Why Businesses Should Shift from Cost Management to Cost Leadership

We propose that business executives and finance leaders embrace the evolution from cost management to cost leadership. Cost leadership is reflected in a culture that, independent of macroeconomic circumstances, pursues a low cost, high-quality, customer-centric approach to managing the business. Cost leadership is characterized by four primary criteria:
(1) recognition as the lowest cost producer in one’s industry, without compromise in quality or customer focus;
(2) realization of a long-term cost-centric culture where cost consciousness is a strategic and leadership preoccupation across functional lines and independent of the vagaries of financial markets;
(3) dissemination of cost information with regard to customer, product, distribution channel, and the like that is timely, understandable, credible, and actionable and is made available to decision makers to fuel continuous improvement; and
(4) aggressive and balanced performance targets are established across the value chain. Achievement of these targets is recognized, rewarded, shared, and celebrated. There is no “resting on one’s laurels.”

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