Cost Innovation 2.0

In difficult times, the steps taken by companies with panic may result in trouble for them. There is a strong possibility that these steps will cost them more than the expected benefit. Moreover, some cost measures, whose long-term effects are disregarded in order to save the day, are generally the first things that come to everyone's mind, thus they do not have a differentiating effect. This makes the companies competing in the same sector collectively unprofitable and vulnerable. Cost Innovation is the way to both effectively reduce costs and leap ahead of the competition.

Cost Innovation is different from making the existing cheaper. There is a limit to cost reduction by sticking to your existing business methods, existing processes and systems. What's more, in reducing the cost of the existing, there is the risk of overdoing and the danger of cutting the muscle while trying to get rid of the excess fat for regaining your health. Another problem is getting into a submissive mood thinking that what can be done under the current conditions has been done and there is no other way to go. The Cost Innovation approach on the other hand, while aiming at rapid gains with creative approaches, also aims to review, the company's products and services, products and service development methods, and to change the way the company does business, to remove much more serious costs from the system.

Since innovation is the only way to differentiate, companies that have systematized innovation have the chance of always achieving business results above other companies, irrespective of the ups and downs of the economy. Companies that cannot differentiate, on the other hand, are forced to compete on price basis only. Price competition makes companies unprofitable and weak. It is inevitable that companies that are weak, vulnerable, and tired by competition will have difficulties when the wind starts to blow hard.

In fact, the innovation climate that mobilizes all the creativity of the employees and enables them to collectively use their talents for the future of the company can produce incredible results in difficult times. Challenges are the mother of creativity. Innovation has an effect that both gathers people around a purpose and gives them soul. Especially when some companies are withdrawn and some are in a downward vortex, a company that knows what it aims at and can gather its creative intelligence around the same goal has a much greater chance of opening the gap with others.

Companies in trouble are looking for quick gains. This is very natural. It is also important in order to instill a culture of frugality and involve all in this effort, as quick wins can easily be observed by the employees. In addition to finding and applying little-known creative methods, bringing employees on board with new ideas can create serious rapid gains.

There are opportunities for quick wins in many areas such as, reducing fixed costs by using external talent through outsourcing and consultant use, and reviewing marketing and overhead costs. Apart from these, there are of course many opportunities, from reviewing the company's products and services, processes, and business model, to realizing innovations here.

However, it is important for companies to distinguish between Good Costs and Bad Costs before attempting anything in the search for quick gains. Good Costs are the costs that work towards the customer and strengthen the company's resilience and business capability. These may include costs that will ultimately reduce the company’s overall cost. Bad costs are costs that do not contribute to the customer and do not strengthen the company. Unfortunately, in many companies, unnecessary bad costs may be coming from activities that were started in times when business was going full blast, but no longer make sense.

Studies that are carried out in Cost Innovation include Value Innovation, Marketing Innovation, Process Innovation, Business Model Innovation and Management Innovation methodologies. Value Innovation envisions creating or increasing the elements that provide value to the customer, the elements that the customer cares about, and eliminating or reducing the elements that the customer does not find important.