Tackling cost pressure without stifling innovation: 'What works today may be outdated tomorrow'

Margins are under pressure, suppliers are raising their prices, energy is more expensive than ever – it is a familiar story. But how do we really tackle this cost pressure effectively, without throwing the baby out with the bathwater? Ronald Batenburg discusses this in his expert blog.

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Too often, I see companies reaching for the cheese slicer: cutting a little bit off everywhere. That yields quick results, but it is rarely sustainable. If you cut 10 percent of your marketing budget every year, you can lose your visibility in the long run. And if you invest less and less in your people, motivation and innovative capacity decline.

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Combination of short and long term

What I see working is a combination of short-term quick wins and structural measures for the future. Take IT costs, for example: switching from on-premise servers to cloud solutions has saved our company €12,000 per year, without compromising on quality. Moreover, we have become more flexible. That is a structural saving that requires good preparation in the short term and entails migration and training costs, but from which you benefit for years in the long run.

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And don't forget automation. By automating standard processes such as invoice processing and expense claims, you not only reduce costs but also make fewer errors, freeing up time for more important work. The same applies to lean principles: eliminating unnecessary steps in processes often yields immediate results.

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In addition, remote working has brought us many benefits. We have been able to dispose of part of the office, causing rental costs to drop significantly. Hybrid working is here to stay, and it saves money not only on accommodation but also on energy and facility costs.

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Rigorous cutting does not work for cost pressure

Let's be honest: not everything works. I have seen companies cut too drastically into training or innovation budgets. In the short term, that seems smart. Your expenses go down and you maintain your profitability. But in the long term, you autumn behind. Your employees stop growing, and you miss the boat when the market changes. As a result, your talented people leave for companies that *do* invest in growth, and because there is no money or room for innovation projects, it takes much longer to launch new products. Thus, a short-term saving leads to a structural competitive disadvantage.

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Another pitfall is blindly outsourcing support tasks. Sometimes it is cheaper, but if you lose control or quality declines, it can damage your reputation. For example, a healthcare institution decided to outsource the entire IT helpdesk and customer contact centre to an external party to save costs. The expectation was that this would be more efficient and yield economies of scale. However, it resulted in slow response times and impersonal service. Outsourcing only works if you make clear agreements and continue to monitor.

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What does work, however, is involving your employees in cost awareness. Teams often know best themselves where things can be done smarter and cheaper. An internal challenge – who saves the most – not only generates money but also fosters engagement and creativity. Furthermore, do not forget the power of technology. AI tools for planning or customer service, data dashboards to provide insight into consumption and waste – it all helps to steer and adjust more quickly.

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Start with a thorough cost analysis

A best practice I always recommend: start with a thorough cost analysis. List all expenses and take a critical look at where the waste lies. Sometimes you discover subscriptions or licenses that no one uses anymore, or you see that certain products yield hardly any margin. By regularly reviewing your product or service portfolio, you can eliminate unprofitable items and focus on what does work.

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And quick wins ? There certainly are. Think of replacing fluorescent lighting with LED, installing motion sensors, or digitising print management. Small interventions, big impact. An organisation with fifty workstations saved 4,500 euros per year on energy this way.

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But beware: quick fixes alone are not enough. You must also invest in structural improvements. Otherwise, you will be fighting a losing battle. Structural cost reduction – such as centralising purchasing or standardising processes – yields the greatest returns in the long run.

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Finally: keep measuring and evaluating. What works today may be outdated tomorrow. By monitoring the impact of your cost-cutting measures, you can make timely adjustments and prevent overshooting with cuts that hinder your growth.

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Summary of what works – and what doesn't

What works:

• Structural savings through automation, cloud solutions, and process optimisation.

• Flexible and hybrid working to reduce housing and energy costs.

• Actively involve employees in cost awareness and innovation.

• Regularly critically review the product and service offering and eliminate unprofitable components.

• Invest in technology and data analysis for better insight and control.

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What doesn't work:

• Blindly cutting budgets for innovation, training, or marketing – this hinders growth and competitiveness.

• Uncontrolled outsourcing without quality assurance.

• Focusing solely on short-term savings without structural adjustments.

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Ultimately, it is about balance: saving quickly where possible, but always with an eye on the future. Only in this way do you keep your company resilient and innovative, even when cost pressure increases.

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Cost pressure is not an excuse to stand still, but rather an opportunity to work smarter and emerge stronger from the struggle.