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To compete in a challenging environment, successful technology companies are changing the way they design products and solutions. Kelly Liu, a partner with Bain's Technology practice, describes why zero-based budgeting and zero-based redesign can be useful tools for helping companies find and allocate the right amount of resources to compete.
Read the Bain Brief: Why Zero-Based Budgeting Goes Wrong
Read the transcript below.
KELLY LIU: Today, tech companies face some profound challenges in the market. Simple product development and delivery on time and on budget is no longer enough. Cloud, artificial intelligence, and Internet of Things are changing the way products and solutions are designed.
Most product managers in tech companies focus on a single product line. However, customers require broadband solutions that are really end-to-end experiences, incorporating speed, value, and easy to use. Many of the necessary changes require new investments where the resources are usually trapped in the traditional functions or departments. More tech companies are turning to zero-based redesign and zero-based budgeting for resolving this conflict.
Zero-based redesign is a clean-slate approach that challenges the status quo and redesigns the cost structures and P&Ls towards the strategic priorities. This frees resources necessary to tackle the big challenges facing the tech companies. Companies can make sure the changes stick by coupling zero-based redesign and zero-based budgeting.
Zero-based budgeting is more than just a fresh start every year. It's an ongoing cost-measurement program that ensures every dollar is spent to advance a company's strategy. It can deliver increased margins, revenues and employee engagement. Leading companies see it not just as a simple new budget exercise, but more of a management system and cost philosophy. Together, zero-based redesign and zero-based budgeting help tech companies hone their strategy to meet the industry requirements, design an organization to support a strategy, and make sure they can continue to do so in a sustainable way.
Why Zero-Based Budgeting Goes Wrong
Four common pitfalls can keep companies from achieving lasting results.
Published in December 2018