Zero-Based Redesign
Innovation Alphabet
Zero-Based Redesign
In a nutshell
The Zero-Based Redesign approach refers to a restructuring that helps companies increase the likelihood of long-term success and prepares them for unexpected disruptions in the business. An evolved, no-frills, practical new operational asset. It prioritizes agility and vision for the future, transforms corporate culture by aligning internal priorities, and radically reforms the cost structure.
DEFINITION
A different interpretation of “starting over”
Usually, traditional efforts to streamline and simplify settle for incremental changes to the status quo. Savings tend to be temporary as costs come flooding back. Zero-Based Redesign, on the other hand, is a one-time effort that sets a brave ambition defined by core activities in delivering what customers value most about you. Organizational structure, governance, responsibilities and processes are integrated in order to satisfy your customers’ needs and optimize the efficiency of your front line, using the best existing technology.
The ZBR approach puts a company in the position of having to virtually rebuild a process from scratch, without considering any type of limitation from the standpoint of resources, budget, and skills. By doing so, reorganization managers think outside the box and try to redesign their enterprise according to a strategic optimum consisting of activities required to support function-level strategy. This step involves reinstating activities, for example, investments in company culture, that are deemed critical to pursuing business objectives.
Application Fields
• Strategy: The Zero-Based approach assists the execution of the company’s business plan by building a strategy capable of guiding day-to-day actions so that long-term goals are accomplished. As a result, it is essential to wipe the slate clean, eliminating all activities that are not necessary for optimizing the company and then starting new ones based on the goals set. For example, if the company sets digitalization as a goal, it will be necessary to support daily operations with investments to create a digital culture among employees.
• Transparency: Zero-Based Redesign enables transparency of operations inside an organization, as it adopts an end-to-end perspective on both internal and external costs. Companies can leverage traceability to redesign business processes, seizing the opportunity to automate workflows and thereby reduce costs.
• Calculated Revolution: Before adopting a Zero-Based approach and redesigning from scratch, it is important to understand the potential response of the organization. Only after that it would be possible to initiate a change management plan. Senior managers must verify that the new organizational structure can function properly and is capable of supporting future operations. Once the appropriate tests have been conducted, managers will be responsible for training and informing employees about the benefits of the new course.
Industries
• Zero-Based Redesign in the pharmaceutical industry
Pharmaceutical industries are usually cautious about integrating innovation within their business models. Yet a Zero-Based reorganization could bring a breath of fresh air to the industry, giving it an important and bold constructive change. In particular, it would enable:
– Choosing the right digital technologies and prioritizing tools that can automate and improve processes.
– Assessing the fit of technologies to determine the most profitable ones.
– Building prototypes to conduct testing and learning experiments, and then testing whether or not a particular solution is a good fit for the business.
• Zero-Based Redesign in the service industry
Delta Airlines, one of the largest U.S. airlines, revolutionized its structure by restarting from scratch to deal with two issues: rising fuel costs and declining passenger traffic due to stiff competition from low-cost airlines. As a result, the company was able to cut costs by more than $1.7 million, and introduced automation technologies that improved visibility and overall service and control levels of the company’s financial processes.
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Business Functions
• Zero-Based Redesign in support of marketing
A consumer packaged goods company launched a ZBR-based marketing program with the goal of redirecting revenue from marketing and sales categories to support new growth initiatives. First, the team created a database with more than fifty cost categories across all business units. Then it applied industry qualitative benchmarks to set goals for each category. Using the detailed information derived, the team identified some ways to save costs: for example, removing some components from the PR agency contract (reducing its overall fees) and cutting packaging costs. The company derived a 15 percent increase in spending efficiency. In addition, the whole process helped instill a sense of ownership among the managers of the departments involved.
• Zero-Based Redesign in support of reorganization
Zero-Based Redesign allows companies to model from scratch the operation and composition of each department. It invites companies to abandon the “we’ve always done it this way” mentality. Executives need to be aware of what’s going on in their company, and redesign everything from there. But not only in times of fear or anxiety, even when things are going well. Companies must then break free from first-quartile benchmarks and retrospective analysis. This means thinking like digital natives, with an approach to the cost that “should be” for creating transformational savings rather than incremental reductions. The Zero-Based approach eliminates boundaries and places the right people to do the right work – a key solution to power profitable growth. But the talent ecosystem is fluid, composed of human labor, bots, virtual and cognitive agents, crowdsourcing, and of course, customers and suppliers.
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