In 2007, the president of a global consumer healthcare products business tasked a team with reducing costs by $250 million. In response to this daunting challenge, the team initiated a number of savings projects. For example, one project cut costs by $3 million by creating multi-language packaging for a dental product. After realizing similar savings on a variety of other projects, team members concluded that they were reaching a savings plateau and would need creative approaches in order to access the next level.
That's when the team's leader turned to a process called idealized design, which had been applied successfully elsewhere in the company. The key feature of idealized design is that participants pretend that the product, process, system, etc. that they are designing was destroyed last night and they are starting from scratch and designing what they ideally want today if they could have whatever they wanted. Doing this frees people up to "think out of the box," unleashing creativity and generating ideas that save money, improve revenues, enhance customer satisfaction, and so on.
The team engaged a facilitator who was experienced with idealized design. He first helped them brainstorm the ideal process for saving money and then helped them cull the best ideas and turn them into implementable designs. For example, they realized that the richest savings opportunities were at the roots of the new product lifecycle rather than in the leaves -- so they designed a program to engage the new product development groups from the very beginning to ensure they bake in an end-to-end lifecycle cost management program and culture. Some of the things they focused on include: global standards (e.g., packaging, active ingredients, flavors, and components); getting product teams to utilize default materials and specifications; and, product formulation harmonization.
To accompany and support the use of standards, the team designed a system so that various country teams could easily access the standard materials and specifications as well as standard artwork and marketing materials. Significant monies were saved, for example, simply in not paying multiple times across the world for essentially the same artwork and marketing materials.
The team also implemented a preferred supplier yellow pages so employees could easily find and utilize the preferred rates that were negotiated through procurement sourcing processes, including online bidding. This enabled incremental savings in the tens of millions.
To help ensure more cost management opportunities were considered, the team developed a product lifecycle template that helps drive cost management. Product teams that complete the template make better decisions on: SKUs; advertising and promotion; sourcing; manufacturing strategy; formulation; packaging; line extension opportunities; and so on.
Another key piece the team implemented was a way to save money by ensuring that what is created is actually valued by customers. This is where idealized design came in again. Idealized design starts with getting customers -- whether they're external or internal -- to design what they want.
It's important, of course, to gain customer input, but most approaches fall far short. Gathering their opinions, reactions to your ideas, high-level requirements, and so on can lead one astray. Customers need to be fully engaged in the design process. When done correctly, that means they flesh out how something should work. The organization implemented a customer idea generation process and system that identified what was valued and what was not, and then engaged users in designing the details. This helped product teams eliminate costly and unnecessary "bells and whistles".
To put things in procurement language, the approaches above helped the organization use less, pay less, substitute/replace, abolish, standardize, and streamline so that the savings goal was exceeded, and a cost-management culture emerged.
The example above is focused on savings, but it's worth noting that idealized design can be applied to anything -- for example, the design of services, products, processes, systems, strategic planning, business design, and even career and personal life. Trying it only requires a bit of courage.
By the way, in case you were wondering, the president's $250 million savings goal was surpassed.