Strategic & Operational Cost Management (SOCM)

With the change in the economic climate many enterprises - small, medium and large; will be faced with financing challenges – both strategic (debt financing) and operational (cashflow). But these challenges have been faced by enterprises in Ireland and overseas over many years and, based on proven experience of strategic and operational cost management. Taking from my corporate and consulting experience over the past 20 years, I have developed an accelerated approach to identifying and prioritise cost management opportunities. This “hypothesis-led” approach complements the other Enterprise Healthcheck tools and allows an enterprise to action the optimum cost management (reduction) opportunities based on both strategic and operational priorities. For want of a better name I will efer to this approach as SOCM.

Strategic (tomorrow) AND Operational (today) approach
The SOCM is an accelerated approach to cost management – where “best practices” have been embedded in the project methodology and tools. Then, using a hypothesis-led approach (identifying the most likely 20% of the enterprise where 80% of the costs/savings will lie), accelerates the review – ensuring speed of delivery and minimum project costs. The proven cornerstones for successful cost management reviews:
+ Creation of an integrated, hypothesis-led programme
+ Focus on realising benefits early
+ Achieving buy-in and sustaining the savings

Because “best practice” and past experience of cost management are directly incorporated into the project methodology, organization and tools (see the graphics), project quality is equally embedded, supported by proven project management techniques plus the experience of the consultants that will work with the enterprise.

Applying Best Practices
A critical element of any cost management review is to understand where costs are actually incurred during the ongoing operations of the enterprise. Based on “best practice” and past experience I have developed the SOCM Cost (Value) Chain – a way of looking at an enterprise from the five areas that both incur costs and generate value.


Hypothesis-led approach
Hypothesis-led approach involves working with senior management in the initial stage of the SOCM project, identifying priority areas – based on enterprise-specific insight & experience; where managers believe cost saving opportunities exist.

An SOCM question-based “ready-reckoner” has been developed, incorporating “best practice” & past experience, to facilitate hypothesis generation. Once identified, this approach ensures that the review focuses on areas that are known to be costly or where senior managers believe that costs could (or should) be managed better.


In addition to analyzing costs (as part of an SOCM review) there are also sound cost management disciplines and principles that are incorporated into an SOCM review:

SOCM Principles:
 Strategy
 Incentives & Controls
 Business Design
 Cost Management
 Continuous Improvement

SOCM Disciplines
 Strategic cost management
 Cost transparency
 Management tools
 Cost culture
 Continuous improvement