Most companies around the world from start up to the giants wants to reduce cost and maintain the profit margin to keep the health of the company. This weekend I was reading articles from PWC and Mckinsey web sites to know how business can identify and reduce their running costs and thanks too the recommendations/steps these firms come up with after conducting robust research in different sectors.
I love to share the following summarized steps that we shall consider before engaging in cost reduction strategy.
Five steps to a more informed, systematic and sustainable approach to strategic cost reduction.
Start with strategy: have a clear view of strategy and ensure it is consistently understood across the organization.
Align costs to strategy: Differentiate the strategically-critical good costs from the non-essential bad costs.
Aim high: Be bold, be brave and be creative
Set direction and show leadership: strategic initiative with the same board sponsorship, direction and accountability
Create a culture of cost optimization
There’s no point looking at cost reduction in terms of benchmarks or percentage targets any more. The real differential is the strategic ambition to set the bar higher (10X) and explore all possibilities, rather than settling for marginal gains.
Reward and incentivize staff to continuously look for improvement opportunities – build a culture of good versus bad costs.
Comments