Glossary of Terms



Across the website and our articles we use a series of concepts and terms that are not widely used or wholly understood. If your like us, we like to understand first the basic principles and concepts, grounded where possible with business scenarios.

To help you extract the most value out of our latest thinking articles and blogs, we have created a ‘glossary of terms’ with c.30 clarity statements that define the concepts of each key phrase, comparing them against other common terms and finally where relevant, provide business scenarios to explain the concept in a practical manner.

These clarity statements will help you get a better handle on some of the fundamental concepts and principles of cost transformation that used frequently throughout our articles and insights.




The Cost of Brexit

The Cost of Brexit?

With the triggering of Article 50 scheduled for 29th March 2017, the vast majority of companies, both international and UK registered, conducting cross border trade will be nervously anticipating how to best mitigate risk. How can they act now, using practical and effective commercial foresight, to get ahead of competitors?

Read More – The Cost of Brexit




Cost Transformation

What is Cost Transformation?

Unlike mere cost reduction, cost transformation tackles not just immediate issues but considers the organisation identity as a whole. It generates a new way of business life, underpinned by self-regulated leadership, where all tiers of staff embrace a mindset that is commercially cost conscious.

Read More – Cost Transformation Definition




Addressable vs. Non Addressable Spend

What is Addressable vs. Non Addressable Spend?

Once you have set the cost baseline, one of the next steps is to identify where you can cut costs and where you cannot. We recognise this as ‘the size of the prize’. Budget owners can often make the mistake of assuming all operating costs in the baseline derived from the financial statements can be challenged. This is not always the case. Some costs may not be touchable in the timeframe you must realise cost savings, others are not touchable at all due to operational risks, regulation, Trades Unions or licence conditions. If you are looking for a top down guideline savings target or % of, you must focus only on the addressable spend element…

Read More – Addressable vs. Non Addressable Spend




Benefits Realisation

What is Benefits Realisation?

Benefits Realisation – Can be best explained through use of an investment cycle illustrated below. It outlines the differences between benefits certified and benefits realised, which occur at different maturity phases in the cycle. It’s important to take away the process to obtain funding and when you have to commit financial benefits in return, this occurs a certain gates where a quorum of independent approvers review progress and risks during the delivery in an attempt to ensure that funding remains on budget and the corresponding confidence in delivery of the projected benefits remains.

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Benefits Tracking

What is Benefits Tracking?

Benefits Tracking – Can be best explained through use of an investment cycle illustrated below. It outlines the differences between benefits certified and benefits realised, which occur at different maturity phases in the cycle. It’s important to take away the process to obtain funding and when you have to commit financial benefits in return, this occurs a certain gates where a quorum of independent approvers review progress and risks during the delivery in an attempt to ensure that funding remains on budget and the corresponding confidence in delivery of the projected benefits remains.

Read More – Benefits Tracking




Business Affordability

What is Business Affordability?

Over the last decade, senior leaders have embarked on major growth agendas that were not grounded on long term sustainable paths. The global financial meltdown and severity took the markets by surprise and has been a wake-up call for and governments, regulators and business executives to go back and challenge their business strategies and embed tighter spending and borrowing controls to ensure that this never happens again. There are many macro-economic reasons that caused it, but in this article, we focus on the behavioural elements and why business affordability will be so important to win in the future.

Read More – Business Affordability Definition




Corporate Centre Affordability

What is Corporate Centre Affordability?

Over the last decade, senior leaders have embarked on major growth agendas that were not grounded on long term sustainable paths. The global financial meltdown and severity took the markets by surprise and has been a wake-up call for and governments, regulators and business executives to go back and challenge their business strategies and embed tighter spending and borrowing controls to ensure that this never happens again. There are many macro-economic reasons that caused it, but in this article, we focus on the behavioural elements and why business affordability will be so important to win in the future.

Read More – Corporate Centre Affordability




Cost Baseline

What is Cost Baseline?

A ‘Cost Baseline’ is defined as “The initial reference point (in this case Operating Cost value) used to compare past, current and projected future values. It is the starting point against which all future costs are measured, it is also the point of reference for evaluating the budgetary effects of projected changes in cost expenditure”.

