Design for frugal growth
With the right kind of organisation, you can expand while cutting costs.
The control of costs had been its greatest strength. But it was now the greatest weakness. The company had spent so many years trying to reduce expenses that this imperative was hardwired into its practices, processes, and organizational design. When executives tried to shift gears, to expand into new markets and introduce new products, the company was ill-equipped for the transition.
Business unit leaders spent much of their time looking inward, negotiating with the executives at headquarters who made the final decisions about personnel, product launch timelines, and many other operational issues. Meanwhile, consumers were growing increasingly sophisticated. They wanted more information about the company’s products. So did institutional customers, such as schools and restaurant chains.
As companies have struggled to create and execute growth strategies, investor expectations for the sector have remained high, and raiders continue to stalk the producers of popular brands. It’s no wonder that the industry has devoted its attention, for at least a generation, to reducing cost, streamlining operations and creating economies of scale by consolidating research, manufacturing, and distribution.
This approach has paid off in the past. But now, having turned themselves, in effect, into supercharged cost-cutting machines, how can these companies suddenly invest in the risky arenas of emerging markets and fundamental innovation? And if they can’t, how will they compete when frugality alone is no longer sufficient?
read more >>
The control of costs had been its greatest strength. But it was now the greatest weakness. The company had spent so many years trying to reduce expenses that this imperative was hardwired into its practices, processes, and organizational design. When executives tried to shift gears, to expand into new markets and introduce new products, the company was ill-equipped for the transition.
Business unit leaders spent much of their time looking inward, negotiating with the executives at headquarters who made the final decisions about personnel, product launch timelines, and many other operational issues. Meanwhile, consumers were growing increasingly sophisticated. They wanted more information about the company’s products. So did institutional customers, such as schools and restaurant chains.
As companies have struggled to create and execute growth strategies, investor expectations for the sector have remained high, and raiders continue to stalk the producers of popular brands. It’s no wonder that the industry has devoted its attention, for at least a generation, to reducing cost, streamlining operations and creating economies of scale by consolidating research, manufacturing, and distribution.
This approach has paid off in the past. But now, having turned themselves, in effect, into supercharged cost-cutting machines, how can these companies suddenly invest in the risky arenas of emerging markets and fundamental innovation? And if they can’t, how will they compete when frugality alone is no longer sufficient?
read more >>
