Innovation and Cost Cutting
A widely high held belief about the success factors of a business is “Increased sales and reduced costs”. If a business can achieve both, it’s even better. When one of them becomes a challenge, the focus shifts to the other one. But there is another factor that can offset the two of them – Innovation.
Many organisations show hesitation to innovate. The major reason being the undermined assumptions that are prevalent since long.
- Companies assume that monstrous investments are required to initiate and grow a successful new venture.
- With all the hype these days around the technology taking the driver’s seat with disruptions like blockchain, artificial intelligence, augmented reality, it’s natural to assume that innovation requires breakthrough technology.
But it Is the strategy and not just the technology that we should focus on. Strategic innovation can be our tool to lower costs. When we speak about innovation, the future is about doing less, not more. Which can eventually lead to creative new solutions while keeping the cost in check.
- Companies should reinvent their strategy and give consumers only what they want and not subject them to a lot of things. It helps in reducing costs while adding more value to customers.
- External innovation should be leveraged in various ways like idea generating and pitching competitions and even long-term collaborations.
- Products can be simplified and focus should be kept on just the functions that matter while cutting loose the rest.
- New product can be developed in collaboration with other companies to reduce cost as well as the risk.
- Rethink the waste management and invent new ways of incorporating it back into the product, or by finding its own standalone offering.
Companies should acknowledge the problems that arise when the focus is laid only on cost cutting and no other aspect. Cost cutting can lead to income cutting as well. Rather than venturing on a path that can possibly lead to unhappy and demotivated employees, innovative initiatives can be taken that lead to employee engagement with their active participation in cost cutting initiatives. Organisations are coming up with initiatives such as paperless day and measure and try to minimise the use of paper on that day. Such initiatives go a long way into reducing the cost without any major operational or technological changes.
It is high time we eradicate the concept of “cost of innovation” and stop incurring cost due to innovation but in turn start reducing the cost by innovating not just the products, but the processes and strategies too.