Read More – Cost Baseline




Cost Conscious Culture

What is Cost Conscious Culture?

The ‘environment’ refers to the ways of working and operating on a daily basis, the consequences of poor behaviour, recognition of actions and decisions you make, the rewards and recognition, and the team dynamics to prioritise and make the right choices for the enterprise ahead of one’s personal gain. Game players should be dealt with publicly to demonstrate that pushing against the tide has no place in the new organisation. This environment should be reinforced and policed by line managers proactively supported by HR & Finance. All support functions must build their commercial relevancy in order to support line managers. To achieve this they must understand the baselines and business affordability so that they can steer the right decision for budget and headcount to maintain affordability levels…

Read More – Cost Conscious Culture




Cost Culture

What is Cost Culture?

The ‘environment’ refers to the ways of working and operating on a daily basis, the consequences of poor behaviour, recognition of actions and decisions you make, the rewards and recognition, and the team dynamics to prioritise and make the right choices for the enterprise ahead of one’s personal gain. Game players should be dealt with publicly to demonstrate that pushing against the tide has no place in the new organisation. This environment should be reinforced and policed by line managers proactively supported by HR & Finance. All support functions must build their commercial relevancy in order to support line managers. To achieve this they must understand the baselines and business affordability so that they can steer the right decision for budget and headcount to maintain affordability levels…

Read More – Cost Culture




Cost Reduction

What is Cost Reduction?

Cost reduction in its simplistic form is a reduction of a business’s cost base from a predetermined point in time.  This approach embraces short term slash and burn cost take-out, while also adopting longer term operational cost efficiencies (doing more for less).

Read More – Cost Reduction Definition




Cost Segmentation

What is Cost Segmentation?

To be in a position for budget holders to manage their costs, they must be able to see them, understand them and break them down into categories where decisions can be made. Segmenting costs into categories is key, but you have to be careful to avoid cutting costs that create value for your organisation. Operating costs should be segmented in a way that allows budget holders to make the right decisions under a backdrop of commercial business affordabilit…

Read More – Cost Segmentation




Discretionary Costs

What are Discretionary Costs?

Discretionary Costs plays a crucial role in the delivery of ‘Strategic Cost Management’, the 1st phase of the journey towards sustainable cost transformation. It is illustrated in step 2 of 3 key steps we take to perform ‘Strategic Cost Management’.

Read More – Discretionary Costs




Enterprise 1st Behaviours

What is Enterprise 1st Behaviours?

The recent financial meltdown and global recession has left many organisations in a mess. One of the many reasons that caused it was value creation through asset growth without enough due diligence on long term risk and business affordability.

Read More – Enterprise 1st Behaviours Definition




LEAN Continuous Improvement

What is LEAN Continuous Improvement?

Organisations are moving away from the cyclical boom and bust cost reduction techniques and adopting more long term sustainable techniques. One such technique that Cost Transformation Ltd endorses is the highly engaging and sustainable ‘LEAN Continuous Improvement’. This technique helps organisations and functions achieve their longer term affordability levels without major structural change whilst also sustaining them.

Read More – LEAN Continuous Improvement




Operational Excellence

What is Operational Excellence?

Operational Excellence is a workplace philosophy that utilises a variety of principles, systems and tools to ensure ongoing and sustainable improvement in an organization. This management philosophy has its roots in earlier continuous improvement methodologies such as Six Sigma and Lean manufacturing. The process involves focusing on the needs of the customer, keeping the employees engaged, positive and empowered whilst continually improving the ongoing activities in the workplace.

Read More – Operational Excellence




Six Sigma & LEAN Six Sigma

What is Six Sigma and LEAN Six Sigma?

Six Sigma is a set of techniques and tools for process improvement. Six Sigma seeks to identify and remove the causes of defects (errors) and minimise variability in manufacturing and business processes thus improving the quality of process outputs. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organisation who are experts in these methods.

Read More – Six Sigma & LEAN Six Sigma




Strategic Cost Management

What is Strategic Cost Management?

Strategic Cost Management is a term used to describe the strategic planning, restructuring and re-alignment of a company’s costs to an operating model that will deliver their revised strategy and strategic ambitions. Such programmes undergo a grassroots diagnostic that allows organisations to focus on operating costs that are either no longer aligned to the strategy (destroy value) or integral to supporting the underlying growth or maintaining positions in markets, businesses and functions (create value).

