Zenith Strategy Associates

The Agile Cost Advantage

Position your business for success with an efficient and responsive cost structure

Cost Reduction

Achieving rapid and sustainable cost reduction is a critical business objective.

Rebalancing the cost base to reflect the current challenging macroeconomic environment could be the difference between maximising future opportunities as economies revert to recent growth trends, or becoming another business casualty.

Cost reduction is a critical business objective

A focus on cost reduction is important and can deliver key, long-term, strategic benefits.

A lower cost base is an important source of competitive advantage, allowing a business to undercut competitors, or offer greater value, and gain market share.

Alternatively, a lower cost base drives improved margins, increasing capacity to fund new growth initiatives.

A well-executed cost reduction program can also bring internal benefits to the organisation.

These include the simplification of internal complexity, and improvements to the internal culture, increasing the sense of accountability within the organisation, as well as morale.
Cost efficiency

Cutting costs sustainably is challenging, with a high failure rate

Although cost reduction programs can deliver a powerful mix of financial, strategic, and organisational benefits, the failure rates of these types of programs are very high.

A recent survey of C-Suite executives for example, found that 75% of cost reduction programs failed to meet their targets.

These days, companies tend to be run relatively lean, and simply do not have staff that are surplus to operational requirements on the payroll.

Effective cost reduction is therefore more about changing the way things are done within a business, to remove the hidden costs that are concealed behind overly complex processes or bureaucratic organisational structures.
Unrealistic targets

Cost Reduction Framework

Agile cost advantage framework
At Zenith, we have spent the last 20 years helping businesses and private equity funds with performance improvement and turnaround support. A key part of our advisory work has been helping clients to structure and deliver successful cost reduction and performance improvement programs.

Based on this experience, we have developed a four stage approach to cost reduction. This introduces a systematic approach to the overall delivery of cost reduction programs and eliminates common causes of program failure. The leads to greater and more enduring strategic value creation. This is why our clients typically achieve a return on program investment of 40-100x.

You can learn more about each stage of our approach below:

A well-structured cost reduction program starts with setting a target. Having a target is important to define the ambition up-front, establish early momentum, and provide a basis to track to success of the program. We then identify cost opportunities.

Each cost opportunity can be thought of as a stand-alone initiative targeting a specific cost area. During the identification stage, as many possible cost opportunities as possible are identified. These are then prioritised based on expected impact and riskiness / time to deliver, to arrive at a list of cost reduction initiatives to take forward as part of the program.

During the design cost initiatives stage, the list of prioritised cost opportunities are converted into actionable plans, with defined milestones, resources, and key financial and operational metrics. In parallel with working up individual plans for each initiatives, those cost opportunities that offer the most potential for delivering early savings should be fast-tracked for immediate implementation. This builds early momentum for the overall program, and in some cases can effectively fund the remainder of the program from the cashflow benefits of these quick win initiatives.

The deliver cost initiatives stage is about tracking the ongoing delivery of the initiatives, as well as tracking the actual financial benefits delivered from each initiative. It is inevitable during a complex cost reduction program that some cost initiatives will either be delayed or fail to deliver the anticipated benefits. Having the necessary tracking processes in place ensures that these variances are identified sufficiently early for additional mitigating measures to be implemented.

Benefits of a Rigorous Approach to Cost Reduction

When a cost reduction program is designed well, with a focus on eliminating the hidden costs within the organisation through operational changes and simplification of decision-making processes, the benefits can be significant.

A lower cost base improves cash flow and increases the capacity of the business to fund new strategic initiatives or expansions into new markets. Businesses that implement an effective cost reduction program benefit from a nimbler, more agile organisation, able to respond rapidly to new opportunities or changes in the market environment.
Cost reduction
  • Greater reduction on overall cost base
  • Faster delivery of cost savings
  • Agile, more responsive organisaton
  • Increased accountability and improved internal culture

Get the Full Report

"Effective cost reduction is about changing the way things are
done within a business, to remove the hidden costs that are concealed behind overly complex processes or sub-optimal operational configurations."
Agile Cost Advantage Report

For the first time, insights from more than 20 years of experience in agile cost reduction have been collated in this essential guide to cost reduction.

  • Identifies common causes of failure in cost reduction programs
  • Sets out a 4-step approach to systematic cost reduction
  • Details 6 ways to identify cost reduction opportunities within a business
  • A much more!
Agile Cost Advantage Report Excerpts

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The four week strategic review cover