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

Having defined the strategic cost-cutting goals within your innovation agenda, it needs to be run with the same board sponsorship, direction and accountability as any other critical initiative. It is important to ensure central governance, senior management agreement and employee engagement.

The centralisation of a cost-cutting initiative is vital to avoid project duplications, to benefit from synergies and to focus on clear areas of improvement.

However, the initiative should also have branches and an army dispersed across the company, mobilising directors and managers of the different areas around this innovation movement and opening minds to collect insights from every contributor. Right from the point of planning, make sure you identify the sponsors from each business area of the strategic cost-cutting and improvement programme.

People with the capacity to make decisions based on employee insights must be mobilised and should have defined timeframes to gather specific insights and execute changes aligned with your innovation agenda. In other words, the cost strategy should be promoted by the company’s leadership, sponsored by the management team and be engaging enough to capture employees’ participation.

STEP 2 is therefore about delivering cost optimisation with the support of the CEO and top managers, helping you clearly define areas of innovation and improvement from the beginning, as well as how to address each of these areas.

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

You can access the full paper here

 

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.

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

You can access the full paper here

 

How to create a culture of collaborative innovation in younger generations

We have seen how Millennials and Generation Z are often disconnected from the strategic vision of a big organisation because they cannot see any links between their everyday work and the company’s business objectives.

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. Alignment with the organisation’s strategy becomes a personal matter, creating the foundation for increasing both engagement and personal satisfaction.

People on the front lines have, in fact, a unique perspective given their skills, experience and view into the organisation. Inviting employees to participate in the decision-making process by sharing their ideas about their work offers leaders multiple and very diverse points of view.

If you inspire people to think strategically about work, they will find ways to solve problems and opportunities for innovation that have the potential to elevate overall performance – and potentially improve their employees’ retention ratio.

With idea management software, such as Exago Smart, you can launch strategic business challenges and invite each employee to share ideas and insights on them. In other words, it allows employees, as individuals, to participate and have a say in building the company’s future together – aligning goals, seeking greater engagement and stimulating creative thinking and collaboration.

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.

In this sense, innovation management software can help you continuously find new answers, as change becomes constant. It also promotes a collaborative culture, for individuals and the community, answering directly to the main needs and motivations of both Millennials and Generation Z.

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

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

How innovation can help you conquer the new generations

A Gallup report shows that US companies lose $350 billion in revenue every year due to employees’ disengagement. In fact, 70 per cent of your employees are probably disengaged. Yet full participation is an emotional commitment that cannot be forced.

With the Millennials and Generation Z joining the workplace, the challenge rises: no longer can we believe that it is enough for a company to provide the work, and that an employee’s motivation will come naturally.

What is more, data shows that employees want to be more innovative at work and want to take more responsibility. This tells us that fostering creative environments and innovation initiatives will also nurture motivation, engagement and, therefore, productivity.

Three perspectives on the value of making companies more inclusive and collaborative

Innovation can be defined as the development of customer value through solutions that meet new, undefined, or existing market needs in unique ways. Solutions may include new or more effective products, processes, services,  technologies, or ideas that are more readily available to markets, governments and society.

The development of a corporate culture where innovation is incentivised and becomes the way of doing business can bring companies several advantages, according to different points of view:

  • From an organisational perspective, managers encourage innovation because of the value it can capture. Innovative employees increase productivity by creating and executing new processes, which in turn may strengthen competitive advantages and provide meaningful differentiation. Innovative organisations are inherently more adaptable to the external environment; this allows them to react faster and more effectively to avoid risk and capture opportunities.
  • From a managerial perspective, innovative employees tend naturally to be more motivated and involved in the organisation. Empowering employees to innovate and improve their work processes provides a sense of autonomy that boosts job satisfaction.
  • From a broader perspective, empowering employees to engage in broader organisation-wide innovation creates a strong sense of teamwork and community and ensures that employees are actively aware of and invest in organisational objectives and strategy.

In this sense, managers who promote an innovative environment can see value through increased employee motivation, creativity, and autonomy; stronger teams; and strategic recommendations from the bottom up.

READ MORE:
How to create a culture of collaborative innovation in younger generations

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

First, ask what your innovation purpose is

Nike’s goal is ‘to bring inspiration and innovation to every athlete in the world’. Starbuck’s motto is ‘to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time’. What is your company’s mission? And how does your initiative take part in carrying it out?

At the end of the day, it all comes down to purpose. When launching your innovation initiative, you must first clearly identify what is your higher strategic purpose – the one that will bind together your leadership, management and employees.

From our experience, getting key players inside your organisation aligned is hard, requiring diplomatic and pragmatic skills. When launching your innovation effort, you must also find a way to communicate that the initiative is bigger than just a simple project with a set of processes and tools. Individual employees need a meaningful purpose to motivate them to dedicate their free time to activities that are not part of their official job description.

You thus need to follow up on, and build on, your organisation’s mission. Define a purpose for your innovation effort and identify ‘the jobs-to-be-done’ through innovation. Show your team that this is an opportunity to shape the company’s future, to out-differentiate the competition.

Whether you seek to apply innovation management to meeting very explicit business challenges or to creating a company-wide culture and capabilities, ask yourself, ‘What do we want to change?’ Understanding your ambitions helps you define a migration path, set your expectations, get the challenges right and allocate resources more rationally.

Your challenges thus have to be aligned with your company’s higher purpose and the strategic objectives you set. You should also define clearly what you want to accomplish and why, as well as the specific needs your chosen challenges address.

Try these ativation questions:

  • Why are we doing this?
  • What do we want to change in our organisation?
  • What are our organisation’s specific needs that are addressed by this challenge, and how can people relate to them? (Focus on the problem, on defining its scope instead of jumping to a solution.)
  • What is the desired outcome? (Understand the perspectives of customers, stakeholders and other beneficiaries. This should be addressed qualitatively and quantitatively whenever possible.)
  • How does this connect with our company’s mission? And with more strategic goals?

We will next see the importance of picking useful and feasible fights, when launching your innovation challenges.

Diana Neves de Carvalho, Exago’s CEO/ dnc@exago.com
Francisco Bernardes, Exago’s head of Innovation Services/ fmb@exago.com

READ MORE:
How to pick useful and feasible ‘fights’ for innovation challenges

FROM THE START:
Your ultimate innovation challenge – what works and what doesn’t