CEOs weigh how to cut costs while stoking growth and innovation

Good morning.

One of the toughest tasks for any chief executive is managing the dual challenge of controlling costs while finding new ways to innovate and grow. Earlier this week, I teamed up with Fortune CEO Alan Murray for a roundtable discussion with CEOs to hear how they’re striking a balance. Joining us to co-host the conversation was Paul Goydan, a managing director and senior partner at BCG.

Goydan has spent a lot of his career helping leaders transform their operations to solve tough problems. The need to invest and experiment with AI has created a need for rapid cost reduction, too. “I don't think we understand where technology will be in five years,” he says, “so we want to drive savings and efficiency. We need to do it surgically because we have growth areas. How do we create a supply chain and manufacturing footprint that can be cost effective and survive these geopolitical challenges?"

Some insights from other leaders:

The first and most important thing for us in cost management is managing complexity. We have so many innovation avenues that we could chase everything. We're pared back our R&D portfolio into things we have to do now, and things we can do later.

Jim Hollingshead, President & CEO, Insulet Corporation

You have to make sure you bring everybody along because it's not going to be clear to everybody else in the organization what this change means to you.

Liz Gehringer, President & CEO, Anywhere Franchise Brands, Anywhere Real Estate

Our mission is really to provide more competition for the Department of Defense. Be a little more agile, a little faster, a little more innovative, and a little more affordable …We took a pause there because we were trying to track down microelectronic chips and parts and paying expediting fees, and it was all about meeting our customer commitment.

Christopher Kubasik, Chair and CEO, L3Harris Technologies, Inc.

Probably around 30% of our warehouses are high-technology driven, with large amounts of automation…It’s been really a super winner for us, particularly over the last two years, as wage inflation has really rocketed.

Malcolm Wilson, CEO, GXO Logistics

If you're just pursuing cost reduction, I think you're actually just going to create a sucky company that nobody wants to do business with. I don't enjoy those companies that have leveraged AI so far that I literally can't get a human being.

Mary Powell, CEO and Director, Sunrun

Instead of a five-year plan, I like that word ‘blueprint’ a little bit better because everyday things change. Adaptability is key.

David Shaffer, President, Director, and CEO, EnerSys

For generative AI, we've set up a small but mighty team that's working across the organization, focusing on sharing best practices around AI. The first one is around experience. The second one is around efficiencies, and the third one is around exploration.

Doug Howe, CEO, Designer Brands 

When we started the journey about five years ago, we were offering over a 100,000 SKUs. We've now taken 80% out, which is a huge complexity reduction. We had 550 legal entities. We've taken that to half … We’re creating AI personas that then can create virtual focus groups. It won't replace a human focus group, but it will enable us to do initial screening much faster and much more effectively.

Christopher Peterson, President and CEO, Newell Brands

We have an unsustainable health care delivery model in this country...We as an industry have had to turn the mirror inward...I think the main lessons that we've taken away and applied are the need to focus on disruptive innovation and transformation of our industry.

Richard 'Chip' Davis, Chief Executive Officer, Rochester Regional Health System

Cost controls are in our DNA, but no one can cut their way to glory. We have to grow…And so you’ve got to do that by making investments…About 8% to 10% of our fleet is refurbished trucks. We internalize our own maintenance, do it ourselves. That also makes it very cost-focused and resilient.

Michael Battles, Co-Chief Executive Officer, Clean Harbors, Inc.

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Diane Brady
@dianebrady
diane.brady@fortune.com

This story was originally featured on Fortune.com