Cost Cutting and Innovation
Cutting Costs and Innovation are Not Mutually Exclusive
You can’t shrink your way to success. – Tom Peters
A recent New York Times article shows that not everyone is experiencing the current economic climate equally. While some companies and industries are experiencing stagnation, others are growing rapidly and positioning themselves far ahead of their competition. Are you growing or pulling back right now? Are your customers, partners and competitors nervous or confident? How can you be sure you are making the right cost-cutting and/or innovation decisions right now?
Twenty years of growth have left many organizations with overly complex and expensive technology infrastructures. Technology departments were in “keep-up mode” and their focus was on delivering value quickly to the business. Efficiency and infrastructure were secondary concerns. Getting it done quickly often led to inefficiencies in ongoing infrastructure management. In short, years of expedience have resulted in redundancy, waste and unused applications. As a result, many businesses are spending 80 percent of their technology budget on existing applications.
We can double the budget available for new projects
There is now an approach for rapidly looking across the Enterprise to identify inefficiencies and repetition that provides a significant opportunity to establish best practices and realize cost savings. For instance, when undertaking a cost-cutting and/or innovation project, inefficiencies and repetition are consistently 10x – 20x more than expected – often doubling the budget available to support new projects once these issues are resolved.
One manufacturer expected about $3 million in savings when it decided to address these inefficiencies. Instead, the company actually cut $40 million and redeployed 65 personnel. A large U.S. bank expected $2 million in savings by consolidating applications for six divisions. Its savings? $23 million. A global logistics company found 80 percent redundancy across its five primary services. This same analysis of the activities in your business should lead to cost cutting and innovation.
The seeds of this approach were introduced almost ten years ago by Dennis Stevens and refined six years ago at Microsoft. It was expanded in the 2008 Harvard Business Reviewarticle, “The Next Revolution in Productivity,” by Ric Merrifield, Jack Calhoun, and Dennis Stevens. More recently, Merrifield give it a thorough executive treatment in his best-selling book, “Rethink: A Business Manifesto for Cutting Costs and Boosting Innovation.”
Our consultants have performed these engagements for a number of organizations, resulting in millions in savings for client companies. In several of these engagements, we were able to identify rapid cost-cutting opportunities sufficient to fuel the innovation these companies desired.
Offering: Cost Cutting and Innovation
Increasingly, organizations are under pressure to cut costs while improving their performance. This is often difficult because most people inside the organization lack a complete vision of how costs are allocated across departments and divisions, as well as across the overall organization, in order to identify where to cut costs, where technology and process improvements will drive real benefit, and to find opportunities to reduce redundancies and improve performance. Use ReThink to identify a clear path to effectively cut costs while simultaneously driving business model innovation.
Contact Us today to get started with a Cost Cutting and Innovation engagement. If you want, we can tie our fees to cost cutting and innovation benefits identified. Most engagements have a payback in less than 6 months.
