Video Transcript: Sustainable Cost Efficiency
Jeremy Kay
SiCW Theme Partner for Sustainable Cost Efficiency
Sustainable Cost Efficiency - are there savings of 15% or more?
There is no doubt that, in today’s economic environment, most companies are seeking to create clear water between themselves and the competition through a continued and relentless focus on cost But there is certainly an eye on growth. And increasingly cost savings are being used to fund this growth by creating space to invest in the top line.
In the search for cost opportunities, organisations have done the easy bit and cut discretionary spend and capacity, but in search for the next 15-20% much more radical thinking is going to be needed: looking right across the value chain (not just on individual functions) - really challenging the perceived wisdom – and thinking like an external investor. Challenging what value each component part of the business actually adds and being bold enough to change it.
The hard bit remains execution. We know that about 50% of opportunities simply leak away during implementation and there are six key things to focus on for success:
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1. Transparency
2. Hard economics
3. Comparators
4. Speed
5. Engagement
6. Sustainability
A real focus on cost efficiency is not something new but, with top lines remaining so uncertain and increasing pressure from shareholders to grow the organisation, high levels of cost efficiency are the thing that can make the real difference between success and failure in today’s environment.
If you are serious about sustainable cost efficiency - there are a number of questions you ought to be asking your colleagues:
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• How do we raise the bar?
• Where can we look to find more value?
• What else should we be going after?
• Do we have access to accurate cost information to make informed decisions?
• Do we understand our costs to serve?
• How do we sustain the benefits?
• How do we embed a cost conscious culture?
• What are other organisations doing that we can learn from?
We know from our research that CFOs believe that about 90% of the savings made in the recent recession are expected to creep back in. Keeping cost out a require leadership to focus on driving a real cost conscious culture. This often means changes, for example changing information, performance management regimes, accountability - such as delegations of authority.
And as with every diet, the losing of the weight is the easy bit, but making the life style change sustainable, that’s the tough bit.
