DIY or Do it Differently?

During our ‘Recalibrating Spend’ series we’ve been urging clients to examine their cost base, particularly in terms of what will be required for the ‘next normal’ rather than what was in place before the COVID-19 crisis struck.

What your business ‘does’ – the fundamental concept of your business – shouldn’t escape scrutiny.

McKinsey’s recent research study “What Sets the World’s Best CEOs Apart?” identified the ability to make bold moves early as a key attribute. The definition of “bold moves’ was not only making a strategic decision, but allocating resources based on that decision. This meant a couple of things, firstly working from the perspective of a zero-base rather than making marginal changes from current allocations and secondly being prepared to remove resources where they aren’t adding value.

Scrutinising what your business ‘does‘ in this context involves reviewing the internal support functions, departments, activities that consume the organisation’s direct resources (cash, people, etc) and asking whether this could be done in a different way.

We’ve applied this type of critical thinking to large functions such as a Marketing function within a large Financial Services organisation (culminating in a trade sale), a processing function within a large insurance Group (invest & retain) and on a smaller scale the infrequent collation and distribution activities of starter packs for a smaller business (outsource.)

The methodology starts with identifying what the business needs and will need from those departments/functions/activities in the future. Then it’s identifying/segmenting the activities performed and identifying what they cost, what the service levels are and how strategically core they are to the business.

From there we identify a number of feasible options for the functions which may range from outsourcing on the one-hand to investing further internally and including strategies such as management buy-out (outsourcing), joint venture, generating 3^rd party sales (retaining) and many more. etc. 

The options are modelled to identify amongst other things the relative cost of the activities compared to market cost, the costs of implementation, the short & long-term risks and from that a solution will be chosen and implemented. 

The benefits are dependent on the type of solution identified but within the “next normal” attractive benefits not only include cost reduction (including potentially headcount) but also service quality improvements and converting fixed costs into variable ones so they flex with the business.

In summary, now is a great opportunity to take a step back and examine with a fresh pair of eyes, which departments/functions/activities, especially support functions, your business should be allocating resources to. At JMCL we’ve a proven track record of doing this work and delivering the benefits. We also act as outsourced procurement resources for a number of clients so have an additional insight into the process.

If you’d like to discuss further please contact Jonny Michael at j.michael@jmclconsulting or m: 07831 390161.