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Cost & Performance Improvement

Overview

As markets, industries and business models continue to evolve, many organizations face pressures on margin and shareholder value delivery. An increasing focus on the cost competitiveness and performance of business-wide operations is essential to remain relevant and compete in the new economy.

Organizations embarking on cost and performance improvement projects typically assess business units spanning multiple functions (operations, go to market, back office, etc.) in order to uncover opportunities for value creation. However, identifying, prioritizing and delivering cost and performance improvement initiatives can be difficult for an organization and its leaders as they deal with the day-to-day operational challenges inherent in the business.

We assist organizations by deploying a proven performance improvement approach, leveraging powerful industry and functional knowledge to design, plan and deliver cost and performance improvement programs. Five key elements make our cost and performance improvement approach highly distinctive:

  • Recognition that all costs are not equal: Costs should be proactively managed and treated as a portfolio of investments that provide a return to the firm, some of which can be reduced aggressively without harming strategy, and others which should be protected. Although lowering total overhead cost is one often appropriate organizational goal, significant value can be created by shifting the mix of overhead investments away from "utility-like" costs and into core capabilities that support strategy execution.
  • Philosophy of evidence over opinion: While previous experience informs the starting point, the correct solution is deduced from the data. The evidence base is collaboratively built and shared with client personnel.
  • Delivery plan: We drill down from findings of what and where the improvement opportunities are in order to create a robust delivery plan, and have extensive experience in supporting the implementation of improvement programs.
  • Collaborative but challenging: We understand that achieving results requires engaging with those who "do the work." We will do the vast majority of work at clients' sites and with the client, but we will not be captured by "old thinking." We will be respectful while challenging the status quo.
  • Track record of success: We have successfully delivered multiple organizational cost reduction transformations, with savings consistently in the range of 15-25%.

Examples of Our Work

In recent cost and performance improvement engagements, we have successfully:

  • Designed and delivered a comprehensive cost reduction program for a large electricity generator, achieving $110 million in cash flow uplift in two years
  • Developed and implemented a new operating system to drive and sustain efficiency improvements at a major energy distribution company, achieving savings of 20% in the cost base
  • Delivered more than $100 million annually in savings by improving efficiency in corporate and operational functions at a major freight transport operator
  • Developed a cost reduction plan for a regional convenience store and gas station operator by identifying cost reduction opportunities and supporting implementation to capture them
  • Helped a global oil and gas services company identify and prioritize the best solution to reduce costs while maintaining a solid infrastructure to support future growth
  • Identified critical overhead and operational cost reduction opportunities for a leading global high-technology engineering business, including potential back-office support savings of approximately $30 million annually.
  • Embedded the product life cycle philosophy into the business planning process at a major pharmaceutical company

View additional case examples

Please contact us at strategy@lek.com for additional information.