Why does cutting costs mean little?
It seems a paradox these days to state that it's not enough to cut costs to grow and to surf the unstable waves of the markets. On the contrary, the experience of successful companies goes precisely in this direction.
Cutting costs, guided by mere financial logic, without a thorough assessment of the real state of corporate health, of the strengths to be exploited to generate more profits and greater value for one's customers, is like starting a treat apparent symptoms, without having understood the causes of the malaise.
Many companies often spend more time focusing short-term earnings instead of thinking about how to literally make a lot more money in the long run by focusing on reducing waste and building the product or service that delights your customers.
The Nobel Prize for Economics Edmund Edmund Phelps argues that Western companies, starting with US ones, are dangerously reducing their rate of innovation. It is no coincidence that among the main causes Phelps includes the lack of strategic vision long term.
This lack of strategic vision by top management and entrepreneurs is attributed to the growing pressure exerted by the financial markets (institutional investors and stock analysts) for constantly exceeding profit growth targets.
The consequent shift of attention towards the achievement of short-term objectives determines important consequences that heavily influence the management of the company. For example, drastic reductions in R&D expenditure are made and no investments are made in training. In other words, there is a tendency to neglect the whole series of initiatives that bear fruit in time spans that go beyond the short-medium term.
Valuable innovation comes from below and necessarily passes from the passion for the product and the desire to realize one's ideas: it is in the product development stage and innovation management that hides the true key to lasting success of a company and it is here that the conditions are built so that the more operational processes such as production, logistics and sales, which represent the effect of the development, are efficient.
Looking at how innovation is managed, it is possible to distinguish who is really strong from those who play hard. Let's imagine two boxers in the ring. A boxer deals his blows in a powerful and precise way, while the other is agitated and swings numerous blows off target: who is more likely to win the match?
Attachments: LEAN Consulting and Training – Lenovys