Read More – Strategic Cost Management




Strategic Cost Reduction

What is Strategic Cost Reduction?

Strategic Cost Reduction is a term used to describe the strategic planning, restructuring and re-alignment of a company’s costs to an operating model that will deliver their revised strategy and strategic ambitions. Such programmes undergo a grassroots diagnostic that allows organisations to focus on operating costs that are either no longer aligned to the strategy (destroy value) or integral to supporting the underlying growth or maintaining positions in markets, businesses and functions (create value).

Read More – Strategic Cost Reduction




Strategic Cost Transformation

What is Strategic Cost Transformation?

Unlike mere cost reduction, cost transformation tackles not just immediate issues but considers the organisation identity as a whole. It generates a new way of business life, underpinned by self-regulated leadership, where all tiers of staff embrace a mindset that is commercially cost conscious.

Read More – Strategic Cost Transformation




Sustainable Cost Savings

Sustainable Cost Savings – The Definition

Cost Transformation has developed a robust framework for setting long term affordability levels (‘Target Cost Baseline’) for businesses and functions whilst ensuring ‘Sustainable Cost Savings’ that support it are delivered. To this end, you cannot look at these disciplines in isolation, Cost Transformation brings all 6 steps to identify, control and provide reinforcement that cost savings are sustainable, deliverable and accurately reflected in budget process. With c.80% of ambitious cost reduction programmes failing to deliver their savings, we strive to ensure you are not asking yourselves “Where did our Savings Disappear?”

Read More – Sustainable Cost Savings




Sustainable Cost Transformation

Sustainable Cost Transformation – The Definition

The aim of a sustainable cost transformation is achieved by a thousand actions taken by all staff each day. There are two high-level issues in achieving this: 1. Aligning the many actions to a common intent, defined by the leader and accepted by the top team. 2. Coordinating the many people involved so they work together rather than tripping over each other. Co-ordination and alignment are the result of thorough planning and diligent execution…

Read More – Sustainable Cost Transformation




Target Cost Baselines

Target Cost Baselines – The Definition

Using a Target Cost Baselines to Define Business Affordability. Cost Transformation has developed a robust framework for setting long term affordability levels (‘Target Cost Baseline’) for businesses and functions embracing ‘Strategic Cost Management’. This is different from traditional cost reduction approaches. Firstly, we feel these approaches are too short term focussed and do not instil the enduring behavioural change needed, thus c.80% of ambitious cost reduction programmes fail to deliver and leave you asking “Where did our Savings Disappear?”

Read More – Target Cost Baselines




The 7 Year Cost Cycle

The 7 Year Cost Cycle

Cost efficiency is becoming the new battleground for competitive advantage and yet many cost reduction programmes fail long term. Several years after declaring success prematurely, operating costs return to unsustainable levels, leaving board members asking themselves, “How did our cost savings disappear?” Why do you think so many companies are unable to successfully reduce costs long term?

Read More – The 7 Year Cost Cycle




‘The Environment’ For a Cost Conscious Culture

‘The Environment’ For a Cost Conscious Culture

The ‘environment’ refers to the ways of working and operating on a daily basis, the consequences of poor behaviour, recognition of actions and decisions you make, the rewards and recognition, and the team dynamics to prioritise and make the right choices for the enterprise ahead of one’s personal gain. Game players should be dealt with publicly to demonstrate that pushing against the tide has no place in the new organisation…

Read More – ‘The Environment’ For a Cost Conscious Culture




Waste Elimination

What is Waste Elimination?

Organisations are turning to waste elimination techniques to help them not just achieve their longer term affordability levels, but sustain them, remaining agile and more flexible to future and regular market changes.

Read More – Waste Elimination




Zero Waste Company

What is a Zero Waste Company?

There are many definitions of zero waste. This paper is focussed on the positioning of zero waste from a perspective of cost reduction. After the recent financial crisis, pan global recessions and a sustainable increase in the cost of regulation, raw material costs and government lobbying, many executive boards are re-assessing their identities and business strategy across the enterprise or within business lines.

Read More – Zero Waste Company