Critical business costs are no longer ‘people costs’
The rate at which business has changed has accelerated over the past 10 years. Progressively, organisations that used to make or do everything themselves have started a journey in which sees them doing less and less themselves – instead, using and integrating their suppliers’ capabilities in with their own more and more.
A good example is the car industry, in which manufacturers used to have their own coal mines, iron ore mines, steel foundries, rubber plantations etc. Nowadays, they buy pre-manufactured seats, electronics, audio equipment, tires – which are then simply assembled by the auto manufacturer.
Another example is Apple, which literally makes nothing themselves.
This trend has crept up on many businesses. Once upon a time, the people who sat around you every day were the key contributors to business costs. But according to our recent research (http://info.proximagroup.com/ten-billion-profit-opp-webinar), the critical costs are actually not the people but rather the complex network of suppliers and relationships that a business has. The labor portion is a very visible portion of a businesses’ cost base which business leaders seem to target and focus on heavily. Reducing these costs has happened over the past 3 years, however the situation today is that all the quick /easy ones have been done in terms of labour costs and in fact if leaders continue on this trajectory they will have no people left in the business in a decade.
If you want to make dramatic changes to your business, you have got to look elsewhere.