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Volume 20 | Issue 2
July 2020
“Efficiency
innovations arise in
industries that
already exist. They
provide existing goods
and services at much
lower costs. They are
not empowering.
Efficiency innovators
become the low cost
providers within an
existing framework.”
-Clayton M. Christensen
Viewpoint
Reinvent Cost Innovation for
Digital Transformation
Depending on an organisation’s services or products, the cost
strategies can vary, as every decision in the product development
process or operations re-design affects the cost. Many product
and service organisations are under tremendous pressure to drive
several initiatives around cost as no business can escape from
disruption happening in lightning speed around them. The low
hanging thinking strikes best as saving through Value
Engineering, Six Sigma or Total Quality Management and so on,
as a part of the business excellence or strategic initiative. These
initiatives have delivered some level of positive results in the
past as the product life cycle used to be longer than it is today.
Cost reduction or saving projects has helped to increase,
maintain the profits or survival, this trend could further step-up
as leaders and businesses have increased cost pressure to face
post COVID19 pandemic crisis.
“Organisations need
to value and choose
their partners wisely
to discover next from
amplifying process
efficiency or cost to
new revenue and
exponential growth
opportunities as their
innovation engine”
Cost Pressurized
Large Organizations v. Small Organizations
This mantra has also benefitted the organisation in bringing a
common language and realise that cost reduction is everyone’s
job in the organisation, by optimising their process or cutting
cost to core year on year for decades. In the process, it has set
a mindset of inward thinking within the organisation and its
leadership by over obsession as a DNA of the organisation,
without considering the intangible damage to the culture of the
organisation. Organisation’s design their reward system to
encourage a focus on cost and not on new revenue streams or
new value to enable the customer retention. The cost focused
Digital
“IT and Software
services
organisations
which respect the
origin or source
of ideas. But this
scenario is more
or less inverted in
Manufacturing
sector with a
‘factory mindset’
as the contractors
are seen as
vendors and
generally treated
as a secondary
workforce”
Kaizen improvements is celebrated expecting year-on-year
contribution to bottom-line or transfer price / delivery cost.
No organisation is built to last by just focusing on saving cost
for their increased profit or growth, instead by new products
and services that touch the customer needs excellently well
and a purpose to stay in the business. The large organisations’
inability to innovate is transferring this burden to shoulders of
their suppliers and vendors to reduce cost year-on-year by 10-
15 percent but asking rate is anywhere between 35-50 percent
to save business from low-cost competitive countries such as
China, leaving India even countries like Singapore, Korea
and Malaysia have a difficult times competing with Chinese
firms than US and Europe. Small and Medium Businesses
and contractors are hard-pressed to take increasing cost
pressures as the operational costs and cost of labour is ever
increasing, which could lead to unwarranted practices to save
their business.
New Mindset – The Art of Leading Collaboration
It is high time for organisations to reinvent their cost
innovation strategy to an all new level. The software services
industry has been a great reference of way finder for industry
across sectors, as they could maximise the value of contractors
by weaving them into the culture of the organisation with no
disparity and equal opportunity in their professional and
technical contribution. These organisations which respect the
origin or source of ideas. But this scenario is more or less
inverted in Manufacturing sector with a ‘factory mindset’ as
the contractors are seen as vendors and generally treated as a
secondary workforce. They do not weave in the culture of the
organisation deeply to solve innovation challenges nor on
initiatives towards shaving cost year-on-year. The contractors
lose their urge to go beyond definition of job work, and this is
a lost opportunity as no organisation has a clear profit sharing
policy in place with vendors.
Digital
Digital
“ Organisations
need to design a
holistic digital
transformation
blueprint by
revisiting their
end-to-end
manufacturing or
process journey,
identify the
inefficiencies, the
risk of safety, the
data transparency
and openness to
work with young
organisations”
The future of ‘Build to Last’ Organizations
Forward looking business organisations are thinking to
reinvent with a new mindset - mission zero ‘cost to zero’
‘downtime to zero’ ‘defects to zero’ ‘accidents to zero’ ‘waste
to zero’ ‘mis-communication to zero’ as every aspect is cost to
the company. There is an attempt to re-define cost innovation
with digital transformation solutions by integrating to co-
create and profit sharing with vendors as business partners by
encouraging to develop intellectual property. Traditionally
these organisations had adopted methods of costing with wide
tolerance. Organisations need to design a holistic digital
transformation blueprint by revisiting their end -to-end
manufacturing or process journey, identify the inefficiencies,
the risk of safety, the data transparency and openness to work
with young organisations by setting the corner stone based on
quick return on Innovation, thus, building a confidence for
subsequent stage of digital transformation. Organisations need
to value and choose their partners wisely to discover next
from amplifying process efficiency or cost to new revenue and
exponential growth opportunities as their innovation engine.
As their short sightedness must not hinder their long term goal
of end-to-end growth innovation in a circular economy.
