Strategic cost-cutting is not dead, and we are here to prove it

Leaders with a clear vision tend to use cost-cutting and improvement to align costs with business strategy. The trend gained ground in the last decade, as world turmoil intensified and growth became a more elusive and complex goal to reach.

With low investments and rising risks, companies gamble on cost-cutting and improvement to ensure that they are prepared and equipped to grow stronger, as they wait for better times to come. In its 2013 third biennial cost survey, ‘Save to grow. Cost-improvement practices and trends in the Fortune 1000’, Deloitte underlined that cost-cutting was seen more and more as a ‘way to drive growth, rather than as way to survive or avoid insolvency’.

However, aggressive cost-cutting tactics under pressure will not salvage companies. The change has to go deeper, reaching a strategic level. This means that a company’s most valuable assets, people and their talents, must be mobilised, ‘consistent with a growth mindset, since having qualified workers and deploying them effectively is key to successful growth’, writes Deloitte.

In their recent paper, Exago’s CEO Diana Carvalho and our Sales Executive Andreia Dias show how a successful cost-cutting strategy is connected to the organisation’s capacity to evolve, to innovate, and to do it as whole. They explain how this process should start internally by capturing the wisdom of each employee, but how it can also reach external stakeholders, harnessing their potentially powerful insights, creating communities around the company and building communication bridges with clients and suppliers.

A successful cost-cutting and improvement strategy indeed helps companies lower costs, focus on the aspects of the business that are controllable and free up resources to fund transformation and future growth. And sustainable growth, by its essence, cannot exist without ongoing innovation. To make it work in your organisation, Andreia and Diana guide you through five major steps.

Feel free to reach us for the full paper at

Putting the Daily Innovation Model together

We’ve seen how you can locate your position in the Daily Innovation Model, built to help companies see innovation as a daily function of their job. When we place the continua on two axes – incremental to radical and process to product – things get interesting and we end up with four quadrants:

Innovation Quadrant for Corporate Innovation

Quadrant 1 – Steady growth
At the bottom right lies incremental-product innovation or change. I’ve labelled it “steady growth.” A company that is constantly looking to improve its offering to the market will enjoy the fruits of its labour in small, steady doses. An example is a box of cereal “now fortified with iron,” that gives a boost to flagging sales of “regular” cereal. Or a management consulting business that adds tax advice into its offering. Through steady growth you milk existing clients for more or add smaller niche segments to already served markets.

Quadrant 2 – Productivity gain

To the left of steady growth lies Productivity Gain, where incremental-process innovations happen. These can be classified as small changes in the way we produce and deliver our goods and services. Streamlining paperwork, reducing steps, tweaks to the shop floor, technology improvements, material substitution and others classify as process improvements. The big benefit to the company comes through cost reduction or improved efficiency. Like “Steady Growth” these gains will also impact the bottom line in a gradual incremental manner.

Quadrant 3 – Industry Leadership
The third quadrant appears at the intersection of radical and process innovation and results in Industry Leadership. A great example would be the assembly line. The original static assembly line that R.E. Olds invented in 1902 resulted in an increase in production from 425 to 2,500 cars. Henry Ford then incrementally innovated this into the moving assembly line. The problem with industry leadership of this nature is that it suffers from the Red Queen effect. While the company may reap big dividends in the short run, the position of leadership will remain short-lived – until competitors start adopting the same methods. In the words of a U2 song, they are all “running to stand still.”

Quadrant 4 – Game Change

Here is where things really get interesting in the Daily Innovation Model. Radical-product innovation is the holy grail. Most of the stories we hear are from this domain. Uber, self driving cars, robotics, microprocessors et al, changed the game for their founding companies, their customers and also for a lot more upstream and downstream providers. While they hog all the limelight, the truth behind the scenes is not unlike the cinema or sports industries. All we see are the stars, and none of the failures by the wayside. And neither do we see the effort and resources that went into the success.

It is easy to talk after the fact about the young kid who dropped out of college because he  in his invention, and became a billionaire by age 30. Yet how many of us would actually take that risk? Because along with a lot of reward at the game changing end of the spectrum, there also lies a lot of risk, hard work and an exponential potential to fail.

But how can you conquer your own Daily Innovation Zone? We’ll see that next.

How to conquer your Daily Innovation Zone

“Innovation is not for us”, they say

By Rumman Ahmad. An MSc in Creativity and Change Leadership from Buffalo State University, Rumman trains, teaches and facilitates groups of people to learn and apply the creative process to solve problems, energizing and motivating them to do their best. He is also the organizer of an annual conference on innovation in Pakistan. An Exago partner since 2016 in this key geography, Rumman has developed a Model for Daily Innovation which can be complemented by Exago’s innovation management software.

Is gamification the way forward?

Exago’s team participated in Gamify 2017, an event gathering specialists to discuss the latest practices and the power and value of gamification for people, brands and organisations. “Gamification – The Way Forward” took place in the city of Porto, Portugal, on 6 June.

