07/20/09For most companies, cost cutting in a down economy means across-the-board slashing that "spreads the pain" of budget reductions across many departments. While that may sound like the best approach for getting critical results fast and for limiting political infighting, it is a mistake – one that will leave your company weaker, not just smaller.
Instead, companies that need to reduce costs should treat the challenge as an opportunity to identify and reinforce their key capabilities, while divesting those activities that do not truly reflect the business’s strengths or long-term goals. This more strategic approach will make your company more resilient as tough times continue and more robust as recovery begins.
A new electronic book, Cut Costs and Grow Stronger, from Harvard Business Press, written by senior Booz & Company partners, tackles this problem head-on. Authors Shumeet Banerji, Paul Leinwand, and Cesare Mainardi argue that reducing expenses and building strength for the future are not contradictory. Companies that focus on their differentiating capabilities and prospects, and then apply rigour to their choices about what to keep and what to cut, are likely to thrive, not just survive, in the months ahead.