When business leaders ask me what is the best way to reduce costs, I always start with a personal story. I remember my parents writing down every single expense in a little book. When our family then wanted to go on holiday, they could see what expenses where just "nice to have" or less important than the holiday. Those expenses could be scrapped to save for our trip.
Similar in the business world, to save money you need to know what you spend, in very detail. Creating that forensic visibility is where saving starts.
Beyond the visibility, when people know what to save for, the motivation is higher. When you have something to look forward to like that nice family holiday, you tend to put in that little extra effort to make sure you get there. Companies that have thrived in their cost reduction journeys are those that have been very successful bringing across the purpose of that journey to their employees.
And that purpose is Growth, it has to be Growth, full stop.
To drive growth in this world where disruption is king, companies often need to reinvent themselves. They need to re-assess where to play, now and in the new. It’s all about fighting the disruption to their core business and creating a new space for themselves. Pivoting to this new space is an art in itself. We call it the Wise Pivot, a strategy for deliberate change by transforming and growing the existing businesses, while scaling new businesses, continuously and synchronously. The Wise Pivot allows companies to surf the waves of disruption, where one pivot is followed by the next and the next. In Malaysia, we have helped companies pivot to the new by unlocking trapped value to fund their growth. Their growth and reinvention is reimagining the way Malaysians live and work.
Obviously, this requires funding. The usual route is to ask for money externally, increase debt, talk to investors or drive aggressive cost reductions by cutting corners or reducing staff. But what if the funds we need to invest could come from within, and in a sustainable way. What if we could optimise business operations through a zero-based mindset, or ZBX as we call it.
ZBX is the transformation of zero-based budgeting—a finance technique already around for decades to cut costs—into a force for Growth, Innovation and Competitive Advantage. This transformation is described very well in a book recently published "The Big Zero". Companies often claim they are already applying zero-based as in the budgeting finance technique. Until they read in the Wall Street Journal how 3G Capital and Warren Buffet are using this re-invented Zero-based Mindset approach to fund their acquisition growth. We feel it’s not just a budgeting exercise but should be a much more holistic transformation. This is about using science-based insights to reallocate resources into growth initiatives and new sources of innovation.
Implementing ZBX starts with creating a forensic visibility on who spend how much on what. New techniques in analytics like AI allow us to do this at a very granular level these days, all the way to every single transaction can be mapped now.
From that starting point, we can combine this with the operational activity insights on what activities really drive your bottom line results, your prime value chain basically. Combining the forensic spending data with the prime value chain allows you to identify where the non-value adding capital is. The decisions on how to reallocate those funds are therefore science-based, not gut feel. This helps with the mindset change as the facts are clear, the whole process is very transparent and key to achieving a zero-based mindset culture throughout the organization.
In a nutshell, ZBX is about focusing on Growth instead of cost reduction, it’s about looking forward not backward, it’s about sustainability not cutting corners temporarily. Positioning ZBX as Growth-focused will help with the mindset change, because growth allows people to dream. People usually tend to accept leaner practices if they can see how this will help the company grow, and hence their own careers as well. The end goal is to have every employee manage the company’s money as if it was their own. Companies that have mastered converting this mindset into their DNA are reaching massive results. And this is not in millions of dollars, we are talking billions here.
Visit us at the Kuala Lumpur Innovation Centre to start your journey to unlock new value.