Despite overwhelming evidence that effective cost management supports enterprise performance, more than 50% of organizations have yet to establish clear measures of success for their strategic cost initiatives.
Download our guide to learn how you can accelerate business performance by focusing on the three key pillars of strategic cost management:
Define clear measures of success
Adopt a consistent framework
Leverage cross functional collaboration
Gartner research shows that leading companies take a proactive and strategic approach to cost optimization — strategically cutting cost while funding new growth at the bottom of the business cycle. This approach equips leaders to sustain through uncertainty and disruption of crises like the COVID-19 pandemic.
Cost optimization is a business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value.
Cost optimization helps functional leaders to maximize cost-savings. It includes:
Obtaining the best pricing and terms for all business purchases
Standardizing, simplifying and rationalizing processes and services
Automating and digitalizing IT and business operations
Cost reduction is the process of decreasing a company's expenses to maximize profits and generate short-term savings. Cost optimization on the other hand is a continuous, business focused discipline aimed at driving spending and reducing costs, while maximizing business value.
Sustainable cost optimization is based on 5 key pillars:
Financial transparency: Increased financial transparency helps leaders understand how to drive business value through cost optimization.
Targets and benchmarks: After establishing transparency, executive leaders must examine how organizational spending compares with peers through external benchmarks.
Accountability of business units and individuals: Executive leaders must foster a culture of commitment to cost optimization by clearly communicating which areas to focus on when proposing cost optimization ideas to leadership.
Managing demand and supply of costs: Categorizing costs linked to both supply and demand can help executive leaders prioritize their cost optimization efforts.
Leveraging savings to drive enterprise strategy: Executive leaders should be proactive not only in optimizing costs but also linking the reinvestment of savings to business outcomes.
Gartner is an objective resource for more than 14,000 enterprises in 100+ countries.
Learn more about how we can help you achieve your most critical priorities.
