VACostCutting

Saturday, April 07, 2007

Koch Classic

I have just read a great book "The Science of Success - How Market Based Management Built the World's Largest Private Company" by Charles G. Koch.

How big is the largest private company in the world? $90 billion a year in revenue.

Page 104 hits the nail on the head as far as what the Cost Cutting Caucus is all about. While you could go ahead and order the book at www.amazon.com or your local bookstore, I will give you a taste of Koch and CCC strategy.

"It is easy to fall into the trap of a single-minded emphasis on cost reduction. Cost is only one component (although a critically important one) of value creation. If your goal is to lose weight, you could accomplish it by cutting off your leg, but that is hardly beneficial. Cost-cutting for its own sake can be just as shortsighted and can seriously damage future profitability. It is more appropriate to focus on eliminating waste, that is, unprofitable activities in light of opportunity cost."

BINGO! Value creation within state government services!

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