The only time we usually hear about cost management is when a business isn’t achieving its growth targets. From redundancies to store and factory closures, cost management actions normally make us think of trying to salvage a company, a turnaround, or making the best of a bad situation.
However, a recent survey by Deloitte’s found most companies that undertake tactical cost reduction exercises completely miss their cost management targets, not even coming close. While in top-performing businesses, cost management is being deployed as a strategic tool to free up both cash and resources for reinvestment into company growth measures.
So what sets these companies apart from the majority who fail?
All around the world, less than 50% of companies are hitting their cost management objectives. Most companies have a very tactical approach, - they don’t know how best to reduce costs, how to engage their employees, nor how to redeploy any efficiencies and savings generated.
Only 12% of companies are able to cut their costs while growing their turnover. These unique companies approach cost management very differently.
- Top Down Engagement – Effective cost management exercises are always driven by the highest level of management. (ideally CEO level)
- Strong strategic imperative:
- Creating efficiencies to solve a problem
- Reinvesting the savings in new projects and opportunities (enabling both the people and the organisation to develop and grow
- Simple decision making – Enabling decision makers with accurate and timely information and insights significantly increases the likelihood of success.
- Effective technology – Linked to decision-making, data analytics tools in the hands of the users and insights and performance shared across the whole organisation, in real time, influenced key business decisions. AI and machine learning tools allow businesses to accurately predict and manage cost structures, automate finance processes, create what-if scenarios and make responsive decisions. This increases accuracy, prevents inefficiencies and drives the company towards growth.
In my opinion, the key differentiator is not only having cost management as a strategic lever, but these successful businesses have effectively embraced technology to deliver this strategy. Not relying on existing tech and processes, they attempt to do things better, they are on a continuous improvement journey, constantly innovating and they welcome different ways of thinking. Harnessing data analytics and technology enables not just cost reduction, but an approach to creating efficiencies, best practices and opportunities to drive growth in today’s constantly evolving business world.
Author: Ian Yates, Founder of Barcanet - Ian has over 25 years experience of helping businesses reduce their costs, automate processes and create efficiencies. Barcanet analyses over £22bn supplier spend. To book a call with Ian e-mail him on info@Barcanet.com