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