More on Cost Reduction & Cost Excellence

Why does it seem easier to talk about cost reductions than to achieve them? With continuing pressure on margins, we know how to make year on year savings – through network operating efficiencies, internal organisational restructure, process re-engineering, improved procurement, appropriate outsourcing, and intelligent managed service contracts.   We are helping our clients to challenge established internal entrenched views to make the savings they need in both capex and opex. We approach this from a very practical perspective. We are seasoned practitioners who have been there in the thick of cost reduction programmes and seen the good, the bad and the downright ugly. We know how many consultants ‘finish’ a transformation assignment, bank the cheque, walk out of the door and leave someone else to manage the consequences! We know that the long-term sustainability of cost reducing programmes is paramount. We minimise the slideware and get on with the practical matters that reduce operating costs without damaging the crucial revenue generating enablers. That, to us, is what Operational Excellence means.

Our deep operational experience of mobile network operations enables us to engage and challenge existing structures, concepts and processes whilst also bringing practical suggestions for change. The range of technical as well as business challenges currently facing operators means it’s more critical than ever to have efficient and effective underlying processes and capabilities. All operators use KPIs to measure business performance, including operations. What most operators often fail to do is to actually link the KPI to a cost or market benefit and in these cases KPIS become aspirational rather than being firmly connected with the business plan and market objectives.

Cost reduction exercises do what it says on the tin and are an essential part of keeping companies fit and healthy.  Unfortunately, necessary or not, cost reduction initiatives create an expectation of cuts and are seen as negative.  Cut too deep or cut in the wrong places, and the damage can be catastrophic.  To get it right, focus must be placed on unproductive costs. Here we focus on the operations side of a business where our strengths and experience lie. We can make a difference to the business performance and results by creating excellence in operations as a competitive advantage.

The Azenby Approach

In our experience, very few consultants have the people available to work on these types of engagements with the depth of experience necessary. This can only be gained from actually having been there and done that. By working the coal seam in an operating business, we have the battle scars! We also think that no single consulting firm can do the full job on their own. The diverse range of skills required for the exercise from financial and commercial to technical and operational, means it better to form partnerships to bring all the necessary ingredients together. Azenby has worked with several larger consulting firms to create expert teams and provide the ‘soup-to-nuts’ solutions to operational challenges and cost reductions. If cuts are to be made then making sure they are applied in the right areas is the Azenby value add.

We aim for deep and meaningful interaction with the organisation from top to bottom. We engage with all stakeholders and look and listen.  In parallel we keep sponsors involved and informed at every stage. Due to our experience we see real benefits being implemented quickly to maximise performance benefits.

We focus on practical solutions not theory – we cut to the chase and focus on the real world. At the heart of operational reviews are KPIs. Often these are long standing, unchallenged, and quite often not directly linked to the products and services that the network supports, and with little or no understanding of the real costs of specific KPIs and the impacts they have on P&L – sometimes with only marginal benefits.

We are committed to staying the course and making sure the benefits get delivered. We will never wash our hands of the problem once solutions are proposed. We stick around and deal with all the wrinkles and challenges of implementation until the promised results are delivered.

Case Studies

Telecoms Infrastructure provider and Service Provider: A leading European broadcast, communications infrastructure, and media services company with revenue in excess of €1bn.  The business had been facing several challenges including declining revenue and decreasing EBITDA margins. Several acquisitions had been made and these needed to be fully integrated to maximise efficiencies and synergies.  We were engaged by a partner firm and participated in a deep review of how the business was executing and implementing an existing cost reduction and efficiency initiative and then supplemented this with additional measures.

OUTCOME: A Joint plan was developed which, after board approval, was forecast to deliver €75M of cash flow (EBITDA and capex) improvement and €30M of these were front end loaded.  This was nearly twice the original Management team plan. Crucially, as this is very much part of the Azenby approach, the Management teams existing plan was risk-assessed in detail.

European National Critical Communication Network Operator and Service Provider: This was a privately owned mobile communications network operator focused on delivering communications to government customers as its primary revenue source. Some of the largest contracts were approaching expiry and cuts to government spending were putting severe downward pressure on pricing.  Azenby, working for a partner, was engaged to define concrete cuts to the business cost base without reducing KPIs and SLAs.   A fast, first pass, appraisal pinpointed reductions of between 20% to 25% in operating costs.

OUTCOME: Over 75% of targeted cost reductions to the operating cost base were implemented within 9 months. This included a 20% headcount reduction programme following a wide-ranging assessment of the organisation structure and operating processes. A large part of the improvements came through the re-negotiation of the largest third party engineering support, transmission, IT, and site rental contracts, whilst still maintaining the very demanding network KPIs and SLAs.

If you want to discuss this topic further with Azenby please feel free to contact us

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