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EricBBigham's blog: Cost-Reduction-Strategy-with-High-Impact-Management - Views ( 114043 ) -article by: EricBBigham

EricBBighams' BLOG ( 111 articles!)

Cost-Reduction-Strategy-with-High-Impact-Management - Views ( 248 )


Author: EricBBigham , Last Modified, 2020-07-07 16:56:50

Category: Business Keywords: Cost-Reduction-Strategy-with-High-Impact-Management

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Cost-Reduction-Strategy-with-High-Impact-Management Bigham Consulting, a London based Strategy Consulting firm introduced a methodology for helping organisations reduce unnecessary overheads back in 2009. This system was revolutionary, in that it tied the costs incurred in an organisation, back to the drivers of those costs. This is often a system referred to as Activity Based Management. Activity Based Management is of course nothing new, i hear you say... Yet the revolutionary idea behind the Bigham Consulting approach, was that it embedded a Value Based Management approach along side the Activity Based Cost approach, essentially placing a Return On Equity Incremental value on each business process and activity driver. Doing so enabled the firms Bigham Consulting worked with to rank the processes and activities by Value. This is an approach attempted by the likes of McKinsey and Accenture, yet they never really got to grips with the solution to the same extent as Bigham Consulting. The key was to marry to extremely complex systems. One the Data set of Processes and activities, which has to be mapped into flow and process graphs, and the other was the Risk data produced by the Capital and Risk teams, mostly referring to the work done by Bigham Consulting with large investment banks. The Cost of Capital from a Risk adjusted bases, could thus be stress tested against process improvement plans. Simply put, if a process or activity undergoes a transformational change, the value of the change in real economic terms, could be measured against the projected metrics of Return On Equity and Shareholder Value Add. The purpose is to make smarter transformation investment decisions. A bank could in theory change any and all processes, but to do so is time consulting and costly, so by eliminating projects which add little or no value, from the planned project s or change lists, the bank could make more value adding changes. Bigham Consulting, using this approach could demonstrate the real value of any planned change and in doing so help senior bank staff, such as heads of strategy, finance and risk to invest in better solutions. Executives used the analysis produced by Bigham Consulting to convince change committee boards and senior leadership teams. Bigham Consulting used a trade mark or service mark to identify the process. It was called "High Impact Management" . High Impact, because of the ..well, high impact of course. The system utilised a structured approach to the reduction of Operational Expenses. Using this approach it become possible to target cost reduction in a logical away. The enterprise value created can be valued using a reference the companies cost of capital, or Weighted average cost of capital (WACC) approach or similar. Doing so creates the business case for any initiative listed in the project planner. The allocation of resources to any cost reduction effort must ultimately pay for itself to be a worthy contender, as in many cases it can prove costly in the short run to invest in change. The choice then become one of time horizon. It is possible to engage Bigham Consulting by contacting the founding partner Eric Bigham, via the website.



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Cost Reduction Strategy using High Impact Management Approach


Blog title: Cost-Reduction-Strategy-with-High-Impact-Management

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