These days, it seems as if the entire global economy is headed for the doldrums. A number of countries and regions stand at the brink of recession. What
Over the past few years as innovation became a trendy business concept, the word has typically evoked additive innovation, that is: new products, new product features, new services, customization of products and so on. All of these innovations involve adding to existing product lines and products.
However, between energy costs which are sky-rocketing and the economy which is at best slowing and at worst moving into recession (depending on where you are based), there has been a huge change in business’s use of innovation. Whereas in the past, a large number of our clients were using innovation to develop new products, product improvements and packaging; today most clients are looking at improving efficiency and reducing costs.
Reductive innovation = cost cutting
You can apply reductive innovation to many areas of your business. Cost cutting is, of course, the main form of reductive innovation that comes to most people’s minds. That’s not surprising – it is critical. If sales of your product are down as the result of an economic slow down, you probably need to slash your operational costs in order to remain profitable. Using creative thinking approaches such as brainstorming and ideas campaigns to generate ideas for reducing operational costs can be very cost effective. However, sometimes simply asking “in what ways might we reduce costs?” is an overly broad innovation challenge. It can be more effective to focus innovation challenges on specific issues. Let’s look at some of them.
Removing steps in business processes
Most business processes are a series of steps. For instance, you might look at the sales process as a series of steps that start with one of your salespeople taking an order; progress through to fulfillment of the order; and finish with invoicing the customer. There are numerous steps in this process and typically the larger your firm is, the more steps there are. Bureaucratic firms are even worse.
Yet every step in a process incurs costs. Even if it is just an administrator checking a few boxes on a computer screen – that takes time. As a result, any step you can remove from a process translates into cost savings.
A useful exercise is to list or illustrate the steps in a process. You might sketch it on paper or build a model out of children’s building blocks (the latter can be remarkably effective!). Then determine which steps can be removed from the process without adversely affecting the process itself.
In the sales process example, you may discover that a lot of unnecessary documentation is created along the way. Some of that documentation is redundant and so the process of preparing it and filing it can be eliminated. This reduces several steps in the process and so cuts operational costs.
The danger with removing steps from a business process is that doing so usually results in diminishing the importance of an individual or group within your organization. These people will understandably place higher importance to their step in the process and may fight bitterly to prevent it from being removed. Preparing for this problem and dealing with it – for example by reassuring threatened employees that their jobs are safe – can help reduce such issues.
Combining steps in a business process
Although it is often the case that few steps in a business process may be dropped all together, it is also often true that multiple steps can be combined into a single step – or at least fewer steps. This again reduces labor costs and improves the efficiency of your operations. But it is also subject to the same dangers as removing steps.
Turning things off
It is easily overlooked, but what percentage of computers in your offices are left on overnight? How many lights are left burning the whole night through? It always amazes me driving through business districts late at night and seeing how many office buildings are lit up like Christmas trees even when there is clearly no one inside. Likewise, many electrical items are left in standby mode throughout the day. This allows these devices to be powered up almost instantaneously when needed. But even being in standby mode requires electricity and adds to your costs.
I am constantly writing notes, making doodles and sketching diagrams while at work. Yet we never spend a penny on notebooks for this. Rather, I use the reverse side of old (non-confidential) paper, such as direct mailers, draft documents, unwanted PowerPoint presentation print-outs and many other documents which pass my desk regularly, but which do not require archiving. I even give extra paper to my kids to draw on, there is so much of it!
Many years ago when I ran a small marketing communications firm and we were producing a brochure for a client, our printer told us that owing to the unconventional size of the brochure, there would be substantial unused space on every large raw sheet of paper that would go through the printing press. So, we quickly designed a little flyer that could be printed side by side with our client’s job. As a result, we produced a nifty little promotional piece at almost zero cost.
In most businesses there are materials that can be re-used and doing so will reduce operational costs. It is a matter of identifying those items and how they can be reused. Brainstorming, ideas campaigns and other idea generation activities are good approaches for identifying opportunities.
Simplify your products
Very possibly your products are more complex than they need to be. By removing unnecessary features, you can produce them less expensively. And while some of the reduced cost will doubtless have to be passed on to your customers (customers will be happy to see your product simplified, but will expect its cost to be reduced accordingly), your company can still benefit by selling more products and maintaining or increasing your per item margin.
Product simplification can also reduce the operational cost of powered products. For instance, a very basic mobile telephone that simply makes phone calls will appeal to customers who only want to make phone calls. Moreover, by having fewer functions, the basic mobile phone will consume less battery power, hence requiring fewer recharges.
Reduce energy consumption
In addition to turning things off, there other ways of reducing energy consumption. These might include reducing business travel, adjusting temperatures in workspaces, replacing company cars with smaller more fuel efficient vehicles and improving the efficiency of your logistics system. Anything that reduces energy consumption reduces your operational costs.
The list goes on. The important thing to bear in mind is that there are many ways to reduce operational expenses. And one of the best methods for finding these ways is by posing challenges to employees through idea management initiatives, brainstorming sessions and other idea generation activities.
Jeffrey Baumgartner is the founder of Bwiti bvba, a Belgian-based company that helps organizations to become more innovative and more creative. He writes and edits Report103, a weekly newsletter on creativity, ideas, innovation and invention in business, and operates the JPB.com website.