For most companies, cost cutting in a down economy means across-the-board slashing that "spreads the pain" of budget reductions across many departments. Although that may sound like the best approach for getting critical results fast and for limiting political infighting, it is a mistake — one that will leave your company not just smaller, but weaker.
Instead, companies that need to reduce costs should treat the challenge as an opportunity to identify and reinforce their key capabilities, while divesting those activities that do not truly reflect the business’s strengths or long-term goals. This more strategic approach will make your company more resilient as tough times continue and more robust as recovery begins.
Capabilities-Driven Strategy provides executives with the tools they need to rapidly and sustainably implement cost reduction. First identify and clearly articulate your company’s key capabilities — not just core competencies or skill sets, but those very few strengths that, in combination, define how your organization competes. Then use this information to create your company’s unique blueprint for effective and efficient cost reduction.
* Fit for Growth is a registered service mark of PwC Strategy& LLC in the United States.