Advanced Techniques in Cost Reduction

Reducing Costs - Identifying and Eliminating the Causes of Work

Organizations use a variety of techniques and approaches to reducing cost. From techniques like Six Sigma, Lean and TQM to automation, workflow control and enterprise applications much of what we do is intended to reduce our costs of doing business.

Yet the challenge is harder than it used to be. Much of the work we do has already gone through efficiency and optimization cycles multiple times. Global competition forces us to attain a level of cost management that is far more aggressive than it was a few years ago.

To even complicate the situation further, our organizations are far more complex than they used to be. So not only do we have to go back to the same cost-cutting well over and over there’s less “water” to draw and the path to get there is far more convoluted than ever it ever has been.

The Tip of the Iceberg

But are we really that efficient and optimized? Is it true that cost reduction opportunities are dwindling, requiring us to constantly do more for less? No it’s not.

Certainly from the perspective we traditional take in seeking to decrease costs the gains are dwindling. But what if that perspective is missing something? What if that perspective is missing a lot?

Perhaps that is true. Perhaps we are missing a lot. In fact, it seems likely that is true when we look at the continuing discussion and analysis of “value-add” work that still suggest that well over half of our time is still spent on non value-added work

Let’s assume for a minute that there is a significant amount of non value-added work going on in our organizations. If there is then we obviously aren’t actively addressing it or it wouldn’t be there. It’s like an iceberg, we work hard (over and over) on the part of the non value-added work iceberg sticking out of the water well the rest of iceberg rests below the water, out of sight and untapped.

Why the Iceberg Exists

The non value-added work iceberg exists for the simple reason that in almost all prevalent approaches to improving process the focus is on fixing affects. We don’t even see the causes because they are tucked away under the surface of the improvement approach we use. Yet those causes are there and if we can identify them we can then take action on those causes to create significant new cost reductions that are several orders of magnitude greater that what we are getting now with our current approaches.

So how do we identify these Causes of Work? They can be exposed by identifying the Moments of Truth, Break Points and Business Rules that exist within our processes.

When we identify these causes of work the next big step in taking advantage of the cost reduction opportunity of the “rest of the iceberg” is to eliminate some of them. Best practice tells us we will eliminate as many as possible. Common sense and organizational context tell us there will be some limits on what we can do.

The limits come from the fact that the more we challenge process from the perspective of the causes of work, the more we begin to challenge things that are deeply ingrained in the behavior and thinking of our organization. So we can expect to run through multiple cycles of cause elimination just like we did when we approached improvement in the approaches preceding CEM.

The Size of the Prize

To help place this opportunity into perspective consider this. Action plans developed around eliminating causes of work predominately cite individual actions that take less than 30 days to implement each. The benefits (cost reduction) consistently fall into the 10% - 30% range.

So if you could improve your processes by 10 to 30 percent in 90 days or less (assuming there may be multiple actions per plan) would you do so?

Most of us probably would. A few of us would think it sounded too good to be true, while some of us would struggle with the concept itself. It does challenge our thinking, and many of our beliefs, but eliminating the causes of work takes a fraction of the time with dramatically larger return than fixing affects can ever hope to do.

When you add on the fact that identifying causes of work and elimination actions is something anyone in the organization can learn to do quite quickly the opportunity moves to a spotlight all of its own.

It’s a big change in how we think about cost reduction and it’s an even bigger change in the results we produce and the time it takes to produce them. Causes of work are an opportunity to put cost reduction back into the competitive limelight, and it’s only a few Moments of Truth, Break Points and Business Rules away...

Through our approach cost reduction can serve your organization in an entirely new way. By focusing on the causes of work then eliminating them, you will tap into the potential of the “rest of the iceberg.” Regardless of how you do this, it should be high on the agenda of anyone responsible for reducing costs.