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Cost Cutting is Expensive While Effectiveness is Free and Rewarding

Heather let go of the door handle as she walked out of her superior’s office, confused and in disbelief. She took a deep breath as if to renew her strength, and she let sink in what was just asked of her. She was asked to submit her plan to reduce by 20% her department’s budget and still deliver the department’s services and ongoing projects for the year.

She looked at Justin, who preceded her from the meeting. Justin received the same assignment. He walked at a slow pace, before turning half-way toward Heather to start a conversation.

“How in the world can we make this happen without compromising the many ongoing and high priority projects? That’s not realistic. How are you going to do it Heather?”

To which Heather answered. “I don’t know yet but what I know is that my team is very busy day after day with short deadlines, and reducing headcounts will surely causes more delays in service delivery.”

This happened about one year ago. Both Heather and Justin got to work to deliver their assignments.

Justin’s Approach

Justin submitted his cost-cutting plan for his department on time as requested. The following was a summary of his proposition, which was designed to be fully effective in 3 months’ time. Let go of 3 external consultants and then redistribute their work.
Five full-time employees would be terminated and their work also redistributed.
The priority order of several deliveries would be modified.
Most project-delivery dates to be postponed to later dates.
Extras, such as free access to the coffee machine for the employees, would be suppressed. The vending machines would stay in the building and employees would pay for their own drinks.
Quarterly team activity was to be eliminated.
As a result Justin’s plan would reduce costs by 20% in 3 months, and the delivery schedule would be modified.

The plan was accepted and implemented in Justin’s department.

Heather’s Approach

Heather acknowledged that she was operating with only the bare essentials after she had already cut so much during the last five years. So she reached out and asked me if I could help. I then asked Heather more info about the department, their business, and technical operations. We agreed that we needed more time to deliver a sustainable cost reduction plan. Therefore, Heather negotiated and was granted another month before submitting her plan.

During that time, we reviewed the business and technical processes, the tools used, the organization structure, teams, the roles, and the outside collaboration in Heather’s department. We worked with the team leaders to find answers for many questions. Together, we analyzed every aspect of her department to create more efficiency throughout.

Her proposition could be summarized as such:

Several business processes were to be either shortened, improved or suppressed and five new business processes were created.
Three technical processes were to be optimized, then automated.
Two positions were to be eliminated and ten others modified.
Two services were to make use of one existing tool instead of the two exactly similar ones they were each using, reducing maintenance cost, licensing fees and duplicate work.
New rules were to be defined for more effectiveness.
Coaching sessions to be delivered to several teams as they adopted the new work approach.
As a result, the department would increase delivery capacity by 15% while reducing cost by 18% over a 6-month period.

Heather’s proposition was accepted and implemented for her department.

Post Implementation One Year Later:

Justin’s Department

Justin had a harsh time implementing the plan in his department as it caused more stress, conflicts and dissatisfaction in the organization while decreasing production. Employee morale went down and has remained there, since there is no improvement to look forward to.

The elimination of free coffee and their quarterly get-together created for them an environment of lack, poor recognition, decreased collaboration, and decreased in reliability.

The clients were very disappointed with the delayed deliveries. To make matter worse, they experienced a high turnover rate, causing them to be even further behind in project delivery.

Heather’s Department

Heather’s department is now running effectively and delivering more, at a faster rate than before, and at a lesser cost. In fact, after the implementation and up to the present day, the cost is now reduced by 22%.

Cost reduction should be a search for improved effectiveness first. Approaching cost cutting as a search-and-destroy mission to cut all extras or reducing only the immediately apparent costs just decreases productivity and therefore ends up costing the company more per production.

How many processes, tools, and roles are outdated, duplicated, irrelevant, and/or repetitive in our units? How about the ones that no one know ‘why’ they exist? Or the multiple tools that our teams use when just a few of these tools can be used by more or all of the teams? How many manual processes can be automated?

In summary, cost reduction is costly, but effectiveness is free as it pays for itself with increased productivity. The good news is that each one of us at our own levels can create some more effectiveness.

