Cost Cutting gone sour ?

Cost cutting without understanding cost behavior is dangerous. Companies usually attempt to reduce manpower by 15%, reduce advertising by 10% ……as a method cost cutting. But instead, they end up compromising on their efficiency, resulting in firefighting with increased costs. They confuse cost reduction to cost rationalization.

Pricing not recovering costs  ?

 Is your product price recovering the direct cost associated with it –or rather, have the direct cost elements mapped to the products? Is the company recovering the overhead component mapped to it- is there an exercise to map the overheads to products -on what basis- % basis/ABC basis/ad hoc basis . Is the management convinced that all its direct and overhead components are built in the pricing and their markup is strategically up to the mark? Is the company selling its products at a loss? i.e. not recovering its total costs?  This is the crux which determines the company strategy. Is it being done in your company?

KPI's not identifying efficiency and productivity ?

Key performance indicators-KPI -lopsided evaluation. The performance evaluation of the three Ms in a critical exercise for the sustainability of the business model. M factors being evaluated against set monetary parameters result in clouded decisions which hurt the business model.
Some harm is visible, some not!!!! 

Let’s shift to the balanced scorecard world and rolling budgets.Cost cutting without understanding cost behaviour is dangerous. Companies usually attempt to reduce manpower by 15%, reduce advertising by 10% ……as a method cost cutting. But instead, they end up compromising on their efficiency, resulting in firefighting with increased costs. They confuse cost reduction to cost rationalization.

Product mix is not optimizing profit ?

Determining the Right product mix-tricky decision. 

Allocating of limited resources among limited skus to maximize profit cannot be done unless we know the cost dynamics of each sku.

 Deciding to make or buy or “STOP” needs cost data for that sku.  This is easily the most common pain point and perhaps a strategic blunder in most of the business models who do not value cost dynamics

 Growth Pangs?

All business models aim growth-some even try to overtake the speed of google. But nature of growth and the way the growth is managed is critical.

 Unrelated diversification can kill..... Growth by focusing on star products and killing the cash cows can be disastrous to the business model

 We need a sustainable growth blueprint backed by crisp execution layout.

Under-pricing as a strategy gone sour ?

Selling below cost to capture the market is playing on economies of scale on one hand and creating monopoly for future exploit of customers on other hand. It’s a dream proposition for any business model.

“Capturing market share by cost strategy” – It needs a killer strategy with full proof execution game plan as risks are enormous, but so are the rewards. The strategic focus shouldn't shift at any time.

Toxin in culture of the organization has started affecting performance adversely ?

It is rather surprising that the management gurus and the financial world wizards have not started attaching a VALUATION figure to the culture of a company. After all, we all have brands being classified as intangibles and given fantastic valuations whenever we want to attract attention of lenders and/or profiled investors/stock markets (surprisingly even today the Kingfisher brand is still being valued at 350 crores in spite of all the saga around it). Even the IFRS accepts and allows brands and their valuation to be considered as assets.

Thinking aloud-How can one measure/monetize the asset of organization culture? Or rather ...What is the method to attach a negative value to an organization with toxic culture?

Perpetual projections based excels are backfiring?

“Films can’t be made by MBAs on excel sheets: Why Bollywood studios are shutting shop”-this being the headline of an article on First post.

I couldn’t help but comment that “neither can businesses be made on mere excel projections- and that is why many start-ups are shutting shops.”

There is a need of business acumen and a sound operational bias apart from the disruptive innovative concept which a start-up brings on the table. We are missing the wise experienced stalwarts of the business world who are being side-lined with the over-optimistic so called “excel” based decision makers who are blissfully ignorant of ground realities and the ‘nuts and bolts’ of running a business.