The Pivotal Role of the CIO in Digital Transformation

Businesses around the world are under intense pressure to invest in transformative technologies such as artificial intelligence, robotics, and cloud that will help them compete effectively in a world increasingly defined by digital innovation and disruption. This unique situation requires chief information officers (CIOs) to play a larger role in shaping and executing business strategy. Deloitte’s global cost management survey found that while cost management is a top priority for businesses, it is referred to as a “save to transform” initiative because many companies are using their cost savings to help fund investments in growth and transformation. CIOs and technology leaders operate at the intersection of all three save-to-transform aspects: cost reduction, growth and transformation.

Read More at Information Week >

How Mill Companies Use Cost Visibility to Fuel Process Optimization

The rise of digital transformation has shaken the foundation of even the most stable businesses. Like most industries, success for mill products businesses comes down to data. From manufacturing and production to finance and procurement, decision-makers must evaluate all transactional and related data to truly understand what’s going on. However, few ever truly understand how deeply the business will be affected by changes or future events as long as their accounts receivable and payable requests, shop floor and manufacturing transactions, and sales orders remain in disparate applications and organizational silos. Without an accurate view of changes in supply chain costs, raw material inventory, and order rates, decision-makers cannot safeguard top priorities such as revenue growth, optimization of operating margins, and cost reduction. Throughout mill operations, there’s always a variety of things occurring, transpiring, and transferring simultaneously. And for this reason alone, acquiring immediate insight to sense, analyze, and respond to emerging shifts should always be a priority.

Read More at The Digitalist by SAP >

“Quick-Fix” Cost Management Is Risky Business

In financially unclear times, it is easy for businesses to attempt cost cutting methods that are risky, impulsive and have major potential to reduce capabilities necessary to fuel digital transformation. Instead, companies must consider value and risk when making cost-management decisions, taking a cost optimization approach that aims to deliver long-term value and immediate spend efficiency. Cost optimization often starts as an exercise in cost reduction, and cost pressures endure. When business leaders make uninformed cost management decisions, the business impacts can be negative, and sometimes difficult to recover from.

Read More at Smarter with Gartner >

How a CFO’s Cost Management Style Can Have a Major Impact on Growth

CFOs distinguish themselves by the cost management practices they implement in their organization – from choosing to eliminate negative cost management practices that drag down earnings, to employing positive ones that increase revenue and profits. Cost optimization is not a new topic for finance leaders, but the practice has taken on new dimensions with the help of sophisticated tools and technologies. CFOs are now operating in a challenging environment where costs have outpaced revenue. Gartner research showed the average shareholder return among companies that employed a balanced approach was 7% higher than their peers. But what role does the CFO play in effectively managing the cost piece of the balanced approach?

Read More at Smarter with Gartner >

Digital Technologies Are Enabling Cost Management to Support Strategy

Today’s digital innovations represent a major evolution in cost management strategies, providing companies with the opportunity to gain a much deeper understanding of their business’s prime value levers, which they can use to fundamentally and sustainably change their cost structures, seize opportunities, and grow profitably. Businesses that are successful with their cost and revenue strategies all have three things in common. First, these companies are employing digital technologies to enable “next-generation” cost management. The second factor is a strategic, rather than tactical, view of costs across the organization that enables decision makers to answer questions like, “where should I be cutting my costs?” or “What will happen if…?”. Finally, these organizations have established effective and transformative cost management programs enterprise wide. As a result, they can provide faster and deeper data-driven insight on what’s driving value and what are the cost drivers.

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Effective Cost Transformation Requires Buy-In From the C-Suite

Cost management is no longer simply a way for companies to improve margins and save money. Finance leaders are now using cost reduction as a powerful lever for digital transformation and to gain better insight into their business. Often times, CEOs delegate responsibility for cost reduction efforts to other leaders within the business. This hands-off approach could be costing their company a lot more money and strategic opportunities than they realize because CEOs have the clout and broad organizational reach to break down a lot of barriers that often hinder successful cost reduction efforts. By bringing a more strategic perspective to cost management, and directly encouraging teams to think bigger, CEOs can enable breakthroughs that are more impactful, such as re-configuring the business or changing the operating model. These strategic cost management approaches offer potential savings that are much larger − and much more sustainable.

Read More at Chief Executive >

Climbing the Ladder to Successful Cost Management

“While, on average, 81% of a company’s costs are defined by the industry they are in, the remaining 19% are largely determined by executive decision-making.” – Jason Boldt, Gartner

According to Gartner, almost 90% of businesses suffer from poor cost visibility, and the same amount struggle with understanding their costs. These challenges are mainly symptoms of relying on outdated cost models – a major cost anchor that holds the majority of businesses back from gaining actionable insights. To overcome poor cost visibility, leading cost management executives encourage positive cost behaviors, or “cost ladders” that alleviate the strain that bad practices put on the business. These ladders include increasing cost agility, figuring out what cost models best fit the business goals, and detecting early cost warnings. However, Gartner found that only one in three companies practice any of these behaviors in their costing activities.

Read More at CFO Magazine >

New Costing Priorities Are Changing the Way We Do Business

In the wake of digital transformation becoming a standard business practice, it is no surprise that modern organizations are shifting their costing priorities from cost reduction to cost transformation. Companies that relied on more traditional cost management methods are now finding that dynamic technologies can open the door to a whole new level of savings. These additional cost savings allow businesses to compete more effectively in an increasingly digital environment. This change in business strategy drives finance leaders’ priorities to focus more on implementing the best technology for their business, and ultimately increase product profitability.  A best in class tool that caters to specific business needs enables organizations to achieve end-to-end visibility of their costs and use this information to better understand what is driving their profits.

Read More at CFO Magazine >

Are You Benefiting from Your Cost Accounting Tools?

Companies that still rely on their legacy costing systems are putting themselves at more of a disadvantage then they probably realize.

 “Many manufacturers have developed overhead rates that are being used long after their “best if used by” dates. The reasons for this include the thought that inflation isn’t all that significant, so how much different can the rate be from last year, and besides it’s so much work to update the rate. After a while, you find the rate hasn’t been updated in a few years and then your costing system has slid into ineffectiveness. Also, cost drivers tend to not be examined that often. Some manufacturers have always used labor hours as cost drivers, so they do not even consider that the significant capital expenditures they have made in the business make the more plausible cost driver machine hours. In standard costing systems, standards are sometimes not updated as often as they should be for some of the same reasons.”

The result of inaccurate cost accounting systems can lead to investing time and effort into products or customers that are either marginally profitable, or actually unprofitable.

Read More at The Bonadio Group >