“Innovate or Die” (Drucker,1999)
Executive summary- Realities on the ground are often vastly different to the understanding of the central office teams, open lines of direct communication with the front end are keys to successfully understanding realities. Seventy percent of change projects fail due to a lack of clarity, understanding, communication or internal buy in as key people believe that the proposed changes will damage the customer, clients, services or financials.
Walking the business at grass root level will reveal instantly the reality of engagement, belief and level of buy in at individual and collective team level. Leaders, managers, change agents and vested colleagues must take regular temperature check walks with their customer facing teams as change is not easy and comfort zoning is natural defensive behaviour, especially if current skill sets are put at risk during change programs. If you do not reinforce the desired cost optimization behaviours when you walk the business the teams will know you are not serious about the changes.
Six clear steps to support rapid cost optimization
1. Cost Optimization as a Culture and Strategy of Continuous Improvement
Cost optimization commonly starts life as an owners or board strategic aspiration. However, to fully realize a culture of continuous Cost Optimization, authentic heavyweight sponsorship at every level of the business is required.
Cost optimization is a mindset, clear behaviours and continuous drive for effective efficiencies but is never a onetime project.
Cost optimization requires central engagement, alignment, role modelling of behaviours that demonstrate “walking the talk”, so that colleagues sense, see and feel positive change.
2. Start with a Compelling Picture –
Brutal facts need to be communicated, adult to adult candid dialogues are the key to opening the door of personal and collective team change. Cost optimization will support businesses to remain in business.
Covid19 Pandemic repercussions across industries is creating two business styles, fast adaptors of change (the survivors) and the slow and resistant to change businesses (slow decliners).
Team members must understand the real effects of change and considered impacts on Customers, Colleagues and Financials.
3. Focus on Profit
Ensure individuals are clear on where they can drive income and additional profits.
Stop all loss-making services, products or units immediately until you understand how you will make them profitable fast, “think like an owner and shareholder”.
Understand your key competitive advantages, your key services and key products, invest in these profitable areas to support growth.
4. Third Parties, Supplier & Partnerships.
Renegotiate terms of contracts, review prices, margins, income and value for money. Prioritize “more for less, better, simpler, cheaper, faster”.
Target orders of fast-moving products, services and good margin items. Then remove slow sellers, underutilised services and introduce regular category management reviews.
Tough trading conditions demand tough responsive actions, pull tighter on the financial strings, check every invoice, did you get everything you paid for in the quantity you ordered, on shelf availability impacts sales.
5. The CFO & Finance Team Focus.
Engage individuals and encourage a culture of continuous individual performance improvement. Strive for maximised income, new growth and cost optimization through every level of the business.
Benchmark the business metrics against best in class performances, highlight areas for urgent improvement and action. Use the power of cross functional teams and groups to influence and support change across the business and hold people responsible for delivery.
Stop procrastination and increase speed of activity, decision making and drive cost optimization behaviours.
6. Strategic Opportunities -Growing Sales, Income, Margins and Cost Optimization
Assess strategic customer satisfaction, strategic positioning, strategic choices and strategic priorities. Understand where finite resources are best invested for maximum returns.
What are the clear wins, game changing directions where our efforts are best placed? What are our creative innovations and new paths to fast income streams?
Set clear growth targets at every level, engage and encourage innovation through every level of the team. Set clear cost optimization targets with hard financial numbers as fully engaged teams already know where the inefficiencies sit.
Business that evolve, adapt and modernise their operating models have a higher chance of survival. Creativity and innovation are keys to new paths to growth.