Cost transformation is an absolute call to action for organizations wanting to maximize business performance and be leaders in their industry.
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. Instead, continuous evaluation of all the levers that impact financial performance — including the way costs are managed – will ensure financial success.
Embark on a Cost Transformation Journey
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 cost transformation journey, with an outcome that re-configures 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.
Establishing a Cost Baseline
This step in the journey creates visibility at a detailed, operational level into 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, and enables the organization to view costs as an equation of unit costs and volumes. Financial scenarios are then developed to establish “what if” scenarios.
Reshaping 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.
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.
Fortune 50 Enterprise Embarks on Cost Transformation Journey
Despite the strong business performance, a Fortune 50 enterprise understood the financial downside of pervasive market disruption in their industry, the looming negative pressures of ever-increasing complexities across their products, services and platforms and the overall need to influence unit cost trends in the face of business growth.
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