Cost Optimisation To Maintain Business Resilience in 2023

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Published on Jan 10, 2023

Abstract 

Last couple of years have been tough for most of the tech executives due to uncertain economics conditions, either directly or indirectly. 'Hustle' has a new meaning all-of-a-sudden. In order to keep their businesses resilient and sustainable until the smoke clears out, majority of the executives are focusing on driving profitability (operational) in the near-term by making some hard choices:

1. IT Tools Cost Optimisation, for example Cloud hosting and storage related costs optimisation

2. Pivoting from sales-led to a product-led approach

3. Optimising the Marketing Mix, For example: shifting the marketing strategy towards organic promotional channels like CRM or building a loyal user community 

4. Focusing on client retention by reallocating dev resources to fix quick-wins in Product Roadmap driven by product analytics and prioritising those features that otherwise took a backseat for new clients' conversion or GTM strategy in the past 

5. Team Capacity Optimisation, for example reassigning tasks for Sales or Support function personnel or pausing non-essential outsourced projects  

6. Reducing R&D expenses

It's important to note that each of these decisions has its own unique consequences. Depending on the financial scenario (or runway), the criteria for choosing which projects to prioritize should be based on maintaining business continuity, creating least organizational friction, and most importantly, providing the flexibility to quickly scale back when the time is right. This article explores some common practices and strategies for optimizing organizational costs during uncertain economic conditions

 IT Tools Cost Optimisation:

1. Review the service or maintenance contracts in view of reduced traffic or requirements, subject to your contract terms, relationship and negotiating power with the vendor (be empathetic of vendor's situation and don't sacrifice relationships!). 

2. Review the tech solutions annual subscription renewal timelines and assess whether its possible to terminate or switch to monthly plan for worst case scenarios. 

3. Implement Cloud cost monitoring tools to get a full overview if you have a multi-cloud storage architecture. For example, analyse unnecessary events data being recorded that may not be  necessary. Implementing a new tool might look counter-intuitive but depending on your IT tools cost, it maybe a small percentage of your overall savings. 

4. Identify tools' overlaps and discuss with your team leads to find ways to optimise it. 

5. Look for lower cost alternatives, provided they are relatively easier to migrate and re-train the team. Migration task in general difficult for any tool, especially for data heavy and is not recommended. However in some cases it could also be a good opportunity to scan the market for better and efficient tools and reassess the organisation's requirement. 

Pivot to Product-led Approach:

1. Organising and prioritising customer feedback from customer surveys, focus groups, and tech support to understand what features are most important to their existing and new target audience

2. Streamlining the product portfolio to focus on high-margin, high-growth products.

3. Implementing Agile methodology and iterative development to make the product development process more efficient.

Shift Marketing Strategy towards Organic Channels:

1. Focusing on content marketing to build brand awareness and drive organic traffic.

2. Fostering a strong user community can be a big help in promoting new product releases without the need to spend significant marketing budget. 

3. Leveraging influencer marketing to reach targeted audiences at a lower cost.

4. Developing a referral program to incentivize existing customers to refer new business.

5. Leveraging social media platforms to engage with customers and build a loyal following.

6. Utilizing CRM and email/in-app messaging campaigns to reach existing customers and promote repeat purchases.

Focus on Client Retention:

1. Reallocating dev resources to fix quick-wins in Product Roadmap driven by product analytics and prioritising those features that otherwise took a backseat for new clients' conversion or GTM strategy in the past 

2. Investing in customer support and training to reduce customer churn and improve satisfaction.

3. Leveraging automation and AI technologies to improve customer engagement and communication without significant manual support or intervention.

Team Capacity Optimization:  

1. Conducting a skills assessment to identify areas where team members could be cross-trained to perform multiple tasks.

2. Implementing job sharing or flexible scheduling to optimize team resources.

3. Offering training and professional development opportunities to improve team members' skills and performance.

4. Focusing on core competencies and outsourcing non-essential tasks to reduce costs and improve efficiency, or pausing non-essential outsourced projects.

5. Consolidating teams or departments to reduce redundancy and improve collaboration. This however may result in making some tough sacrifices, and while there are better experts on this topic, my view is that the only way to implement such strategy is by respectfully, promptly and transparently communicating to the team member impacted, while being fair to their contribution. And do your best to not sacrifice the relationship - economic downturn comes and goes, relationships don't!

Reduce R&D Expenses:

1. Focusing on incremental improvements to existing products rather than developing entirely new products.

2. Partnering with universities or research institutions to leverage their expertise and resources.

3. Prioritizing R&D spending on projects with high potential returns and strategic value.

Conclusion

In today's uncertain economic climate, businesses are looking for ways to reduce costs and improve profitability. IT tools cost optimization, pivoting to a product-driven approach, shifting marketing strategies towards organic channels, focusing on client retention, team capacity optimization, and reducing R&D expenses are some common practices that companies can adopt. It's important to assess each approach's pros and cons and choose the ones that align with the company's goals and financial runway scenario. Implementing these strategies can help businesses become more efficient, agile, and better prepared for any future economic downturns.