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Re-setting for resilient growth

  • 20 July 2020
  • Advise Business Strategy

Can businesses afford to maintain their pre-pandemic BAU operations as the economy begins its slow crawl to recovery? If not, how will they reset, pivot, and adapt to the new environment?

Margin optimisation

Pre-Covid-19, many consumer businesses were already struggling to compete on margin. On the one hand, there has been increasing headwinds due to the rising cost of raw materials, labour and manufacturing as well as wider political events such as Brexit and the US-China trade-war. On the other hand, there are price pressures with increased competition from D2C pure players and new business models that offer customers more affordable options, such as rentals, subscriptions and resale.

Then, the global pandemic happened which exposed how tight many businesses’ margins were. The shifts in retail consumption (death of malls and department stores and shift to online shopping) were further accelerated and resulted in many businesses going into administration or filing for Chapter 11. 

As some of these shifts are still happening right now, what does optimising for margin involve when it’s hard to forecast short-term performance let alone long-range impacts?

This article will focus on a cost-led approach to margin optimisation.

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Build resilience into the cost-structure of your business

What does a resilient cost-base look like?

It means taking a strategy-led approach to ensuring that your existing cost structure allows you enough flexibility to adapt to rapidly changing market conditions, without compromising your brand promise to customers.

To achieve this, businesses need to start by understanding what their strategic USP is and then strike a delicate balance between investing in areas of their business that directly drive value, and adding enough flexibility in how ‘non-essential’ costs are structured to be able to rapidly scale up or down their non-essential costs to respond to shifting consumer demand. 

This can be easier said than done.

When your bottom-line is under immediate pressure, it can be easy to tactically focus on eliminating costs that are easy to turn off as a priority instead of considering the lasting impact that might have on the customer experience you’re able to deliver.

To avoid falling into that trap, we’ve developed a simple 4-step process that outlines our strategic approach to building a resilient cost-base that will prepare your business to survive and thrive:

Our cost base approach

Survive and thrive

Our approach goes further than realising cost-savings at pace, we also focus on strategic growth, where we challenge our clients to re-invest a portion of their savings into iterating the value-driving capabilities they have already identified to continuously enhance their proposition, brand and customer experience.

To do this effectively in a challenging market environment, we recommend ring-fencing a portion of the savings realised early on in your roadmap, running small rapid experiments to quickly prove value before you scale up or down across your operating model.

Contact us below if you would like to understand how you could rapidly optimise your margin and make it resilient enough to survive and thrive in our current market.

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