Driving Strategic Cost Optimization: Smart Spending During a Crisis
SSK Business Services findings on the practices shaping business in a rapidly evolving climate, where cost has become a real competitive differentiator.
SSK Business Services findings offer an inside look at the practices and developments that currently form the future of businesses in this rapidly evolving global business and human climate, where cost is a real competitive differentiator.
In a nutshell
- COVID-19 will have global economic and financial consequences, from raw materials to finished goods, that will be felt through global supply chains.
- “By 2022, 80% of I&O companies that lack digital business strategies are at risk of budget cuts, resulting in outsourcing as a means of delivering outcomes,” Gartner said.
- For several struggling organizations, considering alternative or non-traditional models — collaborative models, committed teams and remote work — may be a reliable way to follow.
1. A difficult environment
Cost management is a continuous, constant cross-company endeavour that companies now take into account more than ever before. For any functional leader, cost optimization is a vital necessity, but its implementation and effect extend well beyond the limits of any single functional zone.
2. Some businesses are hard hit
Businesses with poor or unstable financial resources that are already struggling for profitability are particularly vulnerable.
However, depending on how the situation progresses, even companies that seem to be in good financial condition cannot be exempt. In the short term, industries like travel, hospitality, entertainment and air transport have been especially hard-hit.
3. Initiatives for cost optimization
Given the importance of controlling cash flows in times like this, businesses should quickly develop a strategy for cost optimization as part of their overall business risk and continuity strategies.
In doing so, it is important to take a complete view of the ecosystem, as the methods you take to handle cash will have consequences beyond your own operation.
4. Five areas of focus
While there is a great deal of functional diversity in how leaders address cost optimization, five focus areas enable leaders in different positions and business units to seek beneficial optimization.
- Benchmark for a baseline. Comparative metrics help leaders evaluate their environments to discover what additional financing or enhancement may be needed. Benchmarks also highlight strategic investment sectors — but caution is needed, as benchmarks can be misused easily.
- Identify the important points to protect in the budget: the future financial advantage, the effect on business, business risk, and the time criteria for candidate cost optimization programmes.
- Define non-critical elimination points. Recognising which aspects of the organization can be eliminated or minimised is as important to the decision-making process. These improvements are largely quantifiable as cost reductions, but leaders should still recognise the value of each point to the organization.
- Evaluate an approach. There are many choices, including cost reduction, demand reduction, and a balance of short- and long-term initiatives.
- Discuss strategies with stakeholders and lead the company through the transition. Officials can present alternative options alongside comprehensive descriptions explaining why those alternatives were not chosen.
The ability to analyse and evaluate the value generated within employee networks is what businesses need in a collaborative era. These networks should concentrate both on the productivity of individuals and organisations, and on the importance of interactions between workers and businesses.
Published by SSK Business Services — We innovate today's existence to assure future destiny. Questions about anything in this article? Email info@sskservices.co.uk.
