When efficiency becomes the enemy of growth

Five years ago, you might have thought the job was done.

Lean. Six Sigma. Automation. Every process mapped, every minute accounted for. Product portfolios rationalized. Development cycles optimized. Quality gates tightened. Efficiency metrics exceeded targets. The entire operation ran smoother than ever, yet your margins keep shrinking.

That's the paradox at the heart of European manufacturing today: the better you get at efficiency, the less advantage it gives you. You're optimising faster than your competitors, but they're playing a different game entirely.

When efficiency stops creating advantage

Manufacturers across Sweden and Europe have spent many years mastering internal optimisation. Waste is down, productivity is up, and throughput has never looked better. Product portfolios are leaner. Development cycles are faster. Quality metrics exceed targets. On paper, this is what success should look like.

But outside the factory gates and beyond the product catalogue, the world has changed faster than your logic. Customers no longer buy on efficiency. They buy on relevance: how well you solve their problem, not how neatly you solve your own. They don't reward you for making yesterday's products better. They reward you for building what they need next.

The result? You've become incredibly efficient at producing and developing things customers may no longer value in the same way. Efficiency has turned inward. It's protecting yesterday's business model instead of building tomorrow's.

Inside-out thinking: The hidden constraint

Lean and Six Sigma were never the enemy. They built the discipline that made European manufacturing world-class. But the same logic that delivered excellence also created blind spots.

Inside-out thinking starts with the business and works outward. It assumes that if we optimise our operations, customers will naturally benefit. That worked when markets were stable and customer choice was limited.

But this logic didn't stop at the factory floor. It infected the entire business.

R&D optimized around existing product architectures. Portfolios grew because incremental additions felt low-risk. Sales perfected pitches for solutions customers were already moving away from. Product roadmaps became incremental improvement exercises, delivering faster and cheaper versions of what worked five years ago.

The whole organization became brilliant at efficiency and terrible at noticing when efficient execution of the wrong strategy doesn't matter.

Today, customers have endless alternatives. Digital platforms let them switch in seconds. They no longer reward process, they reward outcomes. When manufacturing remains anchored in inside-out logic, it becomes brilliant at managing itself and terrible at adapting to what's next. The metrics keep improving. The relevance quietly erodes.

What customers actually value

Customers don't pay for your efficiency. They pay for outcomes that matter to them.

That means products that solve their emerging problems, not incremental improvements to yesterday's solutions. Speed to market when their needs shift. Willingness to co-develop instead of selling from a fixed catalogue. Proof you understand where their industry is going, not where it's been.

Faster lead times matter. So do fewer disruptions, easier integration, and proof of sustainability. But only if you're delivering something they still need. Efficiency only creates value when it's visible and meaningful to the customer, when it's in service of relevance, not instead of it.

That shift from cost focus to outcome focus isn't theoretical. It's measurable. Companies aligning their operations to customer outcomes consistently see higher pricing power, faster recovery from shocks, and stronger brand preference.

From factory logic to market logic

The change starts with how you think about value creation. Factory logic measures success in utilisation, throughput, and standardisation. Market logic measures success in adaptability, responsiveness, and customer impact.

Inside-out manufacturers ask: How do we optimise this process? Outside-in manufacturers ask: How does this process make us more useful to the customer?

That shift in questioning isn't cosmetic. It changes what you measure, how information moves, and where you invest improvement effort.

Start with measurement. While internal efficiency metrics still matter, companies must also track external performance; how reliably and quickly they deliver what customers truly value. When your metrics stop at the factory wall, they hide what truly matters.

Then change how information moves. Build short feedback loops between your operations, sales teams, and end customers. Treat every customer interaction as a data point, evidence of what's working, what's changing, and where expectations are moving next. That intelligence flows back into daily decisions rather than quarterly reviews.

Finally, adopt a new rhythm of improvement. Instead of treating optimisation as a fixed roadmap, work in shorter cycles. Test ideas quickly, learn from real customer impact, and adjust. Continuous improvement becomes continuous adaptation.

When relevance becomes the organising principle, efficiency follows naturally, but it points forward, not inward.

Relevance doesn't replace efficiency. It gives efficiency a direction.

What leadership must change

Leadership is where this change either accelerates or dies. The traditional manufacturing CEO rewards predictability: hit the plan, control the cost, keep the line steady. The modern one rewards adaptability: sense the change, act early, scale what works.

The role is less about command and more about creating the conditions for learning at every level. You don't direct evolution from the top; you make it possible.

As one Swedish CEO put it bluntly: "We stopped trying to be the most efficient producer. We started trying to be the fastest learner in our category." That's what separates those still optimising from those already evolving.

Where to start

Start with four hard questions. Are we still optimising existing operations or building capabilities for where the market is going? Is our product roadmap built around customer problems we validated last year, or problems they'll face next year? Are our improvement programs linked to measurable customer outcomes? If we were starting from scratch today, would we design our business the same way?

If the answer to any of those questions makes you uncomfortable, you're not behind. You're just at the turning point.

Efficiency will always matter. It keeps you running. But relevance keeps you winning.