Insight
How to establish a cost savings agenda?
Cost seems to be top-of-mind for most CXOs and retains a high position on the agenda.
The objective of a cost optimization programme could be to fund growth or market expansion, enable innovation in both short- and long-term perspectives, or attain or maintain market position or leadership.
Cost savings initiatives can originate from different perspectives and be quite diverse in nature. A top strategic agenda which impacts the fundamental way of doing business to address structural costs within the current operating model is one example. A selective focus on tactical and targeted improvements within certain parts of the business could be simple in its rationale but effective in optimising cost and trying out an approach.
A structured approach towards the cost savings agenda is essential.
- Ensure (swift) progress to meet determined targets.
- Choose and implement a cost-out model to meet desired scope and objective – neither too complicated nor too narrow, but “fit for purpose.”
- Facilitate necessary shift from a budget perspective to cost cutting, cost optimization or value-driven cost improvements – depending on ambition
- Ensure long-term savings and cost focus become integral to the business agenda.
- Avoid typical pitfalls and limit potential risks.
OPTICOS APPROACH TO COST OPTIMISATION
Leveraging a hypothesis-driven way of working in close cooperation and clear sign-offs from relevant stakeholders help bolster analysis and execution. Given the scope and an emphasis on cost savings, the overall approach may be tailored to meet the desired business objectives.
Opticos structured and pragmatic approach encompassing five phases to executing a typical cost-out programme.
TYPICAL SUCCESS FACTORS
There are identified factors that significantly impact cost out program success rate where effective program management helps boost progress, manage risks, and increase output.
Methods and areas to work with to help articulate, define and achieve financial goals:
- Cost optimization
- Cost transformation or Cost-out
- Cost mapping
- Cost allocation
- Cost assessments and Benchmarking
- Cost transparency
- Financial management
Areas of knowledge and expertise critical to fully establish a cost-savings agenda:
- The Sourcing and Procurement domain, e.g. address overall spending – since this often constitutes a large portion of the total cost.
- The IT Strategy and Digital Business Transformation area provide valuable insights and capabilities to address improvements within the IT and Technology space, often crucial drivers for improvements and cost savings.
- To drive real business change, broad industry experience is needed to understand the market and the industry dynamics within the industry in scope.
Acquiring access to these three areas of knowledge and expertise before embarking on a cost-saving journey could be added to the success factors mentioned above.
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