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Pillars of Sustainable Cost Reduction

This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007

DOCUMENT DESCRIPTION
For most organizations, Cost Reduction efforts don’t produce meaningful or lasting results. This is because they do not take a strategic approach to Cost Reduction. This framework first clarifies the meaning, rationale, and importance of the strategic approach to Cost Reduction.

Then, we delve into the 3 pillars to developing a Sustainable Cost Reduction Program:

1. Adopt a CEO Mindset
2. Develop Institutional Capabilities
3. Create Sustainability

Organizations in every industry, including high end products, can leverage Sustainable Cost Reduction programs to gain a Competitive Advantage.

Additional topics discussed include Continuous Improvement Mindset, Leadership Actions, Competitive Advantage, among others.
This deck also includes a set of slide templates for you to use in your own business presentations.

ABOUT FLEVYPRO
FlevyPro is a subscription service for on-demand business frameworks and analysis tools. FlevyPro subscribers receive access to an exclusive library of curated business documents—business framework primers, presentation templates, Lean Six Sigma tools, and more—among other exclusive benefits. Click here to learn more about FlevyPro and its benefits

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Pillars of Sustainable Cost Reduction

  1. 1. This is an exclusive document to the FlevyPro community - http://flevy.com/pro Framework Primer Pillars of Sustainable Cost Reduction Presentation created by 2 Develop Institutional Capabilities 3 Create Sustainability 1 Adopt a CEO Mindset SUSTAINABLE COST REDUCTION
  2. 2. 2This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Strategic Approach to Cost Reduction Pillars of Sustainable Cost Reduction Templates The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  3. 3. 3This document is an exclusive document available to FlevyPro members - http://flevy.com/pro This framework discusses the foundational pillars required to create a Sustainable Cost Reduction Program Presentation Overview Organizations in every industry, including high end products, can leverage Sustainable Cost Reduction programs to gain a Competitive Advantage. For most organizations, Cost Reduction efforts don’t produce meaningful or lasting results. This is because they do not take a strategic approach to Cost Reduction. This framework first clarifies the meaning, rationale, and importance of the strategic approach to Cost Reduction. Then, we delve into the 3 pillars to developing a Sustainable Cost Reduction Program: Additional topics discussed include Continuous Improvement Mindset, Leadership Actions, Competitive Advantage, among others. This deck also includes a set of slide templates for you to use in your own business presentations. 1 2 Adopt a CEO Mindset Develop Institutional Capabilities Create Sustainability3 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  4. 4. 4This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Strategic Approach to Cost Reduction Pillars of Sustainable Cost Reduction Templates The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  5. 5. 5This document is an exclusive document available to FlevyPro members - http://flevy.com/pro The first step to achieving impactful savings is to take a strategic approach towards Cost Reduction Strategic Approach to Cost Reduction By identifying poorly deployed resources, we can reallocate them to more value-added activities to strengthen or re-position our organization. Most organizations do not take a strategic approach to Cost Reduction. Thus, cost initiatives only achieve marginal, short-term improvements Leaders realize the shortcoming of their Cost Reduction efforts. A 2015 survey of 700 senior executives conducted by Bain & Co. found: 40% of company leaders said they did not achieve their savings targets 80% of company leaders do not expect the cost savings to be sustainable If we take a strategic approach, then Cost Reduction can be a powerful means to reinforce our organization’s strategic direction and increase competitiveness. We can view Cost Reduction as a resource- allocation process in reverse. – It is a systematic review of where and how we will invest or divest scared resources to ensure the success of our strategy Source: Beyond Lean: Cost Transformation, Bain, 2015 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  6. 6. 6This document is an exclusive document available to FlevyPro members - http://flevy.com/pro -5 0 5 -10 -15 Yr 5-9 Yr 0-2 Yr 2-5 Studies that organizations considered Cost Leaders achieve this by embracing the strategic approach to Cost Reduction Strategic Approach vs. Conventional Approach Sustained Cost Reduction is about doing more with less to generate impactful productivity gains. By linking cost structure to strategy, companies see noticeable improvement to performance. Source: Beyond Lean: Cost Transformation, Bain, 2015 Conventional approach “The Rest” Startegic approach “Winners in good times and bad” 18 14 11 7 2 Strong leader LeaderWeak follower Ø 10 ParityFollower Return on Capital, %Change in unit costs, % Cost leadership The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  7. 7. 7This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Strategic Approach to Cost Reduction Pillars of Sustainable Cost Reduction Templates The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  8. 8. 