Factfile 30
Cost cutting is no longer the only answer
For a while companies focused not on producing better products, but on improving business processes to reduce costs. The cost-cutting frenzy and then the reengineering ?revolution? hit the business world like a ton of bricks in the late 1980s, leaving dazed managers with skeleton teams, reduced budgets ? and efficient, streamlined business processes.
In retrospect, some of the excesses of the reengineering craze now seem a little out of hand, with companies trying to re-focus on growth and re-motivate legions of disaffected, bitter employees. Nevertheless, in many organizations productivity increased, costs decreased and stockholders became millionaires as margins soared.
Today, though, many companies have reached parity in terms of cost-reduction and efficiency. How much fat is there really left to cut in the average business and at what point do you begin cutting into the muscle?
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Can GM significantly improve some process such that production costs will be substantially lower than what Ford can accomplish? Maybe, but those sources of margin are getting harder and harder to find.
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TQM and its various sibling methodologies have brought parity and equivalence to whole industries in terms of efficiency and cost structure.
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Even Jaguar, that last holdout of the handcrafted, spare-no-expense repair shop?s dream, has been thoroughly reengineered into the modern age under owner Ford Motor.
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What that means is that unless you?re in an industry that stayed on the sidelines during the cost-cutting, reengineering craze, chances are high that you and your competitors are looking eerily the same in terms of business structure and processes. You?ve probably worked with the same consultants to streamline or eliminate the same processes and pink-slip the same types of employees.
Competing on cost structure is still possible and, for many, it?s still a little easier than competing on product features, but not by much, and not for long.