The 5 steps for strategic cost-cutting in your innovation agenda

In times of uncertainty, when business models are challenged, managers and financial directors are bound to cut costs to make organisations more agile, robust and adaptable to change. Leaders with a clear vision then tend to use cost-cutting and improvement to align costs with business strategy, to lower costs, focus on the aspects of the business that are controllable and free up resources to fund transformation and future growth.

However, aggressive cost-cutting tactics will not salvage companies under pressure. The change must go deeper, reaching a strategic and cultural level. This means that a company’s most valuable assets – people and their talents – must be mobilised to innovate and to find new ways of working that do not require high investments in new product research and development. Together you can save substantial amounts of time and money.

We show you how to add strategic cost-cutting and improvement to your innovation agenda, and how the development of an innovation culture is a powerful tool to align people’s focus, change behaviours, save costs and deliver continuous and effective results. To make it work, we guide you through the following five steps:

 

1. Define your strategic cost-cutting goals, which can be incorporated in your innovation agenda.

You need to have a clear view of your company’s strategy and map out good and bad costs for programme intervention, at macro and micro levels. On the one hand, bad costs should be seen as those that do not align with the growth strategy. On the other hand, good costs are those that support business capabilities to achieve growth and may be worthy of more investment.

2. Guarantee C-Suite engagement from the beginning and have a clear direction for your cost strategy.

You should deliver cost optimisation with the support of the CEO and top managers, defining areas of improvement from the beginning, as well as how to address each of these areas.

3. Invest more in bottom-up approaches, engaging and having your people contributing.

Simply externalising tasks and reducing headcount are often ways to overshadow a complex problem. You need to call on people’s knowledge and experience to help you separate the wheat from the chaff and find concrete and innovative solutions.

4. Be resilient in creating a cost-conscious culture for continuous optimisation of resource use.

Over time, as you seek new ways to rationalise and optimise costs, a new culture of strategic cost-cutting will be embedded.

5. Explain to your workforce your shared mission and remove fears,

ensuring that both needs and strategy are consistently understood across the organisation. Your employees must feel they have a role to play and can have an active voice in the decision-making process, being welcomed into the discussion about the best ways to reach the proposed goals.

 

A well-structured innovation management programme for strategic cost-cutting and improvement can be particularly useful to get employees identifying ground-level enhancements, with several additional advantages:

  • allowing you to develop a cost-conscious culture
  • easily uncover bad costs and inefficiencies
  • assure more dialogue and engagement
  • build up an ongoing, resilient process

Strategic cost-cutting is never blind cutting. It is, in fact, a method to accelerate the discovery of new and more effective ways of doing business, at a lower cost, challenging you to look at the larger picture, to seek the root cause of the problem. It should be seen as a way of questioning how we do things, even why we do them, exploring new innovative routes and building the foundations of tomorrow’s growth.

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

Get to know the Five Steps to Introduce Cost-cutting in your Innovation Agenda here

Transforming cost-cutting into growth in your innovation programme

In times of uncertainty, when business models are challenged, companies are bound to cut costs to become more agile, robust and adaptable to change. Managers can support these efforts, namely within the corporate innovation programme.

Indeed, books do not set out which costs are good or bad for a specific company, or how they impact business strategy and operational reality. No measure fits all.

A successful strategic innovation programme thus implies the definition of specific priorities and mapping out what can be potentially bad and good costs, at different organisational levels:

  • On the one hand, bad costs should be seen as those that do not align with the growth strategy. They are waste and an outcome of inefficiencies that can and should be reduced;
  • On the other, good costs are those that support business capabilities to achieve growth goals, and may be worthy of more investment – so that in the mid to long term you end up saving more or increasing return.

In this process, it may seem easier to make centralised decisions at the board level, at a more macro level, with potentially higher impacts. Yet, simply externalising tasks and reducing headcount are often ways to overshadow a complex problem. Strategic cost-cutting challenges you to look at the bigger picture, to seek the root cause of the problem and to transform the system and its architecture.

In other words, the change must also happen from the bottom up, always with the right leadership and sponsorship, to define the areas of improvement clearly.

The employee community has to understand what’s happening, and to share and collaborate with the company’s challenges. They must be aligned with the business strategy, and feel they have a role to play and can have an active voice in the decision-making process. As an interested party, they must be welcomed into the discussion about the best ways to reach the proposed goals.

 

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

Get to know the Five Steps to Introduce Cost-cutting in your Innovation Agenda here

The 7 (+1) things you have to do to succeed as an Innovation Director

As companies fight to stay ahead of the innovation curve, the role of the Innovation Director is developing and growing in significance. Some have trained in the field with a high degree of specialisation, while others have fallen into the position from other areas and have moulded themselves to become the innovation leader of their company. Regardless, their goal is the same: to help propel and direct innovation within their organisation.