8This document is an exclusive document available to FlevyPro members - http://flevy.com/pro In formulating a Sustainable Cost Reduction, there are 3 pillars to consider Sustainable Cost Reduction – Pillars The bottom-up mobilization will inject our organization with new energy—by empowering staff across the organization to contribute their ideas and energy. As established, to create Sustainable Cost Reduction, we need to adopt a strategic approach to Cost Reduction. This approach combines clear targets from the top, along with bottom-up mobilization. The initiatives required to build Sustainable Cost Reduction can be categorized across 3 pillars: 2 Develop Institutional Capabilities 3 Create Sustainability 1 Adopt a CEO Mindset SUSTAINABLE COST REDUCTION The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  9. 9. 9This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Foremost, we must adopt the CEO mindset—this is a mentality all teams must adopt Pillar 1. Adopt a CEO Mindset Our market position dictates our cost targets and goals—likewise, our strategy guides investment priorities. Adopting a CEO mindset provides the strategic context for Sustainable Cost Reduction. It shifts the focus from cost effectiveness to “winning.” All teams should adopt the CEO mindset and we should provide them with the proper tools to do so To frame the proper CEO mindset as it relates to Cost Reduction, we need to answer the following 3 strategic questions: What is the strategic rationale for our cost reduction goals? What are our true sources of value and Competitive Advantage? What is our Future State cost position? 1 2 3 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  10. 10. 10This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Cross-functional Teams Accountability There are 3 core institutional capabilities that must be developed, which will provide a foundation to Sustainable Cost Reduction Pillar 2. Develop Institutional Capabilities Individuals working on the front line will make cuts when they realize it will free up resources for areas more strategic to the organization. We need to develop the necessary capabilities to implement an effective Cost Reduction Program Cross-functional teams deliver a bottom-up assessment that helps organizations transcend incremental improvements to breakthrough ideas. We can increase support for Cost Reduction by engaging cross-functional teams from the start Accountability and decision rights are equally important. Management teams should clarify decision rights around critical cost decisions, ensure a closed loop with the CFO, and make the savings flow to the bottom line Horizontal View We should focus horizontally across the organization for savings, instead of just looking vertically by business unit. This is because excessive costs grow in the seams of organizations, where business units and functions overlap and decision rights become ambiguous The 3 critical institutional capabilities needed are: 1 2 3 The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  11. 11. 11This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Lastly, to achieve sustainability, we must adopt a Continuous Improvement mindset Pillar 3. Create Sustainability – Continuous Improvement Mindset Principles in Lean Management (e.g. Kaizen, 5S, DMAIC, PDCA) can be adopted to drive Continuous Improvement thinking within the organization. It’s critical to create a Cost Reduction Program, where reductions are sustainable. Most conventional Cost Reduction Programs see costs creep back over time Sustainable Cost Reduction is not easy, but the benefits are worth all the effort invested. A successfully implemented Sustainable Cost Reduction Program frees up resources, assets, and managers. It also builds a competitive edge in the areas that matter most— whether it’s a strategic business, talent, or training. For Cost Reduction to be sustainable, we need to create a culture of Continuous Improvement. This makes cost containment part of the company’ DNA Everyone—from the front line to the C-suite— should be thinking about how to reduce costs down by 3% each year. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  12. 12. 12This document is an exclusive document available to FlevyPro members - http://flevy.com/pro There are 4 actions leadership teams must take to have the cost- containment mindset Pillar 3. Create Sustainability – Leadership For leadership teams to be cost-containment focused in their thinking, there are 4 actions we can take. The CEO mindset, as outlined in Pillar 1, is critical to achieving breakthrough gains. Adopt clear rules and culture change 1 Align incentives and meaningful rewards to executives for delivering value by including Key Performance Indicators (KPIs) in contracts 2 Lead by example and consistently demonstrate the model behavior 3 Be patient, diligent, and disciplined 4 Leadership teams should select incentives that fit the cultural and operating normal of the company. E.g., for some organizations, compensation works best; for others, recognition works best. Sustainable Cost Reduction should be embedded in the budgeting process. Likewise, it should be high on the agenda at all key business review meetings. Implementing true Sustainable Cost Reduction Programs takes time. Those that success embrace a systematic, multi-year process, tracking progress and adjusting over time. The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  13. 13. 