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%).”
02 Apr 2013 A Simplification Bandwagon Begins To Roll
21 Feb 2013 When Process Standardization Backfires