At its core it is a very appealing role indeed, filled with possibilities, but it also has its fair share of challenges. Many of them are recurring, whether you have been in the role for five years or five months. These challenges generally depend on the dynamics of the markets and of your company in each new leadership cycle, but also on the prevailing corporate culture itself.

Unlike any other field, innovation is built on uncertainty; you may have concrete objectives, aligned with strategic goals, but much of what makes you evolve often stems from pure exploration, from someone connecting dots in a new way. Innovation is exciting yet tricky, a balancing act that isn’t always easy to manage. From time to time, you may even find yourself having to persuade others of its relevance.

So what can you do to juggle these aspects? How can you establish an effective innovation structure and help drive innovation across your company? Besides the key traits that every strong Innovation Executive should possess, to make sure you succeed in your role as an Innovation Manager, there are 7 (+1) things you have to do:

 

1. Ensure sponsorship at C-level

Above all else, it is crucial that innovation is seen as an asset for the business as a whole. If you have the board directors on your side, like at insurance company Ageas (whose CEOs even let themselves be kidnapped in a launch initiative of their innovation programme), then you are one of the lucky ones.

But that isn’t always the case. If not, then you should forge the path to instil a culture of innovation within your company by framing it around the key concerns of your leaders.

The results of innovation can, in fact, manifest themselves anywhere from employee engagement to increased ROI or improved medium- to long-term business risk management, so once you can paint a picture of how innovation can meet the concerns that those at C-level may have, then they are more likely to take your programme on board.

On the other hand, you might be surprised; it’s amazing how often people are open to change, once the opportunity presents itself with the right framing.

 

2. Identify management-level champions in key areas and choose the right battles

As Innovation Manager, you should reach the directors of the most important departments. Listen to their issues and their most pressing challenges, and make sure they are aligned with the strategy of the company. You will want to keep your door open to all of them, but may feel the need to pick three or four key priority areas.

Yet, be aware that some will be more receptive than others and there will likely be resistance, as they may feel that your work will change or disrupt theirs at some point.

You should also focus on picking the right ‘battles’. Choose challenges that have business relevance and are attainable, and spend enough time defining the problem. At this point, remember Albert Einstein’s words: ‘If I had only one hour to save the world, I’d spend 55 minutes defining the problem and only five minutes finding the solution.’

Show the heads of sales, marketing, operations and human resources how your field can serve and enhance their work. Everything works better if you have them on your side rather than as opponents, and if you start by setting the example and working collaboratively.

 

3. Get everyone on board

Although you can create innovation silos or hubs focused on innovation and research and development, which are also important, the role of a true Innovation Leader is to instil the idea of innovation as a way of working across all departments.

For that reason, even if there are investment targets, brainstorming sessions or ideation hackathons, innovation can’t just be a top-down strategy. It must involve and mobilise everyone bottom-up, giving people a voice and harnessing their cumulative expertise, while considering the value in different participation profiles.

As the PWC Innovation Benchmark 2017 report underlines, ‘Human experience and insights of all kinds help shape and deliver new ideas, solutions, products, and services that ultimately bring value to markets and businesses’.

The graphic below shows how people-powered innovation most often begins with your own employees.

This is the real challenge then: to bring innovation to the core of your organisation’s culture and to the everyday way of doing things, because your workforce is your most important innovation partner.

 

4. Equip yourself with the right tools

There are several devices that can help you in this process. Tools such as basic research, collaborative innovation approaches or even open innovation can support business innovation, depending on your specific goals.

Collaborative innovation in particular has proven to be effective in impacting your people as a cooperative community and your company as a living organism. You get to invite people to take part in your innovation challenges, share ideas and improve the ideas of others, rallying all your best minds to find answers and solutions that are relevant to your C-level and your key champions. It readapts mindsets and structures progressively, and on a daily basis.

By using established collaborative innovation software to get everyone involved, companies can promote engagement and transparency, maximise the talent pool and find solutions faster with less costs. All of which goes towards driving their innovation agenda successfully.

 

5. Establish a method and related processes

Having said this, people alone are not enough. As an Innovation Manager, you have to touch upon several types of innovation to be successful, in accordance with the various goals you have set yourself.

You should envision short-, medium- and long-term innovations and incorporate strategic cost-cutting and improvement in your innovation agenda, at both macro and micro level, which will quickly drive results.

There is no ‘one size fits all’ solution in innovation, and no single approach. The methods involve process designs, planning, aligning strategies and getting your champions involved – design thinking can help you do this.

If you know the best ideas can come from anyone and anywhere, you need to open channels for them to find their way to you.

 

6. Outline spaces for protected innovation

To achieve any given goal, it is also vital to establish space and time dedicated exclusively to innovation, whether that means a physical or a virtual platform, or days (or even hours) committed to your innovation goals.

