Written by Steve Bosak
If you’re concerned about an uncertain business environment, consider using a collaborative approach to budget reduction. You’ll find new ways to save money, and you’ll boost employee morale at a time when you need an engaged, committed workforce more than ever.
Over the last year, there have been an abundance of media stories discussing whether the U.S. will enter a recession sometime soon. Even though economic indicators show the U.S. is not in one, we have seen some major tech companies—Microsoft, Paypal, Zoom, and Spotify, for example—make significant staff reductions.
If you are concerned about an economic downturn that might impact your company, there is another approach to consider before reducing your workforce: collaborative, innovative cost-cutting.
When most people hear the word “innovation,” they probably think it’s what companies do when they develop some new form of technology or product, such as artificial intelligence software or virtual reality games. They probably don’t think about reducing costs as innovation. But there is a case to be made for using innovation processes to find ways to trim expenses without harming your employees’ livelihood.
An example of this approach comes from a Massachusetts-based computer equipment manufacturer that a colleague of mine helped as an innovation consultant. For purposes of this article, the names have been changed for confidentiality; I’ll refer to my friend as Mike and his client as Praveen.
The Challenge
One day in the midst of a past recession, Mike received a call from Praveen, a former client who had just been promoted to run a division within a computer equipment manufacturing corporation. Praveen told Mike that his company challenged him to reduce his division’s costs by $100 million—a daunting task. Praveen did not want his first act as the division head to be massive layoffs, so he asked Mike to help him find innovative ways to cut costs. Mike jumped at the opportunity.
Approach
Mike has a long history of helping his clients create valuable new products and services. He uses a collaborative, inclusive approach that pulls together people from across the organization to find challenges and opportunities for improvement. He then applies his innovation techniques to guide people through creating, prototyping, testing, and implementing new products and services—and sometimes new internal processes.
The method Mike uses is similar to the design thinking approach. It is transparent and has the benefit of building internal support for new products and the organizational changes which new products might warrant. People tend to feel more invested in implementing and promoting ideas that they have a part in developing because they understand the needs driving the change and become committed to advancing the solution.
Conversation, Insight, and Solutions
Mike applied this same strategy to Praveen’s cost-cutting mandate. He gathered a diverse group of managers from across Praveen’s division who understood all aspects of his division’s products, and he included people from other divisions. He held a series of sessions with the client and these managers in which he created a shared understanding of the entire division’s cost structure, from design and production to sales and support.
Next, they reframed the cost-cutting challenge around products and industrial processes and began ideating ways to save the company money. For some sessions, Mike also invited a few guests from other industries to serve as outsiders who could challenge Praveen’s team and share their own experiences with cost reductions. In these collaborative gatherings, individuals would share stories and ideas about finding ways to cut costs at a variety of businesses.
In one session, an executive from a major airline shared a story about the cost of paint for airlines. Not only does the paint itself have a high cost, he said, but the weight that paint adds to a plane can reduce fuel efficiency. Moreover, he mentioned, paint is a hazardous material that requires special care and storage which, in turn, creates more costs. His airline was able to save money by reducing their reliance on paint for their aircraft.
While the airline executive told his paint story, one of the manufacturing managers chimed in. “We currently paint the entire inside of every computer rack,” they said. “I’m not sure why, but we do it.” After investigating the function of the paint, Praveen’s team decided they could eliminate most of the internal paint, thus identifying a large cost saving for the division.
Another guest in the group was an executive from a major automotive company that produced many similar car models under different brands. He shared how, in a meeting of managers from the different brands, they realized they were all making a special brand-specific version of a very common car part and that this part did not have any design requirement to be unique for each brand. They decided to unify the provisioning of that part, creating an economy of scale.
After listening to the car executive’s story, Mike challenged Praveen’s group to identify similar parts used in different brands or models of their computers. They discovered that certain computer parts performing the same function in all computers were manufactured and inventoried separately for the different brands. Following the example of the car company, Praveen’s team unified the manufacturing of those functionally-similar parts to log significant savings.
Silos and Baby Goats
We should pause here to note that this “car part” story highlights a challenge facing many large firms: Complex organizations with multiple product lines and brands often result in siloed work that hinders communication among the people in different divisions or brands. In some cases, workers may not even understand how their work fits into the overall company function.
If you’re a fan of the Apple+ TV show Severance, you’ll recall the scene where the show cleverly satires this disconnect among workers in the same building of Lumon Industries: While exploring the dark hallways in their workplace, workers from the Macrodata Refinement division discover a man in a suit who is bottle-feeding baby goats. The goat feeder yells at the Data Refiners to go away because the baby goats “are not ready.” Baffled, the Data Refiners go back to their work area with no idea why there is a room full of baby goats in their office building.
Real Results
The collaborative and innovative cost cutting work that Mike did with Praveen’s division may not have located any baby goats, but it helped his division’s managers understand other parts of the company’s business. Through the pre-workshop research and the six cost-cutting workshop sessions Mike facilitated, Praveen’s team found nearly $92 million of cost savings without any reduction in workforce. Praveen was able to claim a big win in his new position and avoid massive layoffs to achieve his budget target.
Is your company concerned about an uncertain business environment? Do you value your employees but need to find a way to reduce costs and increase efficiency? Consider using a collaborative, innovative approach to reducing your budget that engages people from many functional areas across the organization. You’ll find new ways to save money, and you’ll boost employee morale at a time when your company needs an engaged, committed workforce more than ever.
Oh, and to answer the question in the title of this article: Baby goats have nothing to do with innovation… but, metaphorically, they may be hampering the efficiency of your operations. You should definitely find out if there are any hiding down the hall.
Author Steve Bosak comes to innovation and design thinking from the environmental policy and advocacy field, having learned how to create pro-environmental coalitions to promote conservation causes in Congress during the 2000s. He has used his innovation and facilitation skills to craft policy, build coalitions, and create media and internet outreach strategies during his more than 20-year career.