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Resist All Expensive and Slow-Developing Choices to Pursue Cost-Reduction Opportunities

Feb 28, 2008
What is a slow-developing opportunity? It's almost always an opportunity that you don't know how to pursue yet.

What's a slow-developing, expensive opportunity? It's an opportunity for which you've spent a lot of money without yet knowing how to pursue the opportunity. The only difference between the two is that more money is spent in the latter case.

What's the lesson? Focus on learning what you can for as little cost as possible and as quickly as possible. That intention seems obvious, doesn't it?

Yet organizations make enormous mistakes in this direction every day by pursuing cost-reduction opportunities while not learning very much from their efforts. Why?

Here are some of the reasons: For one, organizations may make promises they cannot meet, especially about future growth and profitability. The more promises the leaders make, the more they feel like they need to do something that may fill the gap between the promises and reality.

In the absence of a clear option that's working, leaders may be tempted to throw money at the opportunities that seem the largest . . . and hope for the best. This approach may buy some time, but it rarely fills the cost-reduction gap.

In some cases, such an organization will undergo an ill-conceived belt-tightening that will delay and reduce the effectiveness of good cost-reduction projects. That strategy is like trying to drive your vehicle for another 100,000 miles without a ring job after your engine starts using a quart of oil every 200 miles.

Making promises that cannot be kept hurts most when those who are pursuing the opportunities subscribe to achieving unrealistic accomplishments. In such a circumstance, the money and time are diverted from learning into ever larger gambles to make a quick breakthrough.

That approach is like a pyramid investment scheme. Each promise requires a bigger payment down the road, but there's a limit to the cash flow that's available to make things happen. Seeing their careers potentially suffering damage, such leaders may become desperate and hide the depths of their problems, a step that also hurts learning.

For another thing, some organizations are paradoxically not too well organized. Some of these enterprises are little more than poorly coordinated baronies run by people who aren't held accountable for specific results.

Ask a leader in that sort of organization to accomplish some new task, and that leader may be off hiring people and launching programs before setting objectives. It's facetiously called "Fire, ready, aim."

Even in well-run organizations, most leaders have no experience in developing the large cost reductions that organizations should focus on. As a result, the instinct will be to duplicate the sorts of cost-reduction programs that they have used in the past -- most of which will be inappropriate.

Slow development of cost reductions can be related to a number of causes. Whenever you run into such slow developments, check what's going on to diagnose what the causes might be.

Here are some potential causes to consider as you investigate:

-Lack of appropriate measurements to define what the potential is

-Undefined performance objectives

-Ignorance about current and future best practices

-Inability to project future best practices

-Misunderstanding what the theoretical best practices are

-Lack of knowledge about how to explore choices for approaching the theoretical best practices

-Staffing weaknesses

-Unmet learning needs

-Conflicts between incentives and objectives

-A slow cycle for repeating the breakthrough solution process

-Premature commitment of resources before the opportunities are validated

-Misunderstandings about the strategic process involved in creating breakthrough solution-based cost reductions.

Like most such circumstances, it makes sense to think things through before taking action. That old carpentry adage comes to mind: "Measure twice. Cut once."

With any of these causes, start by being sure that your organization is well versed in initiating major cost-reduction programs through the breakthrough solution process. Next, make sure that stalls are identified, stallbusters are designed and tested, and the eight process steps are all pursued and reported on before any significant implementation commitments are made.

Rarely will more than 100 hours of effort will be required to scope out the potential opportunity, which should supply sufficient understanding to decide if further investigation is warranted. By having multiple teams working on alternative approaches to breakthrough cost reductions, you should be able to further shrink the elapsed time needed to find high potential, rapid-implementation opportunities.

Here are questions designed to help you engage the whole world to achieve astonishing cost reductions:

-Which critical elements of your business model or operations could lead to cost-reduction breakthroughs?

-For the most promising of such opportunities, what are inspiring goals to urge people past the theoretical best practices for cost reductions?

-What is the most effective way you can launch deliberately overlapping global solution searches?

-How can you be more flexible in maintaining resources to apply to your best opportunities when they arise?

-Are you prepared enough to learn from pursuing these cost-reduction choices?
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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