Explore the importance of cutting wasteful spending in businesses and reinvesting the money. Learn about unexamined spending and legacy practices, zero-based budgeting and its transformation, expense management for companies, and maximizing savings through strategic spending.
Identifying and eliminating wasteful spending allows resources to be redirected towards strategic initiatives.
Zero-based transformation goes beyond finances and aims to change the mentality of the organization, empowering employees and creating a culture of conscious decision-making.
Deep dives
Transforming the Way You Operate and Reinvest in Your Business
A significant portion of company operating expenses is wasted, averaging around 15%. This presents an opportunity for CEOs and CFOs to evaluate and transform their organizations. By identifying and eliminating wasteful spending, resources can be redirected towards more important areas like advertising, driving strategy, and changing ways of working. Examples include cutting unnecessary postage expenses in the digital age, reducing extravagant catering costs, and finding more cost-effective training methods. It's not only about cutting costs but also about reinvesting in what's important for shareholders, customers, and consumers, whether it's focusing on ESG, digital agendas, or brand development.
Zero-Based Transformation and Aligning with Business Strategy
Zero-based transformation builds on the concept of zero-based budgeting, which starts from scratch and challenges every expense. However, zero-based transformation goes beyond finances and aims to change the mentality of the organization. It aligns with the CEO and CFO's vision and strategy, focusing on enhancing total shareholder return and driving consumer engagement. By adopting a zero-based mindset and continuously analyzing spending, organizations can make informed decisions about where to invest and adapt to changes in the business environment. It's about empowering employees, embracing change management, and creating a culture of conscious decision-making.
Shining a Light on Spending and Continuous Improvement
To begin the transformation process, organizations need to shine a light on their spending and understand what is being allocated where. This includes identifying hidden costs, realigning marketing dollars, and uncovering shadow spend across departments. Workshops with key stakeholders enable challenging current practices and finding opportunities for improvement. Significant benefits, ranging from 15% to 25%, have been achieved, allowing resources to be reallocated to support growth initiatives aligned with the organization's strategy. Zero-based transformation is an ongoing journey, requiring continuous improvement, adaptability, and conscious decision-making based on changing circumstances and the organization's long-term goals.
Cost-cutting gets a bad rap, but the exercise is actually an opportunity to find money that can be reinvested in the business. Mark Austin, BCG’s global topic leader of cost and zero-based transformation, challenges executives to create more efficient and effective operating models by empowering employees to find areas of unnecessary spending in places that may not be obvious. They can then look to their people and their industry to find the most effective ways to funnel that money back into the organization.
This podcast uses the following third-party services for analysis:
Chartable - https://chartable.com/privacy
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