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Cost Is a Core Priority for CIOs
CIOs have to balance the competing imperatives of growth and cost, including IT spending in core areas such as AI and security, says BCG’s Clark O’Niell.
Cost Management
BCG’s integrated approach to effective cost management rapidly identifies the deep-rooted issues affecting an organization’s cost structure and implements customized, industry-specific initiatives to create organizations that are leaner, faster, and stronger.
A cost management strategy is only effective if it is transformational, lasting, and sustainable. With end-to-end budget or headcount reduction, the impact is immediate—but the benefits don’t last. Quick cuts simply do not address underlying problems, nor do they improve the longer-term health of the company. In fact, they may impact an organization’s ability to compete and serve, ultimately exacerbating the original need for bottom-line improvements.
BCG’s holistic approach to cost advantage efficiently and effectively transforms an organization’s business, taking into consideration direct costs such as labor and materials as well as overhead costs—which in turn allows for reinvestment in future growth, stability, and strategy. The result is effective cost optimization that boosts performance and margins while simultaneously unlocking total shareholder value.
Competitive Advantage Starts with Cost Management
Paul Goydan
Why Is Cost Management Important Now?
Inflation, market uncertainty, and rising interest rates are all putting pressure on organizations. At the same time, organizations need to invest in talent, sustainability, and digital to remain competitive. Higher operating expenses are squeezing margins, prompting companies to look at their cost structure for answers—while continuing to fund innovation and growth. But there are many reasons beyond macroeconomic conditions for streamlining costs. Businesses that secure short-term cost optimizations can shore up long-term competitive advantages, exploring opportunities and enhancements that will be beyond the reach of others.
What’s Different About BCG’s Approach to Cost Management?
Unlike one-dimensional cost reduction or restructuring plans, BCG’s accelerated cost advantage approach resets costs within a strategic framework that is customized, precise, and thorough. Our total cost management process involves quickly diagnosing underlying operating issues, benchmarking performance, and then implementing short-, medium-, and long-term cost optimization initiatives and industry-specific measures to rightsize expenses.
In parallel to optimizing costs, BCG experts help clients build a foundation for future competitive differentiation and growth by:
- Considering end-to-end processes, taking a holistic perspective, and focusing on outcomes
- Embedding digital in everything we do
- Working shoulder to shoulder with company leaders
- Providing margin and cost transparency to enable more informed decisions
- Ensuring executional certainty while driving communication
- Helping cultivate a culture of continuous improvement that leads to sustainable change
Our Client Success in Cost Management
By redesigning the organization for improved accountability, customer service, and overall talent levels, we helped a US-based airline achieve an expected cost reduction of 15% to 20%
Through optimizing materials costs, we helped a global automotive equipment manufacturer realize a 12% reduction in direct product costs
As part of a major cost-restructuring effort focused on increasing efficiency, we enabled a $1.2 billion cost reduction for a leading health care company—freeing up resources for investments in products, marketing, and sales
By implementing a cost transformation program and reducing organizational complexity, we helped a large US supermarket chain achieve an expected increase in TSR of 20%
What Are BCG’s Cost Management Tools and Resources?
BCG has a vast array of proprietary tools and resources to build leaner, faster, stronger organizations. Our seamless, accelerated cost advantage approach starts with a rapid assessment phase to identify and prioritize areas of cost inefficiency where swift interventions are warranted—using benchmarks to compare a company’s performance to its peers. From there, our cost management experts leverage their experience and deep industry knowledge to deploy resources tailored to a client’s specific needs.
The approach incorporates the KEY by BCG portfolio and program management software, which has backed hundreds of successful cost optimization programs, accelerating value creation and managing complexity through every phase of the journey.
Meet Our Cost Management Experts
Our experts recognize the challenges that come with a cost transformation and have an established track record of success across multiple industries. They’re ready to partner with clients around the globe to drive lasting change.
Our Latest Cost Management Insights
COLLECTION
What Matters Most in a Cost Transformation
Successful initiatives depend on a holistic approach that considers every aspect of the organization and uses quick wins to fund long-term initiatives for future growth.
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What Leaders Are Saying About Costs and Growth in 2024
New research shows that executives are making cost management a priority to hedge against global uncertainty.
Spotlight: BCG's Cost Classics
How companies approach cost management has changed over the years—but many of BCG's insights on how to create a cost advantage have stood the test of time. Our collection of cost classics provide leaders with foundational insights that remain relevant today.
The Time Paradigm
How to deliver the most value for the lowest cost in the least amount of time? George Stalk identified the three tasks you must accomplish to become a time-based competitor.
Uncovering Cost Drivers to Achieve Sustained Improvements
Our comprehensive approach helps companies identify and quantify opportunities to reduce non personnel costs, select targets and improvements, and sustain their gains.
Why Change Is So Difficult
Bruce Henderson, the founder of BCG, wrote that all organizations must adapt or die. So why are the forces of corporate culture so set against change?
Six Steps to Achieving Competitive Advantage Through Cost Excellence
Corporate leaders are facing mounting pressure to reduce costs. BCG’s proven framework can deliver cost reduction that improves operations and is sustainable over time.