the Virgin Group had sold Virgin Megastores to its management and that the chain would be rebranded as 'Zawi'. This is a classic example of a business needing a revised strategy. The parent company's faith in the business' ability to strategically adapt to changing market conditions was obviously different to the management's, who are the new owners.
 
You can download an A4 .pdf of the above graphic by right-clicking it.