Additionally, you should also use communication instruments to gauge the results and promote the idea of innovation as both shared opportunity and responsibility. This is the reason it is so important to build a solid bridge with the communications and marketing teams: if you have good content for them, they will be pleased and in turn can create initiatives around your innovation programme that will have a significant impact.

 

7. Show all results and don’t waste time in getting there

The numbers will of course speak for the success of the initiative, such as ROI, engagement levels, participation figures and amount of ideas, but it goes beyond that.

Success also lies in the intangible results – the stories, the people sharing their ideas, the value it creates… It’s about giving your people a voice, letting everyone know what is happening and celebrating individual and collective achievements.

This means that you need to have a methodology in place and to establish KPIs to measure different results throughout your innovation challenge.

 

7 + 1. Lastly, change the way your role is seen

At the end of the day, it is up to you (and your team) to provide the end results. However, you are not, and should not, be alone in this. You have a draft roadmap on what to explore, but you have to encourage others to explore as well.

This means that you have to change the way you see yourself, and that others see you, as the head innovation manager – you don’t govern innovation, nor will you have all the answers; you are a facilitator and a catalyst, engaging and mobilising individuals and teams across all levels.

It isn’t always comfortable, but you must turn innovation and creativity into appealing projects that benefit everyone and change the way of doing things for the better. This will allow your people and your organisation to excel in every task and reap the many benefits of building an innovation culture, whichever the business area.

Diana Neves de Carvalho, Exago’s CEO

 

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Step 5: Be resilient to create a cost-conscious culture in your innovation agenda

If you are introducing cost-cutting in your innovation agenda, your ultimate drive is to create a cost culture that sustains itself over time and is not forgotten three months after being announced by the leadership.

Your final goal is that your workforce feels that the organisation’s investments are personal investments, which can benefit all.

Still, organisations are living creatures in changing contexts. So, strategic cost-reduction priorities should be regularly reviewed and updated in the same way as business opportunities are.

And so we find ourselves where we started: needing to map out intervention areas at micro and macro level, both good and bad costs, and clearly define and (re)align everyone with your cost strategy over time. Ensure that you have the best methods in place to address each area in an efficient way, using top-down yet privileging bottom-up approaches in your innovation agenda.

For bottom-up approaches, also review the communication plan at hand to help your employees understand the tweaks and turns. Let them have an active role in the process of building the company’s future together.

It will take time and some effort, since resistance is normal under less favourable circumstances. It will take people’s commitment.

Yet, with strong leadership, a clear and well-defined strategic cost-cutting programme and the awareness of shared responsibilities, an organisation can reinvent itself and learn how to do so continuously, as models are challenged and new opportunities arise.

 

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

Access the Five-step Guide to make cost-cutting work within your innovation initiative here

How to map costs for your innovation path to growth

We’ve seen why leaders with a clear vision connect innovation and strategic cost-cutting. In our economic environment, this becomes relevant for all companies, both incumbent and challengers.

At the top of the CEO’s agenda, we find over-regulation concerns (79%), geopolitical uncertainty (74%) and exchange rate volatility (73%), according to PWC’s 19th Annual Global CEO Survey. CEOs are not putting faith in global growth during these times of uncertainty.

In 2016, only 35% of CEOs believed that their own companies could grow during the year, as the figure below shows.

CEOs’ confidence in global economy and business growth prospects 

This was the lowest percentage since 2010 and, as the political agenda unfolds, optimism has likely fallen again in 2017. Prospects for 2018 are just as cheerful.

 

Blind cost-cutting is never the answer

Political instability, North Korea-US tensions, terrorist acts across continents, the refugee crisis in Europe, the BRIC’s slowing economies, stock market volatility, the Brexit process… Frantic news is putting CEOs on guard.

In such an edgy environment, management is naturally driven to use cost-cutting to align costs with business strategy. Strategic cost-cutting becomes a path companies take to resist hardships, become resilient and prepare for more solid growth opportunities. It focuses efforts on business areas that can be controllable, freeing up resources for transformation and future growth.

All companies have encountered this reality in the last decade. However, blind cost-cutting, not aligned with strategy and sustainability concerns, may be dangerous. An arbitrary, opaque and misunderstood corporate cost-reduction policy will alarm employees and disengage them from business strategy and leadership’s main goals.

Cost-reduction programmes have time and again failed in the past. In its 2012 report, ‘Stop cutting and start optimizing IT spend’, KPMG says these initiatives flop due to unclear cost drivers, overly cautious cost strategies and the fact that cost discipline is not embedded in a company’s culture. Success depends on cost discipline as well as on changing behaviours.

 

So what should you change?

Where exactly should you cut? And how can you do it to make sure you move forward, finding new and better products and services and building a company fit for any future scenario?

To help you establish a strategic cost-cutting strategy within your innovation management initiative, we will share five major steps you can take to ensure that your business remains competitive, relevant and able to maximise its potential in the face of less favourable circumstances.

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

You can access the full paper here