To respond to disruption and other pressures, communications, media, and technology (CMT) companies need new sources of revenue. To fund new solutions and business models, many are seeking to expand margins and cash flow from their legacy businesses—transforming the core to scale the new.
But traditional cost-reduction methods do not yield sustainable margin improvement. Costs creep back into the business in 12 to 24 months, triggering a cycle of cost cutting that never delivers durable savings for reinvestment. An integrated margin expansion program—rooted in zero-based principles—can break this cycle. Think of it as a holistic approach to financial fitness to get the company in top shape for efficiency, profitability, and growth.
Getting lean, building muscle
CMT companies manage cost and growth in silos without recognizing the power of doing them together. Efforts to take costs out of one part of the business often create them in other areas—or worse—hinder growth by cutting too deeply. And companies often fail to capture synergies across support functions or miss hidden cost drivers.
Integrated margin expansion avoids these pitfalls by shattering the silos and creating senior-level accountability for revenue growth and operational efficiency. It applies zero-based principles to the cost structure, optimizing operating costs and third-party spend. At the same time, it drives top- and bottom-line growth by capturing more revenue from current customers, reaching new ones, and improving pricing and sales effectiveness.
Breakthrough fiscal fitness
Analytics is an enabler of integrated margin expansion. Its power is in how it enables forensic visibility into the business. This is a notable departure from traditional cost reduction initiatives where functional leaders are tasked—often in a “spread the peanut butter” approach—to reduce costs of operations under their control.
What results is that different parts of the business often make decisions without any sense of the cause-and-effect of their actions. In contrast, integrated margin expansion uses analytics to understand cost drivers within end-to-end value chains. This empowers CMT companies to work cross-functionally to target and prioritize cost and revenue centers for a surgical approach to improving—and sustaining—margins.
Staying in shape—for good
Digital tools and capabilities like artificial intelligence (AI) and automation are key to sustaining the benefits of integrated margin expansion. However, this is not just about using digital technologies to reduce headcount. By shifting people to higher-value activities, CMT companies can not only optimize cost, they can also develop the insights, products, and sales and service capabilities that drive growth.
Going beyond crash diets
CMT companies must out-innovate the competition to speed up the business to survive disruption. By balancing sustainable cost reduction and cost optimization in both the front and back office, integrated margin expansion can make it happen, starting with these fundamentals: