Contents
List of Illustrations
Guide
Pages
Fit for Growth
A Guide to Strategic Cost Cutting, Restructuring, and Renewal
Vinay Couto | John Plansky | Deniz Caglar
Cover image: Paul McCarthy
Cover design: Wiley
Copyright 2017 by PricewaterhouseCoopers Advisory Services, LLC. All rights reserved.
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Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Preface
Many companies today are trying to jump-start flattening revenues and deliver higher returns to investors. Some are fighting off efforts by activist investors to gain control of their company. Others are simply trying to survive and regroup. A few are racing to fend off bankruptcy. More and more, enterprises of all kinds are realizing that the only way to unleash profitable growth is to cut costs often dramatically. In the globally interconnected, digitally disintermediated, hypercompetitive markets of the early twenty-first century, there is no safe harbor when it comes to the bottom line. Companies need to focus on managing costs as rigorously as they concentrate on growing revenues. As with any living organism, there is no profitable growth without equally robust pruning.
We have 70 years of collective experience in helping companies succeed in challenging markets. The surest path to success, we have found, is for companies to become Fit for Growth. Companies that are Fit for Growth do three things consistently and continuously:
- They focus on a few differentiating capabilitiesthe things they do better than any other company.
- They align their cost structure to these capabilities.
- They organize for growth.
Our research and client experiencesbased on lessons learned at hundreds of companies across all business sectors worldwideshow that companies that follow this Fit for Growth formula generate the highest growth and financial returns.
This book is a definitive guide for senior executives and middle managers on how to align their company's costs and organization with their strategy, so that they can grow, create value, and continuously outperform their competitors. It provides a complete blueprint for running a large-scale Fit for Growth cost transformation, including concepts, ideas, analyses, real-life case studies, and specific hands-on advice. It can also serve as a definitive handbook of the most important methods for managing costs.
The book is organized into three parts, each focusing on different aspects of the Fit for Growth approach. Each can also be read on its own. Part I, Introduction and Fit for Growth Overview, introduces the Fit for Growth approach, which explicitly connects a company's growth agenda with its organization and cost agenda. Through specific company examples, we give economic and business reasons why companies need to cut costs strategically to grow. We explore what it means to become Fit for Growth and the key elements of the restructuring and renewal journey: identifying differentiating capabilities, aligning the cost structure, and reorganizing for growth. Last, we share 10 best practices for CEOs and CxOs to guide their organizations through a Fit for Growth transformation.
Part II, How to Cut Costs and Grow Stronger: A Manager's Guide, dives into tried and proven approaches to strategic cost reduction. Through case studies and best practices, we discuss the nine most important techniques, or levers, for cost management: business portfolio rationalization, zero-basing, aligning the operating model, outsourcing, footprint optimization, process excellence, restructuring management spans and layers, strategic supply management, and digitization. We explain each lever with practical examples, suggest when it should be applied, and walk through a step-by-step approach on how to execute.
In Part III, Coping with Cost Restructuring: How to Manage and Sustain the Change, we discuss restructuring and ongoing renewal, focusing on the Fit for Growth restructuring journey and sustainability. We start by discussing how to mobilize, scale, and run a successful Fit for Growth transformation. Then we turn to the people aspects: how to manage the organizational morale throughout a cost transformation journey, and what senior leaders must do to keep their organizations engaged. We also discuss how to get the people in the organization ready, willing, and able to change. We review basic change management techniques and discuss why these techniques alone are not enough, and detail how executives must enlist the organization's culture to motivate, enable, and sustain the change. Last, and perhaps most important, we focus on how a company can stay Fit for Growth by introducing tools and techniques to sustain the benefits of the transformation and avoid returning to old, inefficient behaviors.
Whether you are an executive looking to catalyze growth in your organization, or have recently found out that your own organization is preparing to go through a restructuring journey, in