Unlocking the promise of cost optimization
Traditional cost-cutting methods that worked in the past won’t necessarily work today.
With growth being a top priority for many leaders, and given the challenges of margin pressures, economic uncertainty, and rising competition, organizations need a strategic, holistic approach to cost management. This involves not only reducing costs for short-term profitability but also freeing up resources to invest in long-term growth opportunities like innovation, enhanced capabilities, and expansion into new markets.
Welcome to a new era, one in which cost optimization - not cost reduction - is taking hold.
Across all CXO executive functions, operational efficiency features within top 2 strategic priorities
Source: Deloitte analysis of 1,400 senior leaders representing over 30 geographies
Four approaches driving new efficiencies
1. Prioritize long-term investments, not just short-term profitabilityand redeployment of savings for long-term growth
- Reinvest cost savings into the enterprise to align with strategic direction
- Prioritize achieving operational efficiency to drive long-term growth opportunities
- Avoid short-termism, which may lead to profitability risks, lower quality, reduced employee morale, or missed growth opportunities
- Consider transitions from legacy to forward-looking technologies to allow scalable infrastructure and resiliency
2. Shift from cost management in silos to cost optimization synergies across the organization
- Embed cost optimization as an organizational strategy for a holistic approach
- Focus on opportunities to enhance value rather than simply reviewing costs in isolation
- Expect a cultural shift when moving from cost reduction to optimization for growth and competitive advantage
- Align financial objectives with long-term strategic goals to ensure every spent contributes to the enterprise mission
3. Rely on strategic partners, and not just for non-core functions
- Focus on achieving high-impact shared outcomes in core business operations instead of cost-cutting in non-mission-critical functions
- Collaborate with a strategic partner to accelerate the development of new products or services, leveraging their expertise instead of building capabilities from the ground up
- Elevate collaboration to next-generation managed services or operations partners
4. Integrate tech to help with everything from forecasting to talent to risk management
- Use tech to create new capabilities and do what was not previously possible, not just to replace existing work
- Implement AI and emerging tech for forward-looking optimization (e.g., safeguard against potentially costly reputational and regulatory risks)
- Bring a holistic approach to strategy, tech usage, and change management plus communications make it more likely to capture the anticipated value
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