Rapidly changing business models demand increasingly agile responses, as resources shift to support strategic objectives. The true value of zero based cost management lies in driving trade-offs between risk and value, thereby facilitating the need to constantly direct resources to the point of greatest strategic worth.
Read about power of zero basing and why it has recently made a resurgence in the following series of articles exploring topics related to zero basing, its implementation and its potential to transform specific industries.
Initially introduced over 40 years ago, zero based cost management fell out of favor with leadership teams, being seen as unwieldy, labor intensive, highly disruptive and ultimately not delivering to the bottom line. We believe the recent resurgence of this potentially valuable way of thinking about trade-offs between risk and value stands the greatest likelihood of being successfully applied in today’s business environment if organizations adhere to the approach outlined in the article above and expanded on in our continuing series on zero basing.
Many challenging change journeys are non-linear and zero basing is no different. If organizations are to realize the potential to optimize costs and make investments that deliver greater value, they need to fully appreciate the human journey. In this, the first in a series of articles, we discuss how a series of structured interventions can deliver sustainable change, by placing people at the center of zero basing.
How can companies manage the attendant risks of zero basing without blocking the good ideas that spring from this new and challenging way of rethinking the cost base? In this, the second in a series of articles, we discuss how to balance risk and value by looking at three key risk management challenges face by multiple industries and recommend appropriate responses.
The automotive industry is in a turbulent period, with disappointing shareholder returns and poor return on capital. All of this is happening in the midst of huge transformational pressure brought on by three megatrends of electric powertrains, connected and autonomous vehicles and Mobility-as-a-Service – and exacerbated by geopolitical uncertainties like Brexit and potential trade wars. With so much funding required for vital strategic initiatives, it’s time for the automotive industry to reconsider zero based budgeting or zero basing.
When delivering a successful zero basing program, the entire organization needs to be focused on a well-articulated vision of success. The spotlight must always be on those activities where the greatest strategic value lies. And individual teams should be challenged to the max to ensure that the vision outlined by the business becomes reality.