To drive profitable and sustainable growth, companies must identify activities that drive value, take out costs that aren’t contributing to business goals and reinvest those savings into growth initiatives that improve competitiveness.
Accenture Strategy research found that 82 percent of companies are focused on cost reduction to free up funds to invest in growth initiatives, yet only 36 percent strongly agree they are able to sustain benefits of cost reduction programs.
What are the challenges that companies face? There are several, but most important is the fact that businesses aren’t grasping the critical link between cost reduction efforts and growth strategy.
Accenture Strategy’s research identifies several issues on the journey to creating fuel for growth and competitiveness.
Many businesses have too many cost reduction and growth initiatives and they can’t decide where to invest.
Competing priorities among executives puts businesses at risk for cutting the wrong costs and reinvesting in the wrong areas.
Operating models don‘t flex for cost reduction—or for growth.
Executives are unified in only one area: Investing in digital is a top priority.
Reducing costs to fuel growth: Good start, poor finish
Definitely Digital: Executives agree on Digital being a priority
Executing cost reduction strategies to fuel growth is challenging, but it has to happen for a business to be competitive. Here are three actions companies need to take:
1. Organize for growth
Know where growth is coming from and define your long-term growth strategy. Cost reduction activities and decisions on where to reinvest savings need to be aligned.
2. Manage the growth journey
Align leaders on the path forward to achieving cost management and delivering on growth objectives.
3. Digitize to fuel sustainable growth
Commit to building digital capabilities and digitizing traditional processes to achieve unprecedented speed, scale and savings.
Kris helps global organizations develop dynamic supply chain and service operations capabilities. For more than two decades, he has helped clients define cost transformation and procurement strategies that create competitive advantage, transform their operating models, and generate greater value for their organizations. Kris is a frequent author and speaker on the topic of procurement and serves on the advisory board of Procurement Leaders. He is based in Brussels.