As a professional project manager, you are well aware that managing program costs is essential to the success of any project or program. However, achieving cost management excellence requires a comprehensive understanding of the cost leadership strategies for program management. In this blog post, we will discuss what cost leadership is and how to implement cost leadership strategies for program management.
Series
Over the next few weeks, I shall share a series of posts entitled “What Great looks like – Cost Management in Program Management”
What is Cost Leadership?
Cost leadership is a strategy that focuses on producing and delivering products or services at a lower cost than competitors while maintaining acceptable quality standards. This strategy enables companies to sell their products or services at lower prices, which helps them gain a competitive advantage in the market. Cost leadership is a key strategy for program management, as it helps control program costs and maximizes program value.
Implementing Cost Leadership Strategies for Program Management
Develop a Comprehensive Cost Management Plan
A cost management plan outlines the processes and procedures for managing program costs throughout the program lifecycle. The plan should include cost estimating, budgeting, monitoring, and controlling processes, as well as a risk management plan to address potential cost overruns. The cost management plan should also include strategies for optimizing program costs, such as cost-benefit analysis and value engineering.
Cost Leadership Strategies: Implement a Robust Cost Estimation Process
Accurate cost estimation is essential for effective cost management in program management. A robust cost estimation process involves identifying all the costs associated with the program, including direct costs such as labour and materials, and indirect costs such as overhead and administration. Cost estimation should also account for inflation, currency exchange rates, and other factors that may impact program costs.
Use a Performance-Based Contracting Approach
Performance-based contracting is an approach that links contract payments to program performance. This approach incentivizes contractors to deliver high-quality work while minimizing costs. Performance-based contracting is particularly effective for large and complex programs that involve multiple contractors.
Cost Leadership Strategies – Leverage Technology to Optimize Program Costs
Technology can play a significant role in optimizing program costs. For example, project management software can help streamline program management processes, such as cost estimating, budgeting, and reporting. Additionally, advanced analytics and data visualization tools can help program managers identify cost-saving opportunities and optimize program performance.
Cost Leadership Strategies – Key Takeaways
In conclusion, cost leadership is a critical strategy for program management. Implementing cost leadership strategies, such as developing a comprehensive cost management plan, using a robust cost estimation process, implementing a performance-based contracting approach, and leveraging technology to optimize program costs, can help program managers control program costs while maximizing program value. By implementing these cost leadership strategies, program managers can achieve cost management excellence and deliver successful programs.
here are some authors and their books on cost leadership strategies in program management:
- Michael E. Porter – “Competitive Advantage: Creating and Sustaining Superior Performance“
- Robert S. Kaplan and David P. Norton – “The Balanced Scorecard: Translating Strategy into Action“
- James A. Brimson – “Activity Accounting: An Activity-Based Costing Approach“
- H. Thomas Johnson and Anders Broms – “Profit Beyond Measure: Extraordinary Results through Attention to Work and People“
- W. Edwards Deming – “Out of the Crisis“
These authors emphasize the importance of having a clear strategy and aligning costs with that strategy, utilizing tools such as activity-based costing and balanced scorecards to ensure that costs are managed effectively. They also stress the importance of continuous improvement and focusing on creating value for customers in order to achieve long-term success. Great program managers not only have a deep understanding of these concepts, but they also have the ability to implement them effectively in their programs.
What separates Great from Good
Great
Great Leaders have mastered each of these functional skills, and own the domain of understanding the nuances of how they are weighted, throughout the market cycle.
Good
May be conscious that these topics are ‘necessary’ however have not focused on the details to drive the outsized performance that the Great achieved time and time again.