13This document is an exclusive document available to FlevyPro members - http://flevy.com/pro In measuring the readiness and viability of our Cost Reduction Program, here are questions we should answer affirmatively Pillar 3. Create Sustainability – Key Questions If the answer is “no” to any of the above questions, heed this as a warning that our Cost Reduction Program may fall short of its full potential. We can evaluate whether our Cost Reduction Program can feasibly deliver upon its goal by asking the following key questions Is the program reinforcing a Competitive Advantage? Is it lead by cross-functional “A”-teams? Is the Cost Reduction effort part of every management meeting and intrinsic leadership behavior? Is there an annual target for Cost Reduction embedded in the annual budgeting process? Are efficiency gains automatically built into the budget? Is our Cost Reduction Program visible deep in the organization? Do managers and staff diligently pursue cost reduction, even when not supervised? The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  14. 14. 14This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Contents Overview Strategic Approach to Cost Reduction Pillars of Sustainable Cost Reduction Templates The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  15. 15. 15This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Sustainable Cost Reduction Pillars – TEMPLATE Insert bumper. 2 Develop Institutional Capabilities 3 Create Sustainability 1 Adopt a CEO Mindset SUSTAINABLE COST REDUCTION The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  16. 16. 16This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Sustainable Cost Reduction Pillars – TEMPLATE ALTERNATE Insert bumper. 2 Develop Institutional Capabilities 3 Create Sustainability 1 Adopt a CEO Mindset SUSTAINABLE COST REDUCTION The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  17. 17. 17This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Sustainable Cost Reduction Pillars – TEMPLATE ALTERNATE Insert bumper. 1 Adopt a CEO Mindset 2 Develop Institutional Capabilities 3 Create Sustainability SUSTAINABLE COST REDUCTION The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  18. 18. 18This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Insert headline Institutional Capabilities – TEMPLATE Insert bumper Cross-functional Teams Accountability Filler text, filler text, filler text, filler text Filler text, filler text, filler text, filler text Filler text, filler text, filler text, filler text Filler text, filler text, filler text, filler text Horizontal View Filler text, filler text, filler text, filler text Filler text, filler text, filler text, filler text 1 2 3 2 Develop Institutional Capabilities 3 Create Sustainability 1 Adopt a CEO Mindset The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  19. 19. 19This document is an exclusive document available to FlevyPro members - http://flevy.com/pro This presentation was created by LearnPPT. We are a team of management consultants trained by top tier global consulting firms with a collective experience of several decades. Our documents consist of business templates, business frameworks & methodologies, and PowerPoint templates. View our available presentations on Flevy here: https://flevy.com/author/LearnPPT The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  20. 20. 20This document is an exclusive document available to FlevyPro members - http://flevy.com/pro Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com The content on this page has been partially hidden. FlevyPro members can download the full document here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007
  21. 21. 1 Flevy (www.flevy.com) is the marketplace for premium documents. These documents can range from Business Frameworks to Financial Models to PowerPoint Templates. Flevy was founded under the principle that companies waste a lot of time and money recreating the same foundational business documents. Our vision is for Flevy to become a comprehensive knowledge base of business documents. All organizations, from startups to large enterprises, can use Flevy— whether it's to jumpstart projects, to find reference or comparison materials, or just to learn. Contact Us Please contact us with any questions you may have about our company. • General Inquiries support@flevy.com • Media/PR press@flevy.com • Billing billing@flevy.com

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  • NoldyTakaliuang

    Sep. 10, 2019

This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/flevypro/pillars-of-sustainable-cost-reduction-3007 DOCUMENT DESCRIPTION For most organizations, Cost Reduction efforts don’t produce meaningful or lasting results. This is because they do not take a strategic approach to Cost Reduction. This framework first clarifies the meaning, rationale, and importance of the strategic approach to Cost Reduction. Then, we delve into the 3 pillars to developing a Sustainable Cost Reduction Program: 1. Adopt a CEO Mindset 2. Develop Institutional Capabilities 3. Create Sustainability Organizations in every industry, including high end products, can leverage Sustainable Cost Reduction programs to gain a Competitive Advantage. Additional topics discussed include Continuous Improvement Mindset, Leadership Actions, Competitive Advantage, among others. This deck also includes a set of slide templates for you to use in your own business presentations. ABOUT FLEVYPRO FlevyPro is a subscription service for on-demand business frameworks and analysis tools. FlevyPro subscribers receive access to an exclusive library of curated business documents—business framework primers, presentation templates, Lean Six Sigma tools, and more—among other exclusive benefits. Click here to learn more about FlevyPro and its benefits

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