When embarking on cost-cutting programs, many consumer companies adopt a hands-off posture toward what they consider strategic functions—those they see as core to the business—and focus instead on finding back-office efficiencies. Companies have repeatedly searched for savings in their cost centers and support functions by implementing lean techniques as well as through more transformative changes such as automation and outsourcing. The core functions, on the other hand, remain full of unexplored opportunities.
The entire organization—no exceptions—should be in scope when contemplating a cost-reduction effort. In our experience, when companies assess the savings potential in all their departments, they identify twice as much savings in the core functions as they do in back-office functions.
Looking at interactions across departments can surface even greater savings potential. Many companies—particularly those that have been in belt-tightening mode for several years—have already tapped into the most obvious savings opportunities within departments or business units, but they’ve yet to examine inefficiencies in cross-functional, cross-channel, or cross-regional activities and processes.
Authors: Camilo Becdach, Lauren Ratner, Shannon Hennessy
Source: McKinsey Quarterly
Subjects: Finance, Management
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