Cost reduction is the process of decreasing a company's expenses to maximize profits. It involves identifying and removing expenditures that do not add value to customers while optimizing processes to improve efficiency. Cost reduction typically focuses on generating short-term savings. However, squeezing a few percentage point savings from slow stretched and unfocused operations is not enough to sustain competitive relevance in this disrupted marketplace.
The critical priority is not the costs you cut but where you focus resources to stimulate growth and differentiation – strategic cost reduction. This includes Digital Transformation that can sharpen the precision of risk selection and pricing and deliver more tailored and targeted client solutions at a fraction of the cost.
The problem is that many cost optimization programs struggle to deliver or fail to stick. At Dmanera, we focus on optimizing rather than just cutting expenses to ensure your business can sustain competitive relevance and maximize its potential using five steps:
1. Start with Strategy: Have a clear view of your strategy and ensure it is consistently understood across the organization.
2. Align Costs to Strategy: Look across the whole organization and differentiate the strategically-critical 'good costs' from the non-essential 'bad costs.'
3. Aim High: Be bold, brave, and creative – use technology, innovation, and new ways of working to optimize the cost base radically.
4. Set Direction and Show Leadership: Deliver cost optimization as a strategic business transformation program.
5. Create a Culture of Cost Optimization: Ensure you embed a culture of ownership and incentivize continuous improvement.
