iEfficiency is a funy thing that is often associated with “Cost Cutting” or “Optimizing”.  Assuming you start a company with no idea what you are doing you are hugely inefficient.  For all practical purposes you are like an artist with an efficiency factor of 0 or 1.  At the same time because you have this massive excess of capability you can be hugely effective.  A custom shop like Chip Foose’s place down the street from us is a great example.  His cars are hand crafted art. Hugely inefficient to create, but highly effective at being very unique and meeting the buyers every need.

Becoming more efficient has a two costs.  The first is the money it takes to buy equipment, create systems and provide more services.  Building more cars costs more money.  Instead of Chip Foose think Aston Martin.  Similar price point, semi custom cars instead of full custom.  Next we move to an assembly line like Porsche.  more efficient yet still highly effective at being unique, unless you live in Southern California that is.

Eventually we get to the big five global auto makers.  Each unit of efficiency becomes prohibitively expensive.  100% is never achievable because all equipment needs maintenance at some point.  Every company is different but somewhere between 80 and 90% there is a huge increase in cost for very little gain of efficiency.

Next is effectiveness.  We already talked about Chip Foose being incredibly effective.  Each car has to be completely unique and have a huge pricetag to sustain the operation.  While only slightly less effective, Aston Martin too must demand the high pricetag, but as you make more cars, becoming less effective at creating a unique product the price point drops until you hit best selling boredom like a Honda Civic or Tesla Model 3.  Those two vehicles are at about peak effectiveness and efficiency.  You can buy a cheaper car, but people want less of them so they sell fewer numbers, and at a lower price. Think Mitsubishi Mirage or Nissan Versa. That is not continueing to optimize, rather that is going past peak optimization.

As a buzzword in business “optimization” has been turned into nothing more than a mantra for “revenue maximization and cost minimization”.  That is a recipe for failure.  The real deal is peak optimization where your efficiency equals your effectiveness if you want to reach peak profit possibilities.  Chip Foose will never reach Teslas sales figures, and Tesla will never build a car like Chip but then again, Elon never claimed he was an artist.

Unlock the secrets to achieving optimal efficiency without sacrificing profitability. Find out how striking the right balance can transform your business operations and lead to sustainable growth. Let Bourquin Group be your partner in unlocking your business potential. Contact us now to embark on a journey towards success!