From Surviving to Thriving: The Cost-Saving Strategy Most Companies Overlook

We've all been there - when tough times hit, companies often resort to cutting costs. However, just because it's a familiar approach doesn't always mean it's the best.

It may seem like common sense to minimize spending when money is tight, but cutting department budgets and laying off long-time employees can have negative consequences. After all, anyone who's taken part in cost-saving efforts knows that it can make doing business even harder, which may then result in a need for further cost savings.

So how can a business navigate an economic downturn and emerge stronger? After all, cost-cutting often leads to lower revenue, demotivated employees, and stressed-out managers trying to maintain their output levels on a reduced budget.

The solution is to make an upfront investment to identify where savings should be made, and output be improved. While this may seem daunting, don't stop reading! The cost-savings are just a few paragraphs away.

It is time for us to start learning from our past mistakes

Looking at three global recessions: the 1980, 1990, and 2000 crisis, a group of researchers noticed a trend among the 4,700 companies they observed in their study. A startling 17% of the companies did not survive the economic downturns and the bare survivors survived with minimal margins, still struggling three years later to reach pre-recession figures.

While these figures don’t provide a reason to celebrate, the study does provide a glimmer of hope. Nine percent of the companies in the study didn’t just survive – they flourished, outperforming their competition by at least 10% during the three years after a downturn.

So, what did these companies do to survive and then outperform their rivals? Did they:

• A) Have a first-mover advantage by cutting more costs and cutting them faster
  or
• B) Make bigger investments to stay ahead of the game
  or
• C) Ride on their pre-existing growth leader momentum?

The answer is none of the options. The A group had the lowest probability, a 21% chance of emerging stronger, while the B group were left at a mere 26%.

85% of growth leaders couldn’t keep up with their previous pace and toppled during the slowdowns.

The group with the highest probability, 37%, reduced costs and increased spending selectively, focusing on operational efficiency. They recognized that necessary investments are needed for growth, but so are cuttings costs for survival.

How to shape a strategy for operational efficiency

While the study presented above indicates which strategy to take, the big question remains on how to create and implement such a strategy.

Forbes defines operational efficiency as “the capability of an organization to consistently deliver high-quality products and services with a culture of leadership and empowered employees while having a cohesive vision of business outcomes and the future.”

When shaping a strategy for operational efficiency, we are thus concerned with reducing waste in our production, improving our productivity, and delivering better or more cost-effective products and services to our customers. Essentially, we’re attempting to improve our business processes.

At the same time, most companies are stuck in the early phases of process maturity, struggling to understand their processes. Without process transparency, it’s near impossible to make informed decisions that improve operational efficiency.

Benchmark and prioritize

Gartner highlights that 94% of CIOs believe they understand how technology impacts corporate financials, yet only 62% of CFOs agree that’s the case.

The start of an economic slowdown is just the right time to mend this gap, as tight-knit co-operation is essential for survival and growth thereafter. After a prudent discussion, it is time to act. Gartner suggests the following three first steps:

All three suggestions, combined with an understanding of the requirements for operational efficiency, should lead you straight into the arms of process mining.

Understanding your business processes

Investing in digital initiatives such as process mining at an appropriate cost can mitigate the adverse impact of economic pressures in the short run and establish a long-term competitive edge.

Process mining provides you with a complete x-ray of your business processes. By extracting data from the systems that you use every day, like ERP and CRM, it gives a comprehensive and unbiased visualization of your processes, uncovers inefficiencies, and pinpoints the most impactful areas for improvement.

Not only this, our process mining solution QPR ProcessAnalyzer also reveals and calculates the value potential of your improvement actions. It acts as a steady base for your operational efficiency strategy and allows you to measure and monitor the success thereof.

An economic downturn is the right time to invest in a process mining solution to know what and where you should make changes before you blindly follow the cash streams. This can further boost your employee morale, as your employees are presented with solutions beyond lay-offs, and even potential lay-offs are backed by data.

Notably, savings identified with process mining are related to waste and inefficiencies that should be cut and continuously monitored regardless of the economic trend.

Choosing the right software

Of course, no investment comes without hesitation, and it is important to ensure every investment provides a strong ROI – especially in uncertain times. We understand this well, and thus, to make your investment decision easier, we have answered common questions and concerns that especially CFOs may have in a recent blog post.

You can also learn more about bringing clarity to your processes in uncertain times by checking out our free, on-demand webinar on the topic or book a demo with one of our process mining experts to understand how you and your company could benefit from process mining.