Cost Takeout has been heard at one time or another in every C-Suite and boardroom. The primary objective of every leadership team is to take out cost. We live in a world where everything can be done at lower cost. With that in mind, how does a leadership team develop a cost takeout strategy? The first thing is to make sure everyone is clear on what a cost takeout strategy really is. Let’s start with what it isn’t.
It is not:
- A cost reduction project: That lends itself to a product, a process, a part or an activity focused on by a small number of people
- Continuous Improvement: CI is a methodology for improving everything you do which will reduce cost. This is evolutionary, not revolutionary
- A short-term project: Can’t be done in a couple of weeks or months
Cost Takeout is:
- A business transformation
- A process that redesigns the fundamental elements of a business to the lowest cost structure that can support a company’s strategic objectives
- The redeployment of resources to mission critical activities that can provide growth and differentiation
- Leveraging existing digital technology and lowering the “Total Cost” if IT infrastructure
- Rationalizing the product and services portfolio to the most profitable mix
- Process re-engineering: In the office, in the field and in the shop
- Aligning the organization to the new business design
- Partnering with vendors who can do non-mission critical activities at a lower cost
- Leveraging vendor expertise in design and process
- Justifying every $ of overhead in the business
Cost Takeout is one form of Business Transformation. While the above is not a definitive list of Cost Takeout activities, it should give the reader a pretty good idea of the complexity of the process for doing it right. There are five requirements for doing it right:
- Management commitment to the project: start to finish
- A holistic approach which is often associated with “Wall to Wall”
- A clearly articulated business strategy from which all decisions are tested
- A clearly defined methodology for the cost takeout process
- A well thought through change management plan
You can read more about Group50’s cost takeout methodology, projects and results here
At Group50, we have mastered items three through five, but the first thing that needs to be done is to decide if a cost takeout strategy is right for your business, its’ strategy and its current lifecycle. We can help you make those decisions and design a program for your business that will minimize cost and optimize strategic performance. Call a Group50 cost takeout expert today at (909) 949-9083, request more information here, or drop us a line at firstname.lastname@example.org.
About the Author: Jim Gitney is the CEO and Founder of Group50® Consulting, founded in 2004, a consulting firm focused on working with middle market companies to significantly improve their productivity by leveraging people, process and technology as part of a company’s strategic plan. Restructuring and Cost Takeout in manufacturing are Group50 specialties. Group50 consists of consultants who have spent their careers in corporate America learning how to optimize businesses. We specialize in working with senior leaders to develop and implement programs that leverage people, process and technology to optimize business performance.
- Strategy Doesn’t Matter – Unless You Can Execute It…
- Don’t Sell Products, Sell Systems – The Product Lifecycle Revenue Model
- Risky Business…Is your company wearing Tightie Whities?
- The Great Reassessment – Inflection Point
- Is Your Company at an Inflection Point?
- Strategic Maturity – An Imperative at This Economic Inflection Point
- Get on the Train or Get off at the Next Stop! – Inflection Point
- What is an Effective Sales Strategy? – Inflection Point
- Help! I Stopped Growing! – Inflection Point
- Podcast With Jim Gitney on What to do About Moving Through an Inflection Point