Sustained Cost Transformation: Delivering Savings that Stick

It’s no surprise that most companies routinely try to lower their costs. But few succeed in driving costs out and making the savings stick. Yet some companies succeed not only in significantly lowering their costs but also in maintaining those reductions over time. What do the successful companies know that the others don’t? To find out, we dug deep into our data and conducted a series of executive interviews. We discovered that companies that reduced costs and kept them low take a fundamentally different approach from the rest. We call this approach sustained cost transformation. The companies that achieve it typically follow a common path with four key elements. The cost leaders:

– Set targets based on external, market-based data, not on internal benchmarks;
– Tailor cost-cutting efforts to their strategy;
– Get the metrics right;
– Focus on the “seams” of the organization, not just individual units.

Successful companies also know how to make cost-reduction initiatives stick. Rather than relying on exhortation and top-down missives, they launch comprehensive efforts to embed the message in the entire organization. Before long, the company develops a new consciousness—and a new culture—in which keeping costs low is a primary objective. This is the key to delivering sustained cost savings year after year.

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