Business Challenge

Following a substantial restructuring it became evident to management there was an urgent requirement to reduce its operating costs by a minimum of 10%. The organisation had already been involved in a series of cost reduction exercises and it was generally believed that further reductions would be counter-productive.

What WDScott did to help

WDScott developed an approach to help the organisation realise its short term objectives by focusing on value rather than simply cost. In addition the approach sought to design an ‘End State’ view of value and cost - so that initiatives and resources could be reallocated optimally to value creation over the following 24 months. The initial stage of the work was fairly conventional, however the end state process sought to stretch understanding to what might be possible. WDScott used its proven strategic design approach and its best practice ‘Intermediated Process Model’ to support the analysis, but in this case it was necessary to establish a number of ‘new’ principles to be applied. These included: establishing ‘economic transparency’, always adopting an ‘end-to-end’ process view over the lifecycle of the business, embedding an ‘explicit shareholder value focus’, always ‘enhanced capability at lower cost’, enhancing growth potential - profitably, ‘Inherent ease of understanding’ and ensuring high ‘feasibility of transition - low cost, time and risk to change’. The team was quite large, involving 30 client personnel and up to 10 WDScott team members.

Outcomes - the key findings were that it was possible to reduce the operating costs in the short term by over 10% but perhaps more significantly that the costs over a 2 to 3 year period could be reduced by over 30%. This involved simultaneous focus on short-term expenditure reduction and on longer term redefinition of the business, relationships with Intermediaries and with consumers. The outcomes included the definition of some twenty initiatives to migrate the business to the lower cost position identified during the analysis.

Implementation - the business supported the analysis - major recommendations have been implemented including restructuring and accelerated migration to new media - business performing at levels set for this time - much remains to be done.