The Agile Cost Advantage
Cost reduction to improve margins and fund growth
Identify where costs can be reduced and how much each change could deliver. The guide explains how to prioritise initiatives and track the financial benefits while protecting customer service.
PDF by email. Includes the cost framework, prioritisation matrix and sample tracking summary.
The cost reduction process
The Agile Cost Advantage links the savings target to individual initiatives and their financial results. Quick wins can release cash to fund the more complex changes that follow.
- Stage 1
Set targets
Assess the scope for savings by cost type and division. Fixed plant costs may offer little flexibility, while changes to fuel mix or logistics may offer more.
- Top-down requirement
- High-level cost mapping
- External benchmarking
- Stage 2
Identify opportunities
Analyse how costs arise across operations, processes and management structures. Prioritise the opportunities by potential savings and speed of delivery.
- Driver-based analysis
- Value chain mapping
- Spans and layers analysis
- RACI analysis
- Stage 3
Design initiatives
Validate the savings assumptions and prepare business cases with benefits, timing and investment requirements. Assign owners and set delivery milestones.
- Opportunity validation
- Quick win delivery
- Business cases
- Initiative plans
- Stage 4
Deliver initiatives
Track progress against the plan and measure the financial benefits as they appear. Address delays or shortfalls early and revise initiatives where assumptions change.
- Initiative tracking
- Financial tracking tool
- Mitigating actions
The Value Delivery Framework
Financial targets, the program plan and the tracking system are linked throughout delivery. Senior executives oversee the program, resolve issues and agree changes when results fall short.
View the delivery frameworkAdapted from The Agile Cost Advantage, printed page 8.
Prioritising savings by value and speed
Start with opportunities that offer a material benefit and can be delivered quickly. Phase the remaining work to match the team’s capacity.
Scroll across the matrix to read every label.
- Quick wins
- Fast-track opportunities with a material benefit that can be delivered quickly. Early savings can help fund the remaining program.
- Phase 1
- Prepare and deliver the next group of initiatives around the team’s capacity and the work required for each change.
- Phase 2
- Schedule more complex or lower-value opportunities after the earlier initiatives have built momentum and released resources.
Read the initiatives in the matrix
- Project Horizon
- Branch consolidation
- Price structure
- Project Neptune acquisition
- Product X launch
- Overtime reduction
- Re-tender core input
- Reconfigure fleet
- Cross-sell push
- Operational productivity program
- AI automation
- Central headcount
- Legacy contracts
- Outsource back-office functions
- Rent review
- Contractor review
- Alternate fuels
- Plant upgrade
Adapted from the illustrative prioritisation matrix in The Agile Cost Advantage, printed page 10. The positions and axes are qualitative.
Cost reduction in practice
Client examples from printed pages 5 and 6. Figures are Zenith’s own account of each program.
- Financial services
- Over $15m identified
Estimated initial net profit after tax benefit from 24 near-term initiatives. The team helped begin implementation before handing delivery to the client’s internal team.
- Fertilisers and chemicals
- Over $30m removed
Costs removed by rationalising manufacturing facilities and supply points and reducing overheads. The changes also improved utilisation and competitiveness.
- Construction materials
- On track to exceed target
At the time of the report, the business was on track to exceed its savings target. The program covered more than 100 initiatives across five functions as declining cash flow threatened investment.
The Value Delivery Framework
Connect financial targets to initiative plans and progress reporting. Management can see whether the work is on schedule and whether the expected savings are being realised.
Targets, plans and tracking
The program plan sets out how initiatives will meet the financial target. The tracking system compares progress and benefits with the plan, giving management a basis for revising priorities.
Value Delivery Framework, adapted from The Agile Cost Advantage, printed page 12.- Tracking
- Implementing
- Planning
- Program target
Delivery against the program target
The construction materials example shows initiatives in planning, implementation and tracking. Management could compare results delivered to date with the target and see the benefits expected over the following months.
Adapted from the tracking illustration in The Agile Cost Advantage, printed page 6. Zenith’s account of the client program.Finding cost reduction opportunities
The report looks beyond headcount cuts to examine the work being done, how it is organised and the resources it consumes.
- Benchmarking
- Compare cost ratios and operating performance with external benchmarks to identify areas for closer analysis.
- Driver-based analysis
- Identify what causes each cost and test whether the expenditure is justified by the outcome it supports.
- Process mapping
- Map the work along the value chain to find unnecessary activity and opportunities for simplification, automation or outsourcing.
- Spans and layers
- Review management reporting layers and the number of direct reports to assess whether the structure fits the work.
- RACI mapping
- Clarify who is responsible, accountable, consulted and informed to identify duplication and delays in decisions.
- Cost opportunity repository
- Use Zenith’s library of cost reduction opportunities by sector and function to identify further areas to test.
Protecting service and delivering savings
The report explains why savings can fall short and how to address the causes during design and delivery.
| Area | Program approach |
|---|---|
| Cost targets | Assess the scope to reduce each cost before applying a target. Contractual and fixed costs may require a different timetable from discretionary spending. |
| Customer service | Reduce the workload or change the process before removing capacity. The report’s branch closure example shows how lost revenue can outweigh the expected saving. |
| Internal ownership | Give senior internal managers responsibility for initiatives, with the CEO and CFO actively supporting delivery. Plan the handover from external advisers. |
| Financial benefits | Review delivery milestones alongside actual financial and operating results. When benefits fall short, revise the assumptions, take corrective action or identify further initiatives. |
The framework and tools in the guide
Use the report to structure a cost reduction program from the initial target through to financial benefits tracking.
The cost framework on printed page 8 sets out the stages of the program and the analysis used at each stage.
The prioritisation matrix on printed page 10 helps management phase initiatives by value and speed. The business case guidance on page 11 covers expected benefits, timing and investment requirements.
The Value Delivery Framework and sample tracking summary on printed pages 12 and 13 show how to connect financial targets with initiative plans and progress reporting.
Get The Agile Cost Advantage
Includes the cost reduction framework, initiative prioritisation matrix, business case guidance and a sample tracking summary.