Finance Leadership Series: PART 1 of 4

Introducing a New Thought Leadership Series: Optimizing Enterprise Cost Structure for Sustained Growth

Introducing a new series from Thought Logic Consulting on cost optimization for leaders who want to position their companies for stability and growth no matter what the market brings.

While economic recovery from the COVID-19 pandemic is underway in certain industries, for some business segments, recovery may not be coming fast enough. Impacts are still being felt globally from travel and hospitality, to healthcare and insurance, to oil and gas. The pandemic has put extreme pressure on executive leaders to address budget and forecast shortfalls without sacrificing long term stability and recovery.

Industry leaders have experienced volatile financial situations before but not since the digital economy created such tightly interconnected supply chains that span the globe andtouch almost every industry. Even for organizations largely financially insulated during the crisis, such as home improvement, technology, and pharmaceuticals, now is the time to understand and optimize the enterprise cost structure for sustained growth.

Series to explore four key skills leaders must use to ensure stability and position for growth

In this cost optimization series, Thought Logic Consulting will explore a structured and systematic four-step approach to identifying key areas for improvement and potential quick cost management wins across the enterprise.

Cost management part of a holistic strategy

As suggested, cost management is a strategic imperative for companies looking to grow, maintain continuity, or gain market share in a dynamic, highly competitive global marketplace.

While the case for change is certainly easy to defend, especially during a time of crisis or periods of uncertainty, companies that quickly cut across the board may not see the desired benefits. In a McKinsey Quarterly 2009 study, “79 percent of all companies have cut costs in response to the global economic crisis—but only 53 percent of executives think that doing so has helped their companies weather it.” It will be an interesting case study to see if history repeats itself as companies quickly drive to stabilize their balance sheets during this current environment.

At Thought-Logic, we believe that following a holistic optimization strategy can help companies sustain operational and financial health. It is critical to look across entire enterprises and consider alternative businesses and operating models that take advantage of current and projected operational trends. Some current trends we have observed include:

  • Streamlining business processes
  • Taking a renewed focus on cost and external expense policies and compliance
  • Aligning organizational structures to reduce complexity and decision-making
  • Evaluating automation and third-party relationships

Time is right to refresh cost management approach

Cost optimization is not an undertaking that should be initiated as the result of an economic downturn or market uncertainty. It should be an ongoing process that helps companies solidify their balance sheets, and more importantly, maintains focus on business areas to invest and divest. That being said, there has never been a better time to evaluate cost structures with an eye toward scaling for the future.

As part of the overall cost optimization series, our next article will explore building the case for change and analyzing current trends and opportunities in the marketplace. Using the right approach to drive cost optimization will help better position your organization for sustained growth.

1 Isidore, C. (August 25, 2020). American Airlines will lay off 19,000 workers if it doesn’t get additional federal help, CNN. https://www.cnn.com/2020/08/25/business/american-airlines-job-cuts/index.html

2 The Coca-Cola Company. Earnings Release Q2 2020. https://d1io3yog0oux5.cloudfront.net/_bcc928ad355bd7af7c1ceb402bb9a9f2/cocacolacompany/news/2020-07-21_Coca_Cola_Reports_Second_Quarter_2020_Results_994.pdf

3 Wallace, A. (August 28, 2020). Coke will offer buyouts to 4,000 workers in the US and Canada, CNN. https://www.cnn.com/2020/08/28/business/coke-layoffs-restructuring/index.html