No Match Found
Key questions focus on where and how to make further cuts when all the unassailable options have been actioned.
Some sectors such as retail already operate on an exceptionally lean basis. Others have little left to cut after successive rounds of savings. If there’s no fat left, blanket reductions could either prove unsustainable or cut into the muscle needed to survive and thrive. Indeed, one of the clearest lessons from the recession of 2008-09 was that businesses who cut too drastically- often in areas such as technology - found themselves unable to capitalise when the economy began to grow again.
For many businesses there is still an opportunity to cut the fat and to challenge where costs are spent and whether they drive competitive value. But, to prepare for the future, organisations need to meet changing consumer expectations by investing in ESG and innovative technology, from frictionless retail to Generative AI.
The other main trap is a front-office versus back-office mindset that often sees support functions as first in line for cutbacks. In reality, back-office operations can be just as important as customer-facing ones in driving value and growth. The importance of retaining talent at a time of chronic skills shortages is a clear case in point.
Rather than cutting costs across the board or attacking the same old targets, a more effective approach looks at how to pinpoint resources where they can deliver the most value (‘good costs’), while cutting out needless effort and less valuable resources (‘bad costs’).
This kind of cost-based transformation, underpinned by data and facts, requires a rethink of what areas of your business are primed for revenue generation and growth and the associated costs and capabilities needed to support this. The costs from non-core areas can be taken out and reallocated to where they can create value.
So how do you determine what’s valuable and what isn’t?