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New cost management strategies needed to compete in information age: Robert Kaplan

16-February-2005
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New cost management strategies needed to compete in information age: Robert Kaplan

Dr Robert Kaplan, Marvin Bower Professor of Leadership Development, Harvard Business School, has advocated the need for new cost management strategies to compete in the information age. Companies can use activity-based costing (ABC) to produce a more accurate picture of the cost of their operational processes and customer relationships. Dr Kaplan was speaking at a seminar, "Execution as Competitive Advantage: New Strategies for the Information Age," in the Capital on Tuesday. "The time-driven ABC provides a simpler, flexible, sustainable and powerful way of implanting ABC," he said. It has the ability to forecast future resource demands based on predicted order quantities and complexity. It also has more visibility to process efficiencies and capacity utilisation.

Dr Kaplan emphasised that cost management information could increase companies' profitability by improving strategic and operational decisions on prices, products, quality, distribution and services.

The need to understand and manage the profitability of key accounts is clear when only 20 per cent of clients can generate 80 per cent of revenue, he observed. A traditional client-management view focused primarily on revenue growth misses the fact that fighting for incremental sales often reduces profitability, he pointed out.

Dr Kaplan also discussed the balance scorecard model of value creation. A good balanced scorecard connects a strategy map to measures, targets and initiatives. On product leadership value proposition, he suggested, "Continually develop products that offer superior performance for customers. Build bonds with customers and provide them with the complete bundle of products and services they need."

During the day-long seminar Dr Kaplan discussed various issues like making strategy everyone's job and a continuous process. Bill Padfield, CEO, Datacraft Asia, said that the implementation of ABC helped his company in a bigger way. Earlier Frank Koster, MD, ING Vysya Life, welcomed the audience.

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