How Cost Innovation (Costovation) Combines Efficiency With Customer Delight

New Markets is a leader in cost innovation – using the tools of innovation to achieve step-changes in business’ costs. Our book Costovation (Harper-Collins, 2018) is a top resource on the subject, and we have followed it up with extensive client work to make these cost innovations happen.

Innovation and cost-cutting are often seen as opposites – when one goes up, the other has to go down. We disagree. Done right, they are a powerful duo, producing major changes in costs while delighting customers.

We use rigorous methods to find the opportunities for cost innovation and create imaginative solutions to capitalize on them. Many of the options aren’t evident from line items on an income statement, but rather are threaded throughout a business. They may stem, for instance, from having over-complex operations, catering for too many customer use cases, or having over-standardized sales processes.

AI is a particularly useful route for pursuing cost innovation. We have extensive experience in this arena, having worked on AI-powered business transformation since 2012. We also examine other, low-tech approaches as well. Our focus is on solving the business challenge, not on seeking ways to deploy a pre-made solution.
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How We Help You

Finding Cost Innovation Opportunities

We find openings for Costovation beyond the obvious line items. For instance, we look rigorously at factors such as business complexity and over-shooting customer needs, as well as in seven areas where we frequently see the opportunities arise. These include costly customers, expensive sales processes, and contingency creep.

Creating Cost Innovation Solutions

Our approach follows a three-step process to create Costovation solutions. First, we use the tools of innovation to attain breakthrough perspective, questioning long-standing assumptions and drawing parallels from other industries. Next, we focus hard on specific levers for cost innovation, such as concentrating on particular customer segments or Jobs to be Done (another area where we are global leaders in our expertise). Finally, we blur boundaries, looking in innovative ways across the value chain to assess new ways to make, sell, and deliver your offerings.

Bringing Cost Innovation to Life

Our work doesn’t stop with delivering pretty slides. We team with clients to develop and sometimes execute detailed action plans. Cost innovations may be housed in new business units, while in other situations they can be rolled out in stages for specific customer types or product lines. As implementation occurs, it is important to capture the direct and hidden costs relative to prior operations, leading indicators of future expenses, and customer reactions. Success should occur on each of these three dimensions.
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Read our Thinking


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Costovation | Cost Innovation Introductory Guide

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AI and Costovation


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Costovation Book
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Dive Into Our Thought Leadership Pieces on Cost Innovation (Costovation)

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COSTOVATION CASE STUDY

Medtech Giant Selling Digital Services

Objective

​One of the world’s leading medtech companies sought to sell digital services to hospitals more effectively, yielding both lower costs as well as better customer success with the offerings. How should it re-organize its salesforce and implement its offerings differently? It asked New Markets.

Approach

  • Determined the theoretical and actual ways the company was going to market with digital, which ended up differing among sales managers but not varying according to customer type
  • Evaluated how customers’ needs for product education and implementation support ranged, and how these needs could be identified during the sales process
  • Created concrete plans for what aspects of the sales process would change in which sequence, and for which customer types this would be a particular priority

Impact

Our recommendations were moved into detailed action planning, with client teams formed to take specific changes forward. The changes focused on a single large country, with colleagues from other countries closely following progress and charting how they could replicate these cost innovations globally. Broad rollout and scaling up has now commenced.
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COSTOVATION CASE STUDY

SaaS Start-up Simplifying its Proposition

Objective

A start-up was an early leader in providing a critical service to enterprise HR departments, yet it found many companies reluctant to switch from traditional, Excel-based ways of performing the target activity. The firm asked New Markets to identify how it could provide a low-cost, simplified offering that could be sold without extensive customer support, aiming not to vanquish its direct rivals with this product but rather to convince customers to switch from Excel.

Approach

  • Interviewed 30 target customers to understand their Jobs to be Done and current approaches in detail, determining exactly what the new product had to do and what could be de-prioritized
  • Developed concepts to test with customers, evaluating not only the platform’s functionality but how it could be sold more simply in an enterprise setting, and how it could be supported cost-effectively
  • Built support within the company’s board and among investors for this new strategy, showing what specific customer types this would be a fit for and how the company could create a sustainable competitive advantage in this new, low-cost market

Impact

The new offering has been launched to enthusiastic customer reception, and it has powered new revenues without cannibalizing the company’s core, higher-priced offering.
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Let's Embrace Costovation Together​

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