Accenture research shows that almost all savings from traditional cost management initiatives in the life sciences industry evaporate within three years. Only those companies that change underlying cost structures, build permanent cost control behaviors and make sustainable cost management part of the company DNA will permanently fuel growth, compete and win.
The path to sustainable cost reduction includes four key levers:
Consumption – Life sciences companies need to embrace this concept to deal with external and internal pressure to bring new products to market faster while maintaining or exceeding current levels of profitability. Other industries like consumer goods are already targeting reduced consumption as a means to reinvigorate growth.
Supply/Price – Although the onslaught of acquisitions in life sciences has created opportunities to use a supply/price focus as a cost competitiveness lever, it doesn’t take a multi-billion dollar acquisition to drive cost out of your supply base. Reducing price in supply can be done in a number of ways using well established procurement and strategic sourcing best practices.
Structure – In the world of progressive operating models, life sciences companies are behind the curve. Most have either a traditional business unit-centric operating model or have only implemented single-function or multi-function shared services.
Process – Companies must be bolder than they have before. They need to scrutinize the value-add of every piece of data manually collected or cleansed, every report executed, every meeting conducted-and then have the intestinal fortitude to fundamentally and permanently change how work is executed.
For more information on how leading companies in a variety of industries are utilizing these levers, download the full report: Breaking free from the cost-cutting cycle in the life sciences industry.