Do you need help for creating more effectiveness? Contact me and let’s do it!

M. Nadia Vincent

Part 2 – Why CXOs Must Shift from Change to Transformation in 2016

Today, some businesses and organizations may think that they are not technology leaders and decide to postpone the implementation of a digital transformation. Such a wrong decision is based on a poor understanding of the power and value of the digital transformation. Digital transformation is not about technology only but about the vision for the business. It is about creating a transformation through the tools that technology empowers businesses with. It is about customer retention, business transformation, business reinvention and business survival. It is not about being a technology leader.

"Digital transformation is not about technology only but about the vision for the business."

Let’s see digital transformation from a customer retention perspective. Regardless of the industry a business is in, it is impacted by digital transformation. Digital technologies give the consumer more choices and authority, and it also empowers businesses like never before.

Social media has changed our lifestyles completely. Not only do we interact more with our global network but coupled with Internet of Things, we are now sharing our locations, activities, experiences, and lives in real time. Internet of Things also allows consumers to better manage their time, save money, accomplish more in less time and feel more protected.

A happy customer sharing his/her experience in real time and with emotion is the most powerful marketing ever. A customer shooting out negative experience is bad marketing but at least offers to the business the opportunity for improvement, as a business can take that same negative comment and turn it into a positive transformation. When considering the speed at which information is shared globally, we can therefore say that customers drive business in a way that was not imaginable before. They are the true business influencers.

Before the digital transformation, businesses relied upon surveys to solicit from clients and potential clients’ data that was not always accurate or real in order to improve business. Now, businesses can access information about the customer’s experience that are accurate, in real time, filled with emotions, related to other areas of a customer’s lifestyle, and provide insight into their personal and professional networks.

The business that neglects such an opportunity is not listening to its clients and not appreciating them enough. That business is clearly telling its clients “we don’t care about you enough to listen to you, so go and have fun with the competition who can waste their time talking and listening to you instead.”

Digital transformation is an opportunity for a business to give the best experience to a customer all while getting more information from the customer, selling more to him/her and his/her community, anticipating the customers next wishes and offering it to him/her before he starts looking for it elsewhere.

Digital transformation is “the” opportunity to:

  • Get closer to customers
  • Improve customer experiences
  • Retain customers
  • Offer targeted products or services
  • Have customers recommend products and services to their networks
  • Sell more to customers and their networks
  • Develop new products and services for clients
  • Reinvent a business that is threatened by lifestyle changes

    But all that can only happen if businesses tap into the power of digital transformation. The technology is only the tool that helps power the transformation and is not the transformation in itself. Technology is a power tool behind business and Digital Transformation is the change that a business undergoes in order to transform and enter in the next technology era.

Here is what will happen when Company A decides to postpone investments into digital transformation, while its competitor, Company B invests into digital transformation now. Company B invested in a well-crafted digital transformation vision and is engaging with and wooing its clients while tapping into Company A’s customer pools at the same time. Company B gathers a large amount of precious information about its customers and their networks and turns this information into sharp business intelligence. Company B, then offers tailored solutions to its customers and their networks.

By the time Company A realizes the massive loss of its customers and starts implementing some type of digital transformation, company B has already moved to the next growth phase and is catering to its customers anticipated needs or wishes while locking them in with irresistible offers.

Now Company A faces a bigger problem. Not only has it lost customers but it is collecting less data to start with and will have to either:
- Invest in offering tremendously more value to the market.
- Reinvent its business.
- Die

The only way Company B may have left an advantage to Company A would be if Company B implemented their digital transformation merely as a fun tech gadget for the purposes of being in style, without a clever business vision and strategy that would tap into the real power of digital transformation.

Therefore, executives must get involved and invest in digital transformation now and do it with a business transformation vision that includes customer retention, but not as a trendy technology fashion. Digital transformation is a must because it empowers businesses like never before, and the businesses that neglect it will regret waiting while the ones who embraced it early enough thrive.

In part 3, I’ll speak more about the business transformation from the inside out.

M. Nadia Vincent