What are the good and the bad costs in your innovation agenda?

When introducing a cost-cutting strategy in your innovation agenda, you should first have a clear view of your company’s strategy and map out good and bad costs for programme intervention, at macro and micro levels. Both macro- and micro-level-oriented strategies have value and they often make more sense combined.

At a more tactical level, and in line with your strategy, you need to look at your whole organisation and differentiate between the critical ‘good costs’ and the non-essential ‘bad costs’:

  • Bad costs are those not aligned with the overall growth strategy of the company;
  • Good costs support the business capabilities needed to achieve the overall growth goals.

In an online article in Forbes, PWC’s strategist Rodger Howell says that ‘once a company’s costs are classified, strategic cost-cutting and improvement become a process of minimising exposure to bad costs and maximising investment in the best ones’. He adds that this practice helps to ‘create a more resilient growth model’, which is ‘particularly important during times of uncertainty’.

These bad and good costs can happen at both micro and macro level, as the figure below shows. It is key that you keep this matrix is mind when defining your strategic cost-cutting and its goals, and how to address each quadrant.

Strategic cost-cutting matrix

Overall, the bad costs are waste and an outcome of inefficiencies, which can and should be reduced. Do not underestimate them. Even micro-level bad cost-cutting, such as reducing power and resources use, can have tremendous impact on your balance account. Not only are these costs easily identifiable by your employees, but they can also be incorporated into your incremental innovation agenda in ongoing challenges, so that you are always capturing and addressing new and existing inefficiencies.

Measures to cut bad costs at a macro level (such as closing units or laying off people) may, however, have a stronger, higher and more immediate impact on your financial balance. But is it the way for your growth? We are not saying it isn’t part of it, but there are other ways you should always consider as well. These costs are better leveraged by external teams carrying out a strategic analysis to understand which costs are no longer aligned with the organisation’s strategy and can therefore be eliminated without negatively impacting core business.

On the other hand, good costs are those that support business capabilities to achieve growth goals. They may be, in consequence, worthy of more investment, so that in the mid to long term you end up saving more or increasing return.

At a more macro level, they will likely imply some investment and a more disruptive transformation, but can also have a larger financial impact. For instance, if you decide to redesign a profitable business area, you can open doors to new clients and markets and to higher returns.

At a more micro level, for example, by changing a product material or a method of doing things, you can also pave the way for an unexpected internal revolution. Here again your internal workforce can provide useful insights to redefine current products, services and processes. There is always space for improvement, and including this quest in your innovation agenda will help you structure and centralise the process, thus reducing investment in external advisory services and bringing interesting and relevant inputs for your business aligned with your needs.

There is no magic formula and no equation to tell you how and where to cut exactly.

The main message is: remember to look at the bigger picture and understand which methods are more efficient in which situation, so as to develop an effective strategic cost-cutting and improvement strategy.

This process of employee engagement and empowerment will also make your organisation more future-fit and will create a cost-conscious culture, essential to creating a sustainable cost-cutting and improvement strategy.

READ MORE:
For step 2 in cost-cutting within your innovation agenda, you will need this

FROM THE START:
Strategic cost-cutting and improvements in the innovation corporate agenda

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

How strategic cost-cutting helps you shift from survival to growth

In a weak growth environment, with low investments and rising risks, companies gamble on cost-cutting to ensure that they are prepared and equipped to grow stronger, as they wait for better times to come. Yet, cost-cutting is more and more seen as a way to drive growth, rather than as way to survive or avoid insolvency.

With recession, macroeconomic concerns, digital disruption and commodity price fluctuations fueling uncertainty, Deloitte’s 2016 data illustrates this shift from survival to growth. Its fourth biennial cost survey shows that the ‘save to grow’ strategy of ‘using cost reduction to fund growth initiatives’ remains prominent today.

However, in 2016, many US companies were ‘simultaneously pursuing seemingly conflicting goals of aggressive growth and aggressive cost improvement’. Deloitte calls this the ‘thriving in uncertainty’ paradox.

Then, whatever the future holds, the key to cost programme success lies in ‘choosing a cost management strategy that aligns with your company’s needs and is capable of delivering the required level of savings’. In this context, tactical initiatives to pursue aggressive cost targets will not be enough, and are likely to be ‘a recipe for failure’, the report adds.

The change has to go deeper then, beyond tactics, reaching a strategic level. This means that a company’s most valuable assets, people and their talents, become top priorities, ‘consistent with a growth mindset, since having qualified workers and deploying them effectively is key to successful growth’, writes Deloitte.

