Why organisations need to be obsessed with efficiency?

In today’s day and age, the local market has turned global. However, all major organisations around the world are obsessed with producing goods faster, better and more importantly cheaper. Take amazon for instance, when discussing their big ideas to lower prices, deliver faster and increase their availability. Jeff Bezos, 10 years back stated “Everywhere we look (and we all look), we find what experienced Japanese manufacturers would call “muda” or waste. I find this incredibly energizing. I see it as potential – years and years of variable and fixed productivity gains and more efficient, higher velocity, more flexible capital expenditures.” (Bezos, 2008)

However, when we as customers look for products and services, we are still faced with long waiting times, high costs and frequent stock outs. Yet when we ask companies about these shortfalls, they revert to the way business is in Kenya. This answer is widely accepted in every day business. But unfortunately, many firms can only survive with such inefficiencies provided a competitor does not take up market share.

As stated by CEIC Data, “Kenya’s Foreign Direct Investment (FDI) increased by 671.5 USD mn in Dec 2017, compared with an increase of 393.4 USD mn in the previous year.” This clearly shows that many big international brands are seeing opportunities in the market as the country improves its stability both politically and economically. This will put direct pressure on local business to “up” their game and start improving efficiency of their operations. More importantly, global brands will win market share as they come with a culture of being obsessed with efficiency.

The second reason for the firms to be obsessed with efficiency is around being competitive in the regional market. Surrounding countries like Tanzania, Rwanda, Uganda and Ethiopia are showing signs of very high growth. Many African leaders have embraced the “Africa Rising” spirit and the competition to become Africa’s rising star is on. To create a competitive advantage, firms in Kenya must re-evaluate their processes and drive for efficiency.

GDP growth (annual %) in 2014, Data by World Bank Group
GDP growth (annual %) in 2017, Data by World Bank Group

Further to this, tariff deals through the COMESA and SADC have given access to new entrants. Take for example the matchstick industry. Producers in Egypt, under COMESA rules are able to significantly reduce their costs and supply African markets at prices lower than the cost of local production.

The third reason is  around creating a sustainable business. Efficiency in processes creates profits which encourages growth in firms. Local firms must start investing for the next 50 years of their business. To do this, they need to start with creating strategies that can only be executed through efficient systems and processes. Setting targets and measuring outputs allows firms to measure against industry benchmarks. When looking to improve efficiency of the process, these benchmarks provide vital clues on where the gap for improvement lies.

In conclusion, local Kenyan firms must become obsessed with efficiency so as to deliver products that are cheap, good quality and readily available. This will ensure they hold market share and remain relevant to the market. One the many ways of doing this is through the introduction of the lean management philosophy centered around removing waste and delivering value to the customer.

Work Sited

Bezos, J. (2008). 2008 LETTER TO SHAREHOLDERS. Retrieved from SEC: https://www.sec.gov/Archives/edgar/data/1018724/000119312509081096/dex991.htm