Accenture Strategy research reveals that just six percent of CFOs say cost management will be their top strategic priority in 2016. Yet a flexible cost structure is essential for profitable and sustainable growth. CFOs must do more now to drive a broad cost management mandate. Strategic cost management offers a radical approach to disrupting enterprise costs from the inside. This is not status-quo cost reduction focused on doing the same things for less. It makes deliberate and durable changes to the business or operating model to sustain 20 to 50 percent in cost reductions to reinvest for growth.
Strategic cost management is important to the CFO agenda for a number of reasons:
By attacking costs comprehensively, CFOs afford companies a longer runway of financial viability to buy time for growth measures to work, support optionality in pricing, and can fend off private equity buy-outs or hostile takeovers.
Strategic cost management removes activities and processes that do not drive business value, sizes the business for remaining tasks, assigns the right people to complete them, and tracks outcomes. This happens better, faster and cheaper with digital technologies.
By positioning themselves as catalysts for digitally-driven strategic cost management, CFOs can extend their role. Fifty-six percent of CFOs have performance objectives in place that make them responsible for strategic cost management on a daily basis.
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There are three fundamentals that CFOs need for strategic cost management:
Digital stress test
Conduct outside-in scenario planning for digital disruption to highlight where the operating model and cost structure can be transformed.
Digital first plan
Develop an action plan to redefine the current cost base, with digital at the core. The plan should help the business operate at a fraction of the current cost base with immediate and long-term cost-cutting.
Ensure that strategic cost management extends to customers. Happier customers lead to more revenue to reinvest in further differentiation and transformation.