READ MORE:
Why leaders with a clear vision connect innovation and strategic cost-cutting

FROM THE START:
Strategic cost-cutting and improvements in the innovation corporate agenda

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

Six best innovation practices to engage Millennials and Gen Zers

All businesses are created first by ideas. Then, once you are in business, you need new thinking for design, engineering, radical improvement, manufacturing, marketing, advertising, problem-solving, customer retention, etc. Often the difference between success or failure in business is a simple idea.

On the one hand, many corporations have limited resources, funds, and time to give creative dreamers sufficient power to produce breakthrough ideas. On the other hand, other companies have many ideas, but are short on ways to assess, screen, prioritise, leverage and execute them.

Disciplined and well-managed creativity breeds successful idea generation and cross-pollination. Idea management systems and processes can help your company make innovation a discipline. They can help make the hunt for new possibilities each and every department’s business, as well as involving broader and more enthusiastic participation among managers and employees.

As we have seen, building a collaborative innovation culture comes hand in hand with conquering Millennials and Generation Z. This means you not only have to promote innovative thinking in your organisation, but also have to get a feel and touch in your corporate culture that inspire and retain these new generations.

Finally, remember as well the following six best practices:

  • Have strong leadership and role modelling
  • Promote regular learning
  • Give employees self-improvement possibilities
  • Create free time for interests and new ideas
  • Encourage and reward ideas and creativity
  • Do not forget mobile and flexible platforms to reach employees

Any organisation’s most valuable resource is its people. That being so, the capacity to obtain and inspire the best, most innovative and competent employees and to attract the leaders of tomorrow is the ultimate key for your company’s success.

FROM THE START:
Loyalty is no longer enough to both employers and the workforce

Aylin Olsun, managing partner of ASO Company
Diana Neves de Carvalho, Exago’s CEO

Why is innovation management a powerful tool to engage Generations Y and Z

Large companies looking for creative and transforming ideas need to leverage innovation management to conquer employees, particularly Gen Zers and Millennials. Those leading must develop the mindset and organisational structures to empower these younger generations and help them reach full potential, while being part of their company’s evolution.

Being able to align an individual’s everyday work and goals clearly with the organisation’s strategy gets people to think in new ways and imagine new possibilities. It makes it easy for employees to see how their contributions matter.

An innovation management software can help you share your company’s vision and strategy, get people involved, and continuously find new answers, as change becomes constant. Additionally, by including evaluation mechanisms, these sophisticated platforms give the community the chance and means to assess, as a whole, the ideas presented – thus harnessing and activating your company’s collective intelligence.

Idea management software (such as Exago Smart) also promotes a collaborative culture, for individuals and the community, answering directly to the main needs and motivations of both Millennials and Generation Z, as the following table shows:

innovation management to engage generations y and z

As innovation becomes the natural way of doing business for both these generations, organisations should focus on gathering and maximising their potential. The greater challenge, however, lies in managing this process in an efficient, collaborative and transparent way, using technology as a bridge to make their voices and contributions a real part of the corporate evolutionary path.

READ MORE:
Six best innovation practices to engage Millennials and Gen Zers

FROM THE START:
Loyalty is no longer enough to both employers and the workforce

Aylin Olsun, managing partner of ASO Company
Diana Neves de Carvalho, Exago’s CEO

Welcome to our renewed mission, brand and product offering

We all sometimes feel the need or a resolve to explore and create new paths. At Exago, we’ll be celebrating our 1oth anniversary this year and understand it is the time for such evolution, so that we are fit to evolve with your business in the years ahead. As a result, we bring you:

• A new mission statement: we embrace the mission of making innovation come together, both by engaging everyone to collaborate and share the innovation challenge, and by delivering a powerful platform designed to find, improve and bring to life ideas with high potential for value creation.

• A new image: with our innovation management software fully conquering our core business, Exago is now the software, the people and the company. This fresh positioning has inspired a new brand and website, to introduce the best of us.

• A new product offer: after listening to our clients and market needs, we now deliver three software editions:

  • EXAGO SMART gives you advanced innovation performance. Based on our US-patented prediction markets algorithm, this platform efficiently gathers your company’s collective intelligence for smarter decision-making;
  • EXAGO OPEN will take your innovation programme beyond corporate walls, effectively engaging external stakeholders;
  • Arriving soon is EXAGO START, a swift innovation software for those taking the first steps into building an idea management programme.

Regardless of how much changes, our goal to help all our clients succeed in their innovation programme remains the same, and just got stronger.