Strategic Cost Reduction

August 4, 2021

Sustained competitive advantage in the current disrupted marketplace is certainly not gained through squeezing a few percentage point savings from slow, stretched, and unfocused operations in this disrupted marketplace.

The key focus for any business looking to reduce costs shouldn’t just be on which costs to cut, but also one where the focus of resources to stimulate growth and differentiation – this is true strategic cost reduction. To refocus resources away from low returning parts of the business towards higher value and higher return opportunities could have a significant impact on both the bottom line and the overall value of the business. 

The stumbling block for many businesses on their journey with strategic cost reduction is that many cost optimisation suggestions struggle to deliver or aren’t long-lasting. Despite cut-costs, there are sometimes products or services where the returns still won’t be viable, because customers don’t value them – the primary focus should be on value potential rather than volume or cost. 

Certainly, making the right choices and moving the business forward requires a rethink of strategy, costs and, most important of all, how they align. The five steps we set out here focus on optimising rather than just cutting expenses to ensure your business can sustain competitive relevance and maximise its potential.  

1. Strategy First Have a clear understanding of your strategy and ensure it is consistently visible across the organisation.  

2.  Link costs with strategy Look across the whole organisation and differentiate the strategically critical ‘good costs’ from the non-essential ‘bad costs’.  

3.  Be Ambitious Be bold, be brave and be creative – use technology, innovation, and new ways of working to radically optimise.  

4.  Direct and Lead Deliver cost optimisation as a strategic, business transformation programme.  

5.  Adopt a culture of cost optimisation Ensure you embed a culture of ownership and incentivise continuous improvement.  

Success with strategic cost reduction will see rewards on both the top and bottom lines. Moreover, the business will better be equipped to deliver on its objectives and engage all relevant stakeholders.  

Looking a clear sense of what costs to keep and what ones to eliminate? Worried your business will be left behind? Contact us at info@nethersidecg.com to discuss strategic cost reduction.