It is difficult to improve financials of a large business.
Decreasing costs are a sure way to improve financials however it is difficult to find and implement cost cutting opportunities. Cost saving opportunities fall in these buckets
- Long term investments: Finding areas to reduce operational costs with investment is easy. Investment in new systems and tools can reduce labor-intensive processes, improve operations and customer experience. Investment in new facilities can provide scale synergies and help save costs. However, it is difficult to convince top management to invest in the future given short term focus of Wall Street and most businesses. Wall Street’s focus has some merit, long term investments, especially technology investments have been documented to fail to deliver the planned benefits.
- Short term fixes: Headcount reductions, procurement transformation programs all fall under this bucket. They definitely impact costs but their impact on other parts of the business can be difficult to predict.
Increasing revenue growth is difficult for a large business because growth is the primary motivation for most businesses. All large businesses experienced strong growth to become large. In the quest to sustain growth, every imaginable lever gets implemented by businesses. Therefore, a large business founded several years ago had enough time to create a very effective growth machine given its competition, regulatory landscape and other constraints.
However, prices do not get experimented with as much as other aspects of the sales. Fixed prices offer limited opportunities for testing. If you decrease prices, you also change customer expectations and it will be difficult to raise prices later. So for a company that has implemented only fixed prices, increasing revenues through dynamic pricing, also called price optimization or demand pricing, is the strongest lever available.