Proud to be Cheap: The "Secret Sauce" of Low-Cost Winners

By Jon R. Katzenbach and Zia Khan - Harvard Business Review

A lot of companies in a lot of places these days have been struggling to cut costs. Most of them are discovering the hard way that they have for too long put up with too much redundant and wasteful activity. For many, the problem is only starting, largely because thus far they are simply "mandating" cost reductions either across the board or to meet hastily set one-time targets. For these companies, cost cuts are likely to be no more enduring than a one-time haircut.

A few special companies, however, have taken the recessionary squeeze pretty much in stride. These are companies who, like Southwest Airlines, FedEx, and Emerson Electric, have historically been the role models for low cost operation. They seem to always have a cost advantage, and as a result they get through tough times almost as easily as they capitalize on good times. It's not that they don't tighten their belts when the economy dries up a bit; rather it is that they seem to know where and how to tighten in ways that do not inhibit their long-term capability to compete and grow. What's in their secret sauce?

In a nutshell, it is a culture that is "proud to be cheap" in good times and bad. Their people cut erasers in half, turn off the lights when they leave the building, bring their lunch to work, fly in the back of the bus, and stay in Day's Inns. More important, they are always on the alert for ways do things on the job more cheaply, without compromising quality and service standards. Nothing is wasted, nothing is redundant, and nothing is overlooked when it comes to doing it on the cheap.

..:: Check out the complete article: Proud to be Cheap: The "Secret Sauce" of Low-Cost Winners - The Conversation - Harvard Business Review

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