When Efficiency Becomes the Enemy of Growth

As the world changes, so do the rules of growth. Efficiency still matters, but how it is achieved continues to evolve. 

As market dynamics shift, and disruptions grow less predictable and more frequent, leaders are beginning to question whether traditional definitions of efficiency deliver the same growth they once did. 

It's not that lean operations, single-source suppliers, and just-in-time inventory have lost their place. In the right environments, they still hold tremendous value. But in an era where change happens faster than forecasts can predict, efficiency alone may no longer be a full measure of success. 

What if the once-renowned systems of efficiency are now quietly limiting growth? 

Enter the Innovators Dilemma–a phenomenon coined by Harvard professor Clayton Christensen, describing how the very practices that built market leaders become barriers to their future growth.  

The dilemma plays out in supply chain when companies focus on optimization over innovation; for instance, cutting costs by using single-source suppliers and minimal inventories, and standardizing operations while neglecting flexibility. While these may yield short-term margins, the cost of prioritizing efficiency without resilience is one we’re beginning to see in real time.  

The Cost of Efficiency 

Practices once considered the global standard can quickly become liabilities, as seen with Toyota and its ultra-lean production system. 

Pre-2011, Toyota’s system was built on JIT principles, minimizing inventory and storage costs by having parts delivered to the assembly line only as needed. In a perfectly predictable environment, this approach thrived, and was admired worldwide for its efficiency. 

But, in March 2011, the Great East Japan earthquake and tsunami struck and severely damaged Toyota’s supply network. Key suppliers, including a sole-source manufacturer of a specific microcontroller crucial to production, drove Toyota’s previously revered assembly lines to a halt.  

With production at its Japanese plants shut down for weeks and North American production cut for months, the company’s global output declined 78%--a $1.36 billion loss that stung, causing Toyota to rethink its efficient yet evidently fragile system. 

Automotive industries faced a similar circumstance when in early 2020, the COVID-19 pandemic led to a severe and prolonged global semiconductor chip shortage. 

 Prior to the pandemic, many global technology and automotive industries relied on optimized, lean supply chain for semiconductors, using just-in-time inventory practices and depending on a small number of key manufacturers, such as Taiwan's TSMC. 

 But as with many operations during the pandemic, prior optimizations were turned upside down, and the efficiency that was once the catalyst for success became the system’s greatest weakness. 

When lockdowns started, auto manufacturers were certain that demand for new cars would drop. As a result, they scaled back production, cutting production forecasts and closing manufacturing plants. Their suppliers were under the same impression and cancelled orders for semiconductor chips to avoid inventory costs. At the same time, the demand for consumer electronics shot up and absorbed chip supply.  

The resulting mismatch between expected demand and actual demand was drastic; when the demand for cars unexpectedly rebounded, there was no semiconductor supply, and the auto manufacturers had no inventory to fall back on. Production was severely reduced, and companies like Ford and Volkswagen were delayed for months while waiting for chips that cost less than a dollar.  

The shortage ultimately cost the global auto industry hundreds of billions of dollars–another wakeup call for companies to rethink supplier diversification and highlight a true need to build resilience before the next disruption hits.  

In a volatile world, supply chain diversification and supplier relationships are no longer optional. The only predictability about disruption is its inevitable return. When that disruption occurs, whether from technology or geopolitics, companies will find themselves facing the Innovator’s Dilemma time and time again.  

 So what allows some companies to not only navigate disruption, but emerge stronger because of it? 

Adaptability: The New Measure of Growth 

Among the companies who have managed to take advantage of disruption, there is a clear pattern: they intentionally scale with adaptability and flexibility as core competencies. They don’t forego efficiency, but instead redefine its meaning.  

 Traditionally, scaling meant replication–doing what works in a faster and cheaper way. But adding adaptability and flexibility to the mix allows companies to redesign their approach when disruption hits, with the ability to execute that change quickly. Here are a few companies that embody this idea and have capitalized on this framework in a disrupted world: 

 Walmart presents a case of adaptive innovation–still targeting efficiency while using scale intelligently. Walmart has transformed its supply chain by developing an internal neural network unifying data across its operations. Using AI to build a system of connections between inventory, logistics and customer behavior, they are able to predict demand with exceptional precision. With this technology, they are able to reroute shipments if needed before disruption occurs, and reduce waste at scale.  

 Schneider Electric, a global leader in energy management and automation, has taken a forward-looking approach to disruption with a system based on flexibility. In response to AI-related manufacturing demand increases, the company has expanded production capacity in the U.S. rather than offshoring it. Investing $700 million across its U.S. manufacturing footprint, its deliberate shift towards reinforcing domestic supply chains focuses on creating resilience. When disruption inevitably strikes again, their proactive approach will be able to withstand geopolitical shifts and logistics breakdowns, showing intentionality, flexibility and adaptability. 

 Sweetgreen, a mid-sized restaurant chain, showed proactive measures in building a flexible and adaptable supply chain that protected their business in times of natural disaster. The dual-sourcing model for their company used local farms contributing to supply regionally, supported by larger farms in California in times where demand wasn’t met. When a warm winter storm destroyed their supply of peach crop, the team was able to redirect by swapping to local blueberries and strawberries, creating a new product that became one of their most popular items. The direct relationships they built with growers meant they were quickly able to coordinate with Sweetgreen’s needs, a dynamic based on mutual partnership. Because of this dynamic, they were able to navigate the menu disruption with ease, providing an example of a creative solution based on a flexible supply chain. 

 These examples underline how both enterprise and midsized companies can benefit from innovation and flexibility in supply chain. The impact is measurable: a Gartner study found that companies that conduct high levels of experimentation are 3.7 times more likely to avoid revenue losses or see positive revenue impact under uncertain conditions. 

Mitchell Taylor Can Guide This Transition 

At Mitchell Taylor, we partner with companies to navigate supply chain disruption and prepare for the future as they rethink the role of efficiency in growth. As external shocks become more frequent and less predictable, firms need a partner who understands how to rebuild supply chains end-to-end, spanning strategy, planning, forecasting, inventory management, and operations with advanced analytics and IT. 

 Our firm has supported mid-sized companies through periods of volatility, guiding leaders as they transform sourcing strategies and rebuild supplier networks to stabilize operations. Mitchell Taylor’s work has shown that targeted adjustments applied collaboratively can protect your company’s growth long before the next disruption hits. 

 As a boutique consultancy specializing in supply chain, we aim to deliver high-impact solutions. Mitchell Taylor creates partnerships that are based on mutual success, trust, and loyalty, and strengthen your supply chain in the face of volatility. 

Looking Ahead 

Disruption presents an opportunity to strengthen your business before the next wave hits. Optimizing for efficiency alone will no longer sustain your business in the next decade. The most resilient companies combine efficiency and adaptability by diversifying their suppliers, pressure-testing networks, and replacing reactive decision-making with proactive scenario planning. 

 The first step is clarity. A supply chain assessment can quickly highlight where vulnerabilities, dependencies, and opportunities lie. Understanding where flexibility is lacking and where small strategic adjustments can be made can unlock significant potential and future protection.  

 At Mitchell Taylor, we partner with organizations to help build this balance. We take steps to uncover obstacles and improvement opportunities, working alongside leaders to assess current state and co-designing resilience strategies suited to scale and industry. Our goal is simple: to help companies evolve and strengthen their operations today so they grow with confidence in any environment.  

 As the landscape continues to evolve, companies do not have to navigate disruption alone. With clarity, intentional changes and a partner committed to resilience, organizations can not only withstand volatility, but also emerge stronger because of it.