From Chapter 13 “Efficiency” in Ingredients of Outliers.
A Better Way
Let’s take a closer look at exactly what we mean by “efficiency,” which is sometimes confused with the word “effectiveness.” Both words are used frequently in the management literature, and some dictionaries even show each as a synonym of the other. In fact, they have separate meanings.
Probably the most succinct statement about their difference came from the late Peter Drucker, the best known and most respected management consultant, educator and author of the twentieth century. Here’s what he said: “Efficiency is doing things right; effectiveness is doing the right things.” Both are important management tools and they’re not contradictory but complementary. While Drucker ranked the second as somewhat more important, he also said: Efficiency is doing better what is already being done.”
Among the best examples I know of someone “doing better what is already being done” is a man named Frederick W. Smith. Born in Mississippi in 1944, he developed an early love for flying and by the time he was a teenager he had earned his license as an amateur pilot. During his four years at Yale University in Connecticut he continued his interest in flying, serving as a charter pilot at the Tweed-New Haven airport.
It was during that time that an idea began to take shape in young Fred Smith’s mind. Other pilots he met kept talking about the inefficiencies they experienced in delivering parts and equipment. In a 2004 interview with Business Week magazine, he made what he called “a very simple observation. As society automated, as people began to put computers in banks to cancel checks—rather than clerks—or people began to put sophisticated electronics in airplanes—society and the manufacturers of that automated society were going to need a completely different logistics system.”
It was that observation which led him to write an economics class paper outlining what he saw as a need for developing an overnight delivery service in the rapidly growing computer age and his plan for meeting that need. In other words, he envisioned what Peter Drucker had defined as a way of doing better what was already being done.
It was that class paper which has become the stuff of legend. Supposedly, Smith’s professor had given the paper a “C” and commented that such a plan wasn’t feasible. Smith himself doesn’t remember either the grade he received or any comments about it by his professor.
After graduation in 1966 from Yale, where he’d been in the U.S. Marine Corps training program, he joined the Marines, and during the course of the next four years, he served two tours of duty in Vietnam. He was not a Marine pilot, but flew with pilots as a forward air controller on more than 200 combat missions. During his four-year career, he paid close attention to procurement and delivery procedures, as his dream continued to grow.
In 1970, after completing his military service, Smith acquired an interest in an aircraft maintenance company and a year later, confident he could do more efficiently something that was already being done, he launched Federal Express Corporation. In that same Business Week interview he noted that the situation had gotten worse, as others “were trying to use an infrastructure built around mostly passenger air transportation—the airlines—which wasn’t designed to handle it at all.”
Today Smith serves as chairman, president, and CEO of what became simply FedEx, a company with more than 300,000 team members operating in more than 220 countries. Its fleet of some 700 planes and 80,000 land vehicles handle nine million shipments—every day! With annual revenues in excess of $42 billion, FedEx is among the one hundred largest companies in the United States and is consistently ranked as one of the world’s most admired companies. And it all began when a young man took note of an inefficient system, knowing there had to be a better way.