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This makes the argument for a focus on key business processes as a rich source of potential improvement.GE, in its extensive process improvement journey, relies on a user-friendly, adaptable model (see Figure 2) that provides a common framework to understand varied businesses and enable internal best practices sharing and proliferation.
Although it’s hard to fault a business for aggressive marketing, we’re still concerned today about the negative impact of too much outsourcing on effective leadership development, decision-making objectivity, stifling innovative thought, and the appearance of conflicts of interest.
Some individuals actually blame the “tool” for the failure.
Until recently, we enjoyed many years – almost a full generation of strong global and domestic business growth.
Much of the growth in the US was fueled by a prolonged period of low interest rates and readily available credit that helped drive an unprecedented commercial and residential real estate surge.
You can see this by the number of global financial institutions that have been affected by the subprime mortgage debacle.
Compared to the “S&L crisis” of the 1980s in which the same industry was affected—and for many of the same reasons, including lax controls surrounding approval of high-risk loans—our current crisis dwarfs that debacle in magnitude, reach, and complexity.Cost leadership is characterized by four primary criteria: (1) recognition as the lowest cost producer in one’s industry, without compromise in quality or customer focus; (2) realization of a long-term cost-centric culture where cost consciousness is a across functional lines and independent of the vagaries of financial markets; (3) dissemination of cost information with regard to customer, product, distribution channel, and the like that is timely, understandable, credible, and actionable and is made available to decision makers to fuel continuous improvement; and (4) aggressive and balanced performance targets are established across the value chain.Achievement of these targets is recognized, rewarded, shared, and celebrated.Beyond our shores, Brazil, Russia, India and China have grown in dramatically different ways but have increased the global demand for basic commodities including oil, gas, and steel. recession, however, has impacted the rest of the world.More recently, the basic solvency of several European countries has come into question. It certainly isn’t the same as it was in the 1980s when economists would joke, “America sneezes and Japan catches pneumonia.” Nevertheless, in spite of the significant and impressive growth of other economies, the world is increasingly interdependent economically.Advanced cost management practices, like any tool in business, can be used and abused.Those of us who are experienced enough can remember failed initiatives that were caused by poor planning, ineffective communication, lack of quality implementation, poor teamwork, unstable stakeholder buy-in, gratuitous complexity, and overdependence on outside “experts.” It’s interesting to note that the August 4, 2008, issue of Business Week contains a two-page advertisement from a global consulting firm offering to take over accounting, finance, human resources, information technology, and even customer contact functions.Accounting and finance professionals built career-lasting reputations for excellence in the context of leading these initiatives with the cooperation and support of their business partners.These “cost” leadership initiatives not only yielded a competitive advantage in efficiency, but they often also produced improved “top-line” results from better and renewed customer focus.Given most managers’ lack of orientation, preparation, or temperament for a recessionary period, their first response and reaction is usually: These negative and dysfunctional reactions will proliferate, will influence and will dominate an organization that isn’t proactive in promoting innovation and creating a cost leadership culture, strategy, and practice that’s backed up with coherent planning, initiatives, and actions.The purpose of this article isn’t to bemoan or critique the past but to focus on how business leaders can (and must) flex and change to meet the needs of the new economy we face.