Why 48% Of Cost Reduction Initiatives Fail

Almost half of all cost reduction initiatives fail – and that’s despite enterprises scaling back their cost-cutting ambitions – as Deloitte’s 2013 Cost Improvement Survey reports:

“[Despite lower targets…] executive respondents have reported a higher failure rate for their cost initiatives. In 2008, the failure rate was 14%. In 2010, it was 37%. And in 2012, the failure rate climbed to 48%, meaning that nearly half of all cost initiatives now fail to achieve their goals.”

One root cause – possibly the root cause – must be that most organizations don’t have an enterprise process management platform. So they:

  • don’t have a comprehensive and joined-up perspective on their operations
  • don’t have a framework for effective collaboration on the design and implementation of change
  • can’t fully leverage the power of process visualization to simplify
  • can’t easily break down silos and engage their people in continuous improvement
  • are locked into project-thinking, and so down-playing longer-term sustainability.

It’s a diagnosis that’s borne out by the survey respondents:

“The biggest barriers to effective cost reduction cited by respondents are “lack of understanding” about the need for cost reduction (74%), and “erosion of savings” (73%) resulting from cost improvements that are not feasible or sustainable.

Survey respondents indicated that their companies are attempting to overcome the barriers by focusing more attention on change management (52%), clearly defining goals and objectives (41%), and communication (32%).”

Related Posts

02 Apr 2013   A Simplification Bandwagon Begins To Roll

21 Feb 2013   When Process Standardization Backfires

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