Color Books®: Unlocking the full potential of transformation programs
As inflation worldwide reaches its highest level in more than 40 years and the immense price increases are expected to stay for the next years, more and more companies are reacting to this development by not only increasing prices themselves, but also looking into cost-cutting programs.
However, a significant share of performance improvement programs miss their financial and operational targets. This is due to adverse effects in the initiatives, insufficient planning, and execution, as well as value leakage and missing transparency. In my opinion, key challenges of effective cost-cutting programs lie – besides others – in a lack of transparency and accountability as well as appropriate resources at the right level, a misjudgment of overall effects as well as an incomplete link between operating drivers, financial effects, and a measurable P&L impact.
To handle those challenges effectively, goetzpartners uses Color Books® to structure and execute performance improvement projects and unlock the full potential of transformation programs. While most performance improvement initiatives are set up to address costs across the entire cost baseline, each color book within goetzpartners’ Book Logic® is focused on a single dedicated cost category. It contains clear KPIs and policies, creates transparency on performance impacts of the transformation measures, and secures the P&L effect.
When managing complex transformation programs, the Color Books® provide a clear and structured approach:
- P&L baselining: Standardize and consolidate the P&L cost center structure and map P&L cost centers to P&L cost categories
- Cost categorization: Assign P&L cost categories to Color Books® target categories, including a KPI portfolio of financial and operational KPIs
- Initiative allocation: Transfer initiatives to Color Books® categories and remove overlaps from initiatives
- Impact preparation: Define effective cost reduction measures and prepare for implementation readiness
- Performance reporting: Validate P&L effectiveness and follow up on deviations to get forecast back on target
The Book Logic® creates transparency for data-based decision-making. It is based on standardized financial and operational KPIs. It also allows for an improved efficiency of cost-cutting programs through an overlap-free P&L impact reporting and consistent tracking of actuals, forecasts, and plans. That's why the Color Books® form a great basis for having an overview of an overall program and for being able to communicate it.
We have applied the Color Books® approach in large transformation projects. Being able to measure the project so accurately in terms of costs, savings, time, and quality, was always a key ingredient for success. For a multinational corporate, for example, we cut out 2 billion US-dollars costs in 1.5 years – a memorable result that really underlines the power of our Book Logic®.
Author: Dr. Gunnar Binnewies