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Live! Challenging the limit to reduce costs

  Survival is the basic choice of an enterprise in a crisis, and it is also the most characteristic judgment criterion. Preserving cash flow is the core key to the survival of an enterprise, and even a fundamental requirement of life and death for many small and medium-sized enterprises.
  Obtaining good cost capability is one of the key factors for companies to maintain cash flow, and in times of crisis, I emphasize more on challenging the limit to reduce costs.
  In the usual good business environment, many companies put more emphasis on expansion. However, in the face of an unstable environment like the epidemic, what enterprises need more is how to adjust their development model, remove those growth and losses without quality, optimize loss-making business, and ensure continuous cash flow.
  In this process, the most important thing is that enterprises have the ability to help themselves through the difficulties and reduce costs by challenging the limit, that is, reducing costs more than usual.
  ”Challenging the limit to reduce costs” was proposed by Samsung in order to save itself during the Asian financial crisis in 1997. It means the following three things:
  First, eliminate all waste.
  When an enterprise is in good times, there will be a lot of wasted costs in management. For example, the cost of meetings, many high-level executives like to hold meetings in order to prove that they are busy. The meeting makes everyone stop what they are doing, which is a huge waste.
  Another example is the cost of the process. The problem that could be solved immediately after two people communicated within half an hour, but chose to borrow the process to solve it. It takes at least three people to go through a process, and it takes three or four days at the same time, which is also a huge waste. Businesses need to streamline processes and increase efficiency.
  Second, stop loss-making businesses.
  When it was loose before, it doesn’t matter if a business loses money, there will be opportunities in the future. But when the crisis comes, when the cash flow of the enterprise is tight or there is no cash flow, these loss-making businesses need to stop, and the enterprise has no resources and space to support the loss-making business.
  Third, find an effective business flow as soon as possible.
  While subtracting something, you also need to add something to generate current cash flow by focusing on real customer value. Enterprises can make adjustments in their business to make costs more efficient in a good business direction.
  When challenging the limit to reduce costs, on the one hand, it is necessary to strictly control capital and efficiency; on the other hand, enterprises can adjust the business value through the “addition and subtraction” of business value.
  This is also an effective way for enterprises to obtain cash sources, which can help enterprises obtain new business capabilities and new business value while responding to the crisis.
  In the face of adversity, many companies mention cost reduction, and a key word is layoffs. But in my opinion, how a business thrives in adversity depends on its employees, not layoffs.
  An effective way to reduce costs is to increase efficiency, and efficiency comes from employees, and employees’ willingness to change and contribute to efficiency is one of the prerequisites for growth in a crisis.
  Therefore, in a crisis, the core is how to release the energy of employees to help the company survive the crisis. Just like in the epidemic crisis, many restaurants or retail have stagnated, but some employees have given some solutions. By selling goods as live broadcasters, they contribute their own efficiency and help the company in a timely manner.
  In an uncertain environment, employees are sometimes more sensitive to the market and customers than managers. Unleash the energy of employees, relying on the creativity and action of employees, they can often get a more direct smile. As Drucker pointed out, the biggest opportunity to improve economic performance lies entirely in whether companies can improve the work efficiency of their employees.
  How to release employee energy? Enterprises can take five actions: stimulate employees’ professionalism, respect employees’ contributions, empower employees to reform, people before profits, and give employees opportunities for self-development.
  Employees determine the cost of an enterprise. If the output of employees is high and the value created is large, the cost of the entire enterprise will actually be reduced accordingly. Therefore, in times of crisis, excellent companies will find ways to retain employees, retain talents, and even use the crisis to absorb better talents from other companies, so as to optimize the talent structure of their own companies.
  These companies are very clear: the implementation of corporate strategies requires a better talent structure, and the sustainable development of the company depends entirely on the talent itself. More specifically, successful leaders rely on creating a good corporate culture that inspires people.

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