Building confidence in uncertainty — putting humans at the center of cost transformation

Legendary author and business guru Stephen Covey is reputed to have said, “If there’s one thing that’s certain in business, its uncertainty,” and that has never seemed more relevant than now.

Change is happening — at incredible speed — and it seems each day or week that passes brings significant shifts that shape both our immediate present and our future, forcing organizations to respond quicker and protect their resilience.

The uncertain regulatory environment around the world is the result of 2024’s year of mega elections as new governments enact policy change. In some cases, the outcome of policy change has been margins being squeezed on all sides, from the rising cost of raw materials and supply chain delivery, to the need to appeal to cash-strapped consumers. And while technology advances or the opportunity for a mega-deal present major opportunity, they require investment. Inaction is not an option, as it means risking being left behind.

Such a radically shifting external landscape requires business transformation and, in the current economic environment, changes to the operating model are required in order to access cash for transformation and resilience.

At EY, we have visibility of how organizations are addressing these challenges — across all industries but specifically in the consumer and health sectors. Given this visibility and our work, we developed a proven cost transformation process delivered by a three-step model that diagnoses, designs and delivers change.

1.      The EY External Investor Lens is a powerful diagnostic approach that rapidly identifies cost saving opportunities across a business using an aggressive private equity-style mindset and pace. Using comparable company benchmarks, scenario planning operational alternatives together with performance evidence, we create a roadmap of benefits, potential and cumulative levels of risk, complexity and resource requirements, all of which empower management to make radical change.

2.      Our end-to-end cost reduction approach ensures core processes are streamlined and optimized, delivering operational change that results in reduced waste, improved structures, and faster, better decision-making.

3.      And our EY.ai Value Accelerator ensures artificial intelligence (AI) adoption delivers tangible value in the form of productivity improvement and its corresponding impact on EBITDA. It’s particularly beneficial as it relies on adoption of agentic and functional solutions already being deployed with other organizations — meaning the impact is proven.

One risk to be managed in any cost transformation is that priorities shift away from building business value. Stephen Covey said something else that resonates with me and speaks to our approach of putting humans at the center. He said, “People are your most valuable asset. Only people can be made to appreciate in value.”

I want to put forward some thinking points that recognize a human-centric approach as an essential growth driver as you consider cost transformation change. The consumer and health care sectors are all human-centric businesses that solve the challenges of society. Be mindful of the symbiotic impact that societal change is having on teams and people.

·       Think about the ways you reduce expenditure that are not related to your organization’s purpose, i.e., focusing on noncore activities. SG&A expenses such as rent, marketing, accounting, travel and so on are an opportunity for many to drive radical cost reductions while protecting your people.

·       Do not jeopardize institutional experience and expertise through a loss of critical skills, specifically those that future-proof your organization. This knowledge is the core of the value you deliver and needs to be protected as the center of the business.

·       As you reduce costs, consider them in relation to the humans you serve outside of your organization, whether they are clients, customers or patients, and ensure their experience remains a good one.

·       Think about the change being driven across your organizational culture. How do you sustain savings and cost-conscious behavior and make this a sustainable part of the way you operate?

·       Recognize the balance of headcount reductions, specifically as we enter this next phase of technology adoption in the form of AI. The way we work will change. There may be fewer jobs that look the same as they appear today, but they will be better, more engaging, more empowering, leading to a more satisfying career pathway for your people.

I strongly believe that cost transformation that takes a human-centric approach can result in building organizational resilience and flexibility to face an uncertain world and support organizations across the consumer and health landscape to shape the future with confidence.