“Gamification applies game concepts and mechanics to everyday activities” to promote social connections, behaviour changes and additional engagement, according to Rui Cordeiro. The CEO at Fractal Mind, organiser of Gamify, talked about how games can make us dependent on incentives, feedback and overstimulation, or even create a dissonance with reality. Yet they can also establish an emotional commitment, and help develop memory, improve reflexes and learn by having fun.

This is quite important for brands seeking to gain their customers’ trust and involvement, explained Inês Drummond Borges, Marketing director at Worten. She then went on to say that “customers expect solutions, experiences, entertainment and events” from their selected brands and gamification is typically part of the latter three dimensions.

“It’s interesting to understand that our innovation management software allows companies to work on that first and more unexplored dimension Inês has mentioned, by making it appealing for people within and outside organisations to come together to find solutions, new ways of doing,” notes Exago’s head of Innovation Services, Francisco Bernardes. To Francisco, “this feeling of sharing a valuable and exciting challenge is the ultimate emotional and rational connection brands and organisations can establish with customers and with their own employees”.

The head of Strategy and Operations at LCG, Cristina Ferreira, spoke as well about why gamification is key to motivating employees and developing skills and competences within companies. “Eighty-seven per cent of employees are not involved at work” and those involved are actually “147% more productive than others”, so there’s an enormous potential for companies to unleash, she believes.

Two hundred entrepreneurs and professionals gathered at Gamify 2017 in Porto, also taking part in workshops on Disruptive Creativity and Gamification & Design Thinking as an Innovation Framework. The next conference will be held in November in Lisbon.

Brazilian Kyvo and the Korea Innovation Center bring startup communities together

Kyvo, an Exago’s consulting partner, has joined forces with the Korea Innovation Center (KIC) to select Brazilian entrepreneurs for the K-Startup Grand Challenge, South Korea’s most relevant startup acceleration programme. Applications are open until 6 June.

The K-Startup Grand Challenge is supported by Facebook, Adobe and IBM, as well as South Korean giants LG, Hyundai and Samsung and the country’s Science and Technology Ministry. When the challenge was held previously, 140 countries participated. The 50 final winners of the competition will receive investments of up to 166,000 US dollars plus mentorship and training in Seoul.

“We understand that the Brazilian ecosystem supporting SMEs or startups aiming to compete in the global market is very active. Besides, there are several quality startups in the Information, Communication and Technology area,” explains the president of KIC, Heonsoo Rhee. Hilton Menezes, co-founder and strategic designer at Kyvo, adds that Kyvo and KIC are also hoping “to create a meeting point between Brazilian and South Korean companies”.

An Exago partner, Kyvo Design-Driven Innovation is an innovation service provider that employs service design to improve clients’ experiences of services and digital products. Fully complementing Exago’s innovation management solution, Kyvo has created a three-step design process that uses different visual tools to deliver a great experience and relevant results to clients.

Kyvo is responsible in Brazil for Track, the Visa company’s acceleration and incubation programme, and is also the exclusive user of Global Silicon Valley acceleration methods in the country.

Getting started with the Daily Innovation Model

I’ve introduced my Daily Innovation Model, built to help companies see innovation as a daily function of their job. To start using it, you should first understand where you are exactly.

                         Innovation Quadrant for Corporate Innovation

Incremental to Radical innovation
The first continuum, going vertically from bottom to top is concerned with the type of innovation.

Practically everything in the world builds upon something else and hence, is incremental. But relative to each other some are less so, i.e they are more radical. For example, the iPod as a whole was more incremental than radical. But iTunes was more radical than incremental. The original Wright brothers’ airplane was more radical. Subsequent aircraft were, to an extent, incremental.

Having said that, the iPod, the Boeing 747 and other products were also radical in the way that they contained cutting edge technologies. And hence, each of our perspectives might vary, resulting in the same product being placed at different points on the continuum. There is nothing wrong with that since there are no absolutes in this game.

Product and Process innovation
The second continuum, going horizontally from left to right, is concerned with the focus of the innovation.

When you try to answer the question, “Are Uber and Airbnb products or processes?”, you cannot be faulted for getting tied up in knots. You might say, they are both services. For our definition, the term Product implies services as well – anything that is delivered to the end user.

A pure process on the other hand is “a way of doing things,” i.e. how we create the actual product or service. So manufacturing is a process that creates, say, a car. Or analysis of financial transactions is the process that delivers the service of a company audit. In the app world, the code and technology behind the scenes is the process that creates the interface and delivers the service.

Context, however, is important. Manufacturing is a process for an auto maker. It consists of machines that combine together to produce a car. But the machine is a product for another manufacturer, whose end user is the auto maker. See, it can get complicated! Hence, the continuum.

Putting the Daily Innovation Model together

“Innovation is not for us”, they say

By Rumman Ahmad. An MSc in Creativity and Change Leadership from Buffalo State University, Rumman trains, teaches and facilitates groups of people to learn and apply the creative process to solve problems, energizing and motivating them to do their best. He is also the organizer of an annual conference on innovation in Pakistan. An Exago partner since 2016 in this key geography, Rumman has developed a Model for Daily Innovation which can be complemented by Exago’s innovation management software.