In times of uncertainty, when business models are challenged, managers and financial directors are bound to cut costs to make organisations more agile, robust and adaptable to change. Leaders with a clear vision then tend to use cost-cutting and improvement to align costs with business strategy, to lower costs, focus on the aspects of the business that are controllable and free up resources to fund transformation and future growth.
However, aggressive cost-cutting tactics will not salvage companies under pressure. The change must go deeper, reaching a strategic and cultural level. This means that a company’s most valuable assets – people and their talents – must be mobilised to innovate and to find new ways of working that do not require high investments in new product research and development. Together you can save substantial amounts of time and money.
We show you how to add strategic cost-cutting and improvement to your innovation agenda, and how the development of an innovation culture is a powerful tool to align people’s focus, change behaviours, save costs and deliver continuous and effective results. To make it work, we guide you through the following five steps:
1. Define your strategic cost-cutting goals, which can be incorporated in your innovation agenda.
You need to have a clear view of your company’s strategy and map out good and bad costs for programme intervention, at macro and micro levels. On the one hand, bad costs should be seen as those that do not align with the growth strategy. On the other hand, good costs are those that support business capabilities to achieve growth and may be worthy of more investment.
2. Guarantee C-Suite engagement from the beginning and have a clear direction for your cost strategy.
You should deliver cost optimisation with the support of the CEO and top managers, defining areas of improvement from the beginning, as well as how to address each of these areas.
3. Invest more in bottom-up approaches, engaging and having your people contributing.
Simply externalising tasks and reducing headcount are often ways to overshadow a complex problem. You need to call on people’s knowledge and experience to help you separate the wheat from the chaff and find concrete and innovative solutions.
4. Be resilient in creating a cost-conscious culture for continuous optimisation of resource use.
Over time, as you seek new ways to rationalise and optimise costs, a new culture of strategic cost-cutting will be embedded.
5. Explain to your workforce your shared mission and remove fears,
ensuring that both needs and strategy are consistently understood across the organisation. Your employees must feel they have a role to play and can have an active voice in the decision-making process, being welcomed into the discussion about the best ways to reach the proposed goals.
A well-structured innovation management programme for strategic cost-cutting and improvement can be particularly useful to get employees identifying ground-level enhancements, with several additional advantages:
- allowing you to develop a cost-conscious culture
- easily uncover bad costs and inefficiencies
- assure more dialogue and engagement
- build up an ongoing, resilient process
Strategic cost-cutting is never blind cutting. It is, in fact, a method to accelerate the discovery of new and more effective ways of doing business, at a lower cost, challenging you to look at the larger picture, to seek the root cause of the problem. It should be seen as a way of questioning how we do things, even why we do them, exploring new innovative routes and building the foundations of tomorrow’s growth.
Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO