Building a Better Cost Structure
As an enterprise grows and faces challenges created by marketplace disruptions, increasing client expectations, legacy platforms, or regulatory compliance requirements, "business as usual" is not a recipe for success. Business Transformation is an absolute call to action for those who want to maximize business performance and be leaders in their industry. Specifically, financial success requires continuous evaluation of all the levers that impact financial performance -- including the way costs are managed.
Traditional methods of cost management assign cost reduction targets by department, forcing each to manage within their silos by targeting low hanging fruit. While straightforward to implement, these are short-term, narrowly-focused approaches to cost management that are not sustainable over time.
The Northridge approach to improved business performance and cost management is to embark on a Business Transformation journey, with an outcome that reconfigures a firm's overall cost structure for the future. This approach enables a firm to recognize the factors that drive its end-to-end costs and aims to leverage critical changes in business processes to create a new, optimized cost profile with a transformative outcome.
Northridge Cost Transformation Solutions
Cost Transformation engagements are typically performed in phases with specific sets of outcomes and deliverables. First, we aim to understand through a baseline of the current financial processes and data. Next, we identify key opportunities through analytics to drive sustainable cost reductions. Finally, we develop a scorecard and governance processes to create a long-term cost culture.
Establishing a Cost Baseline
This step in the journey creates visibility at a detailed, operational level to the correlation between work that is done and the resulting costs incurred. The baseline is created from an end-to-end process view, irrespective of departmental silos (e.g. the cost to acquire a customer, the cost to provide customer care, the cost to bill and collect payments). This baseline enables the organization to view costs as an equation of unit costs and volumes. Financial scenarios are then developed to establish "what ifs" -- for instance, the volumes change, but the unit costs do not. This sets the stage for the cost transformation targets.
Re-shaping the Cost Curve
Changing the trajectory of the cost curve requires identifying opportunities for business transformation that will fundamentally alter the way work is performed and will substantially modify the work driver volumes. These business transformations look to the future state of business operations. Examples of Business Transformation solutions include:
- Technology Assessments: Examine the use of technology to strengthen digital capabilities such as customer self-service options.
- Business Process Redesign: Simplify processes or eliminate work steps that reduce errors, re-work and manual intervention.
- Cost Transformation: Identify impact and determine timeframes for specific cost reduction opportunities through data-driven analytics and business process redesign. An initiative roadmap and investment plan is a critical outcome of this phase, which provides a management tool for planning and tracking opportunities.
Leveraging a Better Cost Structure
Cost Transformation demands a continuous evaluation of the business and financial performance. A cost culture creates a mindset that today's financial results are not good enough for tomorrow's competitive and ever-changing marketplace. Discipline driven through a governance and communication process, coupled with a management scorecard that drives insights for action and accountability for results, are critical success factors in building a cost culture.
Embracing a highly collaborative approach, Northridge can guide an organization through a Cost Transformation journey to achieve its financial goals and promote a forward-looking business perspective. Our professionals are equipped with the right knowledge and background to move organizations to a clear and focused cost management program.