Efficiency vs. Effectiveness

I just finished reading about this in chapter two of Ronald J. Baker's book,

"Implementing Value Pricing: A Radical Business Model for Professional Firms."

Thank you, Chris Do and the Futur , for putting this on my book radar!

My parents have told me for years that "that numbers will only tell you a story about numbers- not people." This sentence was kryptonite to my PowerPoint presentations and often so traumatic that my spreadsheets could be heard crying in their files. Efficiency vs. effectiveness is something I would often argue about with my mom. Reflecting on those arguments while reading this chapter, I laugh! Because I see myself as the traditionalist now, and her as the radical thinker.

There was a time when we committed to buying a ton of coffee from our partner farmers, but our sales were looking light. I proposed a solution for raising money that was brutally efficient, cost-effective, and low-risk in terms of quality. But my mom said no.

Because she cares about effectiveness and not efficiency. She'll take the risk if it leads to the results she's after. And this is why my mom, Joji Pantoja, is a globally recognized, award-winning CEO...

And I'm the guy who makes her coffee.

My mom takes risks.

Instead of focusing on the money we didn't have, she focused on the lots they delivered and asked for a few days to pay. We usually pull out the best micro-lots and reserve these exclusively for Coffee for Peace Davao. But this time, she had us consolidate and re-sort the best of the best. She then flipped these for an added premium.

Her strategy gave us a "just in time" rolling cash flow that allowed us to buy all the coffee we committed to purchase that season and make a profit. Those batches of arabica coffee we sold made it to Manila, Cebu, and all over Mindanao under various brand names and roast profiles. The farmers got exposed, and their coffee was experienced in different ways, in multiple environments, by new customers and entrepreneurs in new cities and provinces nationwide.

If I had it my way, all that great coffee would have been roasted in our "mad max" roaster and served only in Davao. My strategy was risk-averse and guaranteed profit. But it was transactional and put the value of the customer relationship over the value of our partner relationship. I saw value in terms of cost, speed of delivery, and sales. My mom saw value in terms of relationships, trust, and the long-term impact of our work.

She showed me that an effective strategy can be risk-tolerant and value-centered. She saw the numbers as relational, happy farmers = happy buyers = happy customers:

  • She saw the long-term value of us keeping our promise to our partner farmers meant they'd be more inclined to produce more specialty coffee in the future.

  • She saw the long-term value of us selling the best of our Specialty Coffee to competitors meant that they'd be more inclined to buy specialty coffee in the future.

  • She saw the long-term value of competition in the specialty coffee market meant that more people would be exposed to specialty coffee in the future, meaning customers would have more options and more opportunities to experience specialty coffee.

To be honest, this lesson on efficiency vs. effectiveness has melted by brain. It's a good starting point though, and I'm excited to learn more about this topic. I think this is the first time I've actually been on the same page as my mom in using the term "value" in a Coffee for Peace buiness context correctly.

I just started reading this book. Please free to help me understand what I wrote better. And maybe i'll even buy you a coffee!