The Cost-Cutting Challenge

Cutting costs isn’t something new or unique to today’s business environment. What I think is different today though is that businesses are being smarter. They are not just looking to reduce their overheads, they are looking to increase the efficiency and productivity of each member of staff.

Naturally increasing productivity through people working harder is not a sustainable solution, so companies and particularly those in the financial services sector are looking for ways to achieve this goal without burning out their people.

Business Process Improvement (BPI)

Far from being a new idea, BPI has been around almost since the beginning of the industrial revolution. What some of the most efficient and productive companies have learnt is the valuable lesson that any business process improvement is not a "one and done" exercise. The changes have to be implemented, and in most cases, they need to be bedded in and possibly tweaked for optimum performance.

What you find in many organisations is that they bite off more than they can chew, making the process slower and more difficult for staff and customers (both internal and external). This makes those involved less willing to participate in the tweaking and improvement process.

As well as all of those points, most people and therefore businesses have a natural aversion to change, seeing it as unsettling etc.

There are of course many approaches that can be applied to avoid these pitfalls and sand traps, but one of the most effective is the right sizing of the project and the changes from the outset. This is an area in which Fifth Step frequently helps clients, both in the identification of target areas and the planning, communication and management of the business process improvement process.

Legacy System Drag

Many organisations have, usually through the process of mergers and acquisitions, ended up with legacy systems. These systems can cause inefficiency in many different ways (from the need to double key data, to needing unique or different training). One of the key reasons why organisations need to remove this drag is because of the limitation and often the complete incompatibility that such systems have with the modern systems that are required for digital transformation.

Digital transformation can mean different things for different organisations, but the objectives are relatively common:

* Improvement of straight-through processing
* New channel enablement, the ability for customers or third parties (such as brokers) and their systems to interact with your systems directly
* Improve data collection and accuracy
* Implement or improve process automation

In addition to enabling digital transformation, legacy systems are often expensive to maintain, with many vendors charging a premium to support systems that have been retired.

All of this means that legacy systems are a fruitful area for efficiency improvements and cost reductions but is often ignored because the changes are thought too complicated. The best advice that I have for organisations facing this challenge is carpe diem – seize the day, for all you non-Latin experts! - as this process is not going to get easier. If you don't have the expertise required to manage this change in-house, you can always work with an experienced change partner. At Fifth Step we are regularly helping and guiding clients through such transformations and helping them realise the savings required.

Inventing Your Future

The future can be an expensive place, especially if you're not playing a part in influencing it. Having an innovation team is unfortunately still seen as something that highly innovative companies like Apple or Google do when it needs to be regarded as a far more regular business activity, something all businesses do as part of good business practice.

There is evidence gained over many years, which demonstrates that organisations that embrace and encourage innovation are far more productive.

What is surprising about this is the reasons why? It's not just because those businesses become more creative and invent new ways of solving problems but because they come together as a team and have a process to receive and deal with change and improvements in a constructive and productive way, no matter where in the organisation the ideas come from.

Establishing an innovation team and building an innovation pipeline does take some time and should be regarded as a strategic rather than a tactical fix. The reasons businesses haven't embraced innovation are numerous, but I believe that most of today's executives don't have this in their background to help guide the approach.

Fifth Step's approach to building an innovation team and pipeline is based on well-proven approaches, many of which are used by the organisations that are regarded as some of the top innovators in the world.

Conclusions

Some of the suggestions in this blog require some initial investment, but they will have the right overall effect on the business and its culture, changing it so that efficiency and productivity is very much business as usual rather than being something that your business is still striving to achieve.