87% of companies in the Fortune 500 over the past 50 years have experienced at least one growth stall (Conf. Exec. Board).
90% of the time back-office costs are back to prior levels 4 years after a cost-cutting program (McKinsey).
While innovation and cost leadership have been tradeoffs in years past, they are table stakes now – companies must do both. Here’s how:
Heightened competition and maturation of core businesses create pressure on companies to simultaneously innovate and be a cost leader.
The key to success involves much more than figuring out operational efficiencies. It ends up being more about making the right bets on the right talent and putting them in the right roles
Our CEO clients who have transformed through organizational consolidation tell us:
- The “hard stuff” is actually the “soft stuff” – it’s all about people and change
- You can’t evaluate people for going forward roles based on backward-looking criteria – a new spec must be used
- The people decisions will be a massive undertaking that will test your will and challenge your preconceived notions
- You can do everything else right, but if you leave a few underperforming senior leaders in the top jobs, it will all be for naught.
What Works: Transformational Consolidation
Develop the vision for growth: Most consolidations are done in the context of cost-cutting. Focus equally on how the organization will continue to thrive and grow.
Find your growth leaders: The leaders who got you here may not get you there. Assess your leaders based on their ability to grow businesses in the ‘new normal,’ not through traditional growth in emerging markets.
Tip your sacred cows: Rethink your core business’ viability and do not flinch. The camera industry shows examples of relying too heavily on core businesses (print) that are quickly becoming less relevant.
Surgical, not blanket cost-cutting: Across-the-board cuts usually result in a smaller version of your existing company. Smaller does not mean more competitive. Cut deeply in areas that will no longer provide long term value and very lightly in growth areas for the future.
Barriers to success
- Across-the-board cuts
- Focus on operational consolidation at the expense of talent identification
- Featuring cost reduction vs. increasing competitiveness
- Shutting down innovation activity for cost reasons
The key to consolidation is not choosing the right things to cut; it’s choosing the right things to grow.