Dramatic performance improvements in disrupted markets – Part 1
Are you confident that you can drive the necessary performance improvements required to compete in a disrupted market. That your systems and processes can rise to the challenge. This is a key concern for executives who are now facing structural challenges rather than cost issues.
Instead of an economic upturn, executives are faced with disruption. Instead of profit improvement, they are faced with finding another 30-40% of savings to compete with the new challengers.
This pain is highlighted by KPMG UK, whose report identified that Cost to Income ratios of new digital challenger banks were 30% lower than incumbents. One Savings Bank got their CTI down to 26% in 2015. That is 50% lower than the top 5 banks. The stats vary from country to country, but the trend is still of concern.
So after a decade of cost cutting, where do executives find “another” 30% of savings???
Incremental Improvement does not cut it
Incremental improvement was popular, with small wins for small risk. But how does 5% increments compete with disruptors who have 30% lower costs due to simpler business models.
Disruption has forever changed the traditional tricks of the trade. Legacy cost management is like bringing a knife to a gun fight. The huge investments in enterprise systems have failed to realise promised results. This is all because they are focused on the wrong problem.
If you want to drive dramatic performance improvements in a disruptive market, then throwout legacy thinking and disrupt mindsets.
You will be surprised that transformational performance improvement can be done at low risk and without big spend. It is all about being smarter. This is the digital age, clever wins over scale and budget.
So where can you be clever and drive dramatic performance improvements.
Fixing the hidden costs
It is the 2/3 below the surface that is the greatest threats to ships. The same applies to costs. The hidden intangible costs are your biggest threat and your biggest opportunity.
All the cost cutting and investment in enterprise systems have focused on the obvious, the tangible, the 1/3 above the surface. What is left, is the intangible, unstructured, hidden costs and that is where an additional 30% of savings can be made.
Putting the spotlight on hidden and intangible costs
Take a walk around your business and see what is consuming most of your employees time. It is a lot of inconsequential bits and pieces. 5 minutes here, 10 minutes there but taking up 70% of the day.
How much time is spent on creating spreadsheets, updating spreadsheets, copying and pasting data, looking for data. Some statistic say that 15% of knowledge workers time is spent reproducing existing information.
How much time is spent checking, fixing mistakes or worst recovering from costly errors because no one found the mistake.
When you evaluate how much productivity loss is driven by poor risk, compliance, finance and strategy processes, then you will begin to appreciate the need to re-engineer those tasks. Just imagine the benefits of freeing up staff capacity to do business development and revenue generation, instead of non-productive work.
There are huge savings to be made from tackling the hidden and intangible costs in your business. This blog series will expand on how to drive performance by focusing on these issues.