February 22, 2024
Organizations are constantly reinventing themselves to keep up with shifting market conditions, competition, and customer preferences. Or they may launch change programs to adopt new technologies and ways of working.
The changes often involve removing cost from processes that aren’t as efficient or cutting edge as they once were in unlocking resources for new initiatives.
According to new BCG research, corporate leaders are making better cost management a priority as a hedge against ongoing economic, financial, and political uncertainties.
Wholesale cuts are one way to manage costs. But drastic measures such as sudden workforce reductions may lead to unintended consequences because they fail to address the root causes of inefficiencies. Nor do they position an organization for future success.
By contrast, a holistic approach to cost management considers the entire enterprise, including operations, labor, and technology. This approach includes quick wins to release funds to invest in long-term initiatives that further growth. It also connects change to an organization’s purpose and vision for the future.
So, what are the key elements of successful cost transformations? Five BCG experts weigh in.
Organizations’ biggest cost is usually operations, making it the first place to seek efficiency and productivity improvements to fund the future.
When organizations launch a cost transformation, it’s natural to focus on the “cost” part of the equation. But the “transformation” part is just as critical.
Rethinking organization design does more than eliminate unnecessary expenses. It aligns decisions and resources with strategic goals, and promotes sustained performance.
When organizations connect cost management initiatives to their purpose, vision, and values, their transformation efforts are more likely to be successful and sustainable.
Making IT a core element of a cost initiative allows the organization to optimize operations, reduce spending, improve service delivery, and enhance competitiveness and efficiency.
