Strategic cost cutting with Strategy&'s Fit for Growth approach

28 August 2017 Consultancy.uk

While the global economy is improving its momentum, many organisations still find themselves faced with lacklustre growth and profitability. By strategically cutting costs and using the ‘Fit for Growth’ approach however, companies can bolster their financial health, according to Marco Kesteloo, a partner at consultancy firm Strategy&.

Economic, social and political developments are making the world increasingly complex. The expectations of consumers, investors and shareholders play a role, in addition to increasing competition, regulatory pressure and ongoing digitalisation. According to Marco Kesteloo, a partner at Strategy& in Europe, which is PwC’s strategy consulting arm, “If companies fail to manage the increasing complexity, this leads to costs, while reducing costs is crucial for healthy business growth.”

Consciously save and invest won costs

“It is better not to reduce costs by chopping indiscriminately with a cleaver,” Kesteloo says. “You have to make conscious choices about where you save, what you invest in and what you can do efficiently or in a better way. It's about making sustainable growth possible and not saving through one-time costs cutting, to survive. If done incorrectly or ad hoc, cutting costs can make a company weaker and that is disastrous in this period.”

Fit for Growth approach

New competitors

To indicate how fast organisations need to respond to market changes and complexity, companies should consider the competition offered by new digital players as an example. "These companies have different business models and cost structures, and can become fierce competitors of existing companies on a very short time-scale,” Kesteloo states. “Take the supermarket landscape. Digital players are gaining a share rapidly, while new entrants are forming a new breed of competition. The acquisition of Whole Foods by Amazon for instance is a signal to the established order that formerly pureplay digital players are competing in more traditional channels. This trend demands adaptability and agility at incumbent companies.”

Good and bad costs

The Fit for Growth approach, derived from the management book ‘Fit for Growth: A Guide to Strategic Cost Cutting, Restructuring, and Renewal’ (authors: Vinay Couto and Deniz Caglar, both from Strategy& in the US), offers this form of manoeuvrability by structuring companies to be permanently lean-and-mean. The method distinguishes between good and bad costs, taking into account the strategy of an organisation as a starting point.

Kesteloo: “It's key for an organisation to invest in areas which add value to its competitive edge, while saving costs in areas that are not in line with the strategy. That is the key to sustainable growth and success. From this viewpoint, utilising benchmarks is less relevant as the strategy is of course different for each organisation.”

Strategy&’s Fit for Growth framework

Structural causes

When looking for ways to save costs according to the Fit for Growth method, no departments or parts of an organisation are left unturned. “The message must be: we are all in the same boat,” says Kesteloo. “It's also important to always look forward and not to dwell in the search for those at fault for mistakes in the past. However, you need to investigate the structural causes of excessive costs, because you learn from it as an organisation.”

New digital opportunities

Digital developments are disrupting existing business models, but also open the door to new opportunities. “Similar to new digital players, existing organisations can use digital solutions to work more efficiently and save costs. In addition, existing organisations can develop new capacities based on digital capabilities, enabling them to distinguish themselves in the marketplace and increase their revenues. The key to success is that the approach is embedded in the strategy and processes, and that leadership is committed to the transition.”

Recent transformation examples

People and communication

The Fit for Growth approach is about 'hard numbers', but also about people and communication. “We look at both the decisions that need to be made and the norms underlying them, because if you understand the corporate culture, you can better implement cost savings.”

“To implement a new (cost) strategy, a CEO must clearly demonstrate commitment and ensure that managers want to convey and implement the change programme. Change in an organisation demands a lot of people's engagement and energy. Good communication is crucial, because it is the only way to get people to follow the new plan. Managing a few quick wins at the beginning can help.”

Permanent change

It is important that, leveraging the Fit for Growth approach, lasting change is realised. Nevertheless, organisations often end up cutting costs that return over time. On this, Kesteloo concludes, “Staying on the diet requires a lot of discipline and focus, yet it is necessary because cost savings will pave the way for investment and growth.”

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How First Consulting generates more insight using fewer reports

08 March 2019 Consultancy.uk

Organisations are continuously investing in more advanced data collection and manipulation methods to enable smarter and more informed business decisions. In order to maximise their business value, companies understand the growing need for performance related insights from their data. First Consulting, a consultancy firm specialised in business change, has helped many clients in the utilities sector to deliver effective change through improved use of their data.

Most utilities firms are structured in such a way that every business unit has a team of analysts who are responsible for providing relevant data insights to their business colleagues. The business analysis teams form the link between business decision making and IT by translating business requests into meaningful actions and delivering information via reports.

Typically, the business user will receive a unique report for each information request, with each new report requiring individual, tailored support from the analyst team. This limits the productivity of the analyst teams and minimises their ability to address new data requests. The growing demand for information puts additional pressure on these teams, as a significant amount of time is required simply to gather and update the required data. This has caused reporting portfolios to expand dramatically. However, due to the analysts’ already stretched capacity, reports do not always deliver the most vital information and documentation is often incomplete.

Redesigning information delivery

At First Consulting, business consultants work in close collaboration with their clients to improve the mechanism for the delivery of information and analysis in response to business requests. The improved structure focuses on providing information per role type, rather than per request. As such, one dashboard is designed for each organisational role type, with all the relevant information presented in a single overview. This allows all individuals of a given role type to open a single dashboard and view what they need, as opposed to collating a large range of disparate links and unique reports which, previously, were all required to enable business decision making.

Moving from unique reports for each request, to reusing KPIs in a select group of dashboards

By implementing this new way of working, clients are able to reduce the reporting portfolio from over 100 reports to fewer than 20 dashboards (see figure above). In addition, the capacity for data maintenance can be reduced significantly by using modular KPIs, allowing for the re-use of data across multiple dashboards.

Changing while everyday work continues

In order to deliver effective change, it is essential that day-to-day processes remain unaffected whilst transitioning to a new reporting landscape. First Consulting achieves this by embedding business consultants within the client’s analysis team to gain feedback and determine exactly what visuals are necessary within the dashboards. This focuses effort on the outcome (such as what should be presented in the final dashboard) and allows a broad range of requirements to be considered in the business context and combined, where appropriate.

Key users and stakeholders are involved from the outset to help define what makes a high-quality dashboard. Adopting this approach helps the team to produce an optimal output that contains the key business information for the appropriate roles in an easy-to-use format.

Once it is clear what should be included in the final dashboard and how this should be presented, the team works according to the priorities set out by the product owner. This ensures that analysts work on the requirements which deliver the most value and which form the most coherent dashboards.

Main results

The advantages of implementing straightforward, no-nonsense solutions using fewer reports are particularly noticeable for the business and for the analyst teams:

  • Making adjustments is easier and maintaining and updating data costs less time
  • Management information is displayed in one location and is displayed according to defined standards, facilitating decision making
  • There is greater capacity within the business for complex analysis and project support

First Consulting combines process, technology, and implementation consulting to deliver impactful and value-adding solutions. The firm has more than 200 consultants based in the UK and the Netherlands.