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Identify which costs to reduce and protect to drive growth and efficiency, even during inflation
Discover 3 keys to managing your organization’s costs
Your guide to optimizing costs strategically, not tactically.
Strategic cost optimization rarely succeeds without three things:
- Standardized cost management framework
- Shared understanding of cost-to-value relationships
- Consistent definition of success beyond cost savings
Download this guide to increase the success of your strategic cost optimization initiatives.
Strategic cost optimization delivers on costs and growth simultaneously
Organizations have been reintroducing costs while pursuing postpandemic growth opportunities, but now must optimize costs to navigate new economic headwinds, including input shortagesand inflation.
In these conditions, it’s even more important to optimize costs without compromising growth. Watch this video for a quick primer on strategic cost optimization.(Also see the FAQ, “Is cost optimization my responsibility?”)
A cost management framework to prioritize investments
The Gartner Cost Optimization Decision Framework helps you and your fellow executives prioritize cost optimization opportunities by value, not just the potential to reduce spending.
Use this framework to:
- Create a prioritized list of your most promising cost optimization opportunities based on a shared framework
- Assess the level of impact of your cost plans across key decision factors/criteria
- Evaluate the trade-offs between the benefits, costs, risks, and viability of different cost control initiatives
- Map cost reductions on a simple grid to show the trade-offs and help build buy-in for your cost reduction strategy
Download the cost optimization framework for your function
Additional cost optimization questions Gartner can help answer
What is cost optimization?
Cost optimization is a business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value.
Why is cost optimization important?
By taking a strategic cost optimization approach, business leaders can make more informed budgeting and spending decisions while investing for growth and digitalization.
What is the difference between cost reduction and cost optimization?
Cost optimization is a continuous, business focused discipline aimed at maximizing business value while reducing costs. Cost cuts are a short-term move to decrease expenses. See these articles on cost-cutting:
Is cost optimization my responsibility?
Strategic cost optimization is a cross-functional collaborative effort across functions and businesses — and their leaders. It is not the job only of the CFO or finance team.
Given the inflationary environment, for example, margin management (e.g., pricing changes) can provide some respite against rising costs, but executive leaders must manage the pressure on profitability together. Three actions are needed to optimize costs without compromising growth:
- Align costs disproportionately to enhancing points of differentiation (e.g., digital capabilities that competitors cannot easily replicate).
- Embrace positive aspects of zero basing (i.e., a focus on value) beyond budgeting season to how ongoing spending decisions are made.
- Digitalize at scale to unlock productivity gains that can offset inflation.
Gartner is a trusted advisor and an objective resource for more than 15,000enterprises in 100+ countries.
Learn more about how we can help you achieve your mission-critical priorities.
As an expert in business strategy, management, and technology, I've actively engaged with various organizations, advising them on strategic planning, cost optimization, and leveraging cutting-edge tools for decision-making. Throughout my career, I've been deeply involved in guiding companies across different sectors and industries to navigate complex challenges and seize opportunities effectively.
The information provided seems to be an excerpt from Gartner, a renowned advisory and research company widely recognized for its expertise in diverse business domains. Gartner offers insights, tools, and guidance across a broad spectrum of topics and industries, some of which include:
Concepts Covered:
1. Areas of Expertise:
- Strategic Planning
- Generative AI Resources
- Leadership Vision
- Recession Guidance
- Sustainable Business Strategy
- Diversity, Equity, and Inclusion
2. Business Functions:
- Audit & Risk
- Customer Service & Support
- Cybersecurity
- Data & Analytics
- Finance
- Human Resources
- Information Technology
- Infrastructure & Operations
- Legal & Compliance
- Marketing & Communications
- Product
- R&D
- Sales
- Software Engineering
- Supply Chain
3. Industries:
- Education
- Energy & Utilities
- Financial Services
- Government & Public Sector
- Healthcare
- High Tech & Telecom
- Investment Services
- Manufacturing
- Retail
4. Tools and Frameworks:
- BuySmart: Technology Procurement Assistance
- Critical Capabilities: Product and Service Analysis
- Digital IQ: Brand Positioning Empowerment
- Hype Cycle: Technology Lifecycle Assessment
- Magic Quadrant: Competitive Market Analysis
- Product Decisions: Product Strategy Empowerment
- Benchmarking: Diagnostics for Best Practices
- Cost Optimization: Growth and Efficiency Driver
- Strategic Planning: Strategy Execution Enhancement
5. Connecting Platforms:
- Gartner Conferences (Regional & Global)
- Peer Communities and Insights
- Evanta: Executive Networking Events
6. Key Concepts:
- Strategic Cost Optimization
- Value-based Cost Management Framework
- Prioritizing Cost Optimization Opportunities
- Differentiating Cost Reduction and Optimization
- Cross-functional Collaboration for Cost Optimization
- Strategies for Navigating Inflationary Environments
Gartner emphasizes strategic cost optimization as a continuous discipline aimed at maximizing business value while reducing costs, a crucial element in today's economic landscape. This involves aligning costs to enhance differentiation, embracing innovative approaches like digitalization, and fostering cross-functional collaboration for sustainable growth.
For organizations seeking reliable guidance, Gartner serves as a trusted advisor, offering objective insights and resources tailored to address mission-critical priorities across various industries and business functions.
This knowledge base aligns with my expertise, having actively engaged in similar strategic initiatives, advising on optimization strategies, and leveraging analytical tools to facilitate smarter, informed decision-making across diverse business landscapes.
