Launching a cost transformation can be challenging if companies don't have all the correct components in place. Patrick O'Hagan, a partner with Bain's Performance Improvement practice, discusses the importance of setting strategic goals, employing the power of digital and aligning all parts of the organization.
Read the transcript below.
PATRICK O'HAGAN: Whether cost transformation succeeds or fails is often determined before the program is actually launched. So what do I mean by that? We work with many companies on cost transformation, and what we found is it's critically important to get three things right before launching the cost transformation.
One is to link it to strategic goals. For example, to use the cost savings to reinvest in innovation, or to build out new capabilities like key account management and serve your customers better. That's motivating to the employees to have those strategic goals. It also ensures a company comes out the other side performing better on the top line and the bottom line.
The second is to commit to the power of digital. To rethink costs, not just to reduce cost. So we've seen companies use the power of automation or advanced analytics and machine learning, for example, to not only save money but actually improve the speed of work, the quality of work, and to free up time of employees to work on high-value-added activities.
Thirdly, it's really important to align the management team. The CEO, the CFO, of course, they're both very important voices. But cost transformations touch all parts of the organization, and so the employees are looking for their respective leaders—for example, R&D or manufacturing, or an international country—to show as much commitment and buy into the program.
So if you want to significantly increase the odds of success for your cost transformation, we've seen it's really important to link it to strategic goals, to unlock the power of digital and to fully align the management team.