Lokesh Venkataswamy
CEO & Managing Director
Siva Kumar
Principal - Strategy & Growth
Innovation siva@innomantra.com
Innomantra Consulting Private Limited
Level 9, Raheja Towers
M.G. Road, Bengaluru - 560 001, India
Mobile: +91 98452 72555
+91 080 41253444
contact@innomantra.com
www.innomantra.com
Bangalore / Mysore / Colombo / Chicago / Hong Kong / Troy / Zurich
©2015-20 Innomantra Consulting Private Limited –Viewpoint Ver. 1.0 F July 2020
Digital

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Innomantra Viewpoint - Reinvent Cost Innovation for Digital Transformation

  • 1. Volume 20 | Issue 2 July 2020 “Efficiency innovations arise in industries that already exist. They provide existing goods and services at much lower costs. They are not empowering. Efficiency innovators become the low cost providers within an existing framework.” -Clayton M. Christensen Viewpoint Reinvent Cost Innovation for Digital Transformation Depending on an organisation’s services or products, the cost strategies can vary, as every decision in the product development process or operations re-design affects the cost. Many product and service organisations are under tremendous pressure to drive several initiatives around cost as no business can escape from disruption happening in lightning speed around them. The low hanging thinking strikes best as saving through Value Engineering, Six Sigma or Total Quality Management and so on, as a part of the business excellence or strategic initiative. These initiatives have delivered some level of positive results in the past as the product life cycle used to be longer than it is today. Cost reduction or saving projects has helped to increase, maintain the profits or survival, this trend could further step-up as leaders and businesses have increased cost pressure to face post COVID19 pandemic crisis. “Organisations need to value and choose their partners wisely to discover next from amplifying process efficiency or cost to new revenue and exponential growth opportunities as their innovation engine” Cost Pressurized Large Organizations v. Small Organizations This mantra has also benefitted the organisation in bringing a common language and realise that cost reduction is everyone’s job in the organisation, by optimising their process or cutting cost to core year on year for decades. In the process, it has set a mindset of inward thinking within the organisation and its leadership by over obsession as a DNA of the organisation, without considering the intangible damage to the culture of the organisation. Organisation’s design their reward system to encourage a focus on cost and not on new revenue streams or new value to enable the customer retention. The cost focused Digital
  • 2. “IT and Software services organisations which respect the origin or source of ideas. But this scenario is more or less inverted in Manufacturing sector with a ‘factory mindset’ as the contractors are seen as vendors and generally treated as a secondary workforce” Kaizen improvements is celebrated expecting year-on-year contribution to bottom-line or transfer price / delivery cost. No organisation is built to last by just focusing on saving cost for their increased profit or growth, instead by new products and services that touch the customer needs excellently well and a purpose to stay in the business. The large organisations’ inability to innovate is transferring this burden to shoulders of their suppliers and vendors to reduce cost year-on-year by 10- 15 percent but asking rate is anywhere between 35-50 percent to save business from low-cost competitive countries such as China, leaving India even countries like Singapore, Korea and Malaysia have a difficult times competing with Chinese firms than US and Europe. Small and Medium Businesses and contractors are hard-pressed to take increasing cost pressures as the operational costs and cost of labour is ever increasing, which could lead to unwarranted practices to save their business. New Mindset – The Art of Leading Collaboration It is high time for organisations to reinvent their cost innovation strategy to an all new level. The software services industry has been a great reference of way finder for industry across sectors, as they could maximise the value of contractors by weaving them into the culture of the organisation with no disparity and equal opportunity in their professional and technical contribution. These organisations which respect the origin or source of ideas. But this scenario is more or less inverted in Manufacturing sector with a ‘factory mindset’ as the contractors are seen as vendors and generally treated as a secondary workforce. They do not weave in the culture of the organisation deeply to solve innovation challenges nor on initiatives towards shaving cost year-on-year. The contractors lose their urge to go beyond definition of job work, and this is a lost opportunity as no organisation has a clear profit sharing policy in place with vendors. Digital Digital
  • 3. “ Organisations need to design a holistic digital transformation blueprint by revisiting their end-to-end manufacturing or process journey, identify the inefficiencies, the risk of safety, the data transparency and openness to work with young organisations” The future of ‘Build to Last’ Organizations Forward looking business organisations are thinking to reinvent with a new mindset - mission zero ‘cost to zero’ ‘downtime to zero’ ‘defects to zero’ ‘accidents to zero’ ‘waste to zero’ ‘mis-communication to zero’ as every aspect is cost to the company. There is an attempt to re-define cost innovation with digital transformation solutions by integrating to co- create and profit sharing with vendors as business partners by encouraging to develop intellectual property. Traditionally these organisations had adopted methods of costing with wide tolerance. Organisations need to design a holistic digital transformation blueprint by revisiting their end -to-end manufacturing or process journey, identify the inefficiencies, the risk of safety, the data transparency and openness to work with young organisations by setting the corner stone based on quick return on Innovation, thus, building a confidence for subsequent stage of digital transformation. Organisations need to value and choose their partners wisely to discover next from amplifying process efficiency or cost to new revenue and exponential growth opportunities as their innovation engine. As their short sightedness must not hinder their long term goal of end-to-end growth innovation in a circular economy. Lokesh Venkataswamy CEO & Managing Director Siva Kumar Principal - Strategy & Growth Innovation siva@innomantra.com Innomantra Consulting Private Limited Level 9, Raheja Towers M.G. Road, Bengaluru - 560 001, India Mobile: +91 98452 72555 +91 080 41253444 contact@innomantra.com www.innomantra.com Bangalore / Mysore / Colombo / Chicago / Hong Kong / Troy / Zurich ©2015-20 Innomantra Consulting Private Limited –Viewpoint Ver. 1.0 F July 2020 Digital