In many organizations, sales are the dominant pulse. Everything from daily conversations to management meetings is characterized by the question: How are sales? It not only influences strategic decisions but often sets the mood for the entire company. A strong month brings relief and pride, a weak month creates anxiety and questioning. But in a world where sustainability and long-term resource management are becoming central, it is no longer enough to stare at the top of the revenue column. We must also understand the structure, meaning and potential of costs.
From cutting costs to transformation
When talking about costs, it is easy to think of savings. It sounds boring, limiting and defensive. But the opportunity creation of costs can be something else entirely. In a sustainable transformation, it is not just a question of cutting costs, but of transforming how resources are used. If an organization decides to reduce conference travel and instead drastically increase resources for new digital collaboration, innovation and sustainability, a shift in the space of opportunity occurs. This type of change often arouses curiosity rather than resistance, precisely because it is not just about removing but redistributing towards something new.
Constraints feeds innovation
Constraints have a creative power. It is when we can no longer do as we have always done that new solutions are born. Just as a water flow that is obstructed finds new paths, organizations are forced to think differently when old structures are constrained. What is first perceived as a problem becomes a seed for innovation. Rules and frameworks that are wise and rooted in values act as catalysts rather than obstacles. However, this requires a new approach to what costs actually represent.
Understanding costs as paths to new revenue streams
Behind every cost is a structure. By exploring this structure, business opportunities can be discovered. An environmental fee is a clear example. Instead of seeing it simply as an economic burden, it can highlight inefficient material flows and lead to the use of recycled materials, which in turn can provide competitive advantages. Similarly, a supplier’s price increase can open your eyes to alternatives that were previously unconsidered. Suddenly, the cost increase becomes a signal that the value chain needs to be developed, not just controlled.
The emotional cost that is often forgotten
There is also another type of cost that is rarely visible in the calculation but that fundamentally affects the future of the organization: the emotional cost. When employees are forced to work with products that create a lot of waste or that are thrown away after a short use, a conflict of values often arises. This affects commitment, pride and trust. A person who no longer feels meaningful risks leaving the company. What is the cost of losing the very person who could have created the company’s next big circular product? What is the cost of not catching that idea before it leaves with its carrier?
The cost of of opportunity, the cost of not acting
For many businesses, transformation is no longer about winning orders, but about not losing relevance. What is the cost of not exploring circular business models? What is the cost of not listening to employees’ thoughts on how the business can become more meaningful and sustainable? Sometimes it’s the little things that trigger big effects. Not offering free coffee to employees because the price of coffee has increased may seem like a small and simple cost saving, but if it sends the signal that relationships and well-being are not prioritized, it can fundamentally affect the work climate. Cost of opportunity is therefore a necessary perspective to include when looking at costs from a holistic perspective.
A framework for understanding costs as a tool in the transition
To navigate through these complex cost dimensions, the following 2×2 matrix can be of use:
| Direct cost | Alternative cost | |
|---|---|---|
| Economic level | Actual expenses, resources and investments | Revenues lost through missed investments |
| Value-driven level | Costs linked to internal culture, well-being, work environment | Lost innovation, lost ideas, lost trust, lost talent |
This simple framework can help leaders ask themselves new questions. What is the cost of maintaining a linear model? What do we gain from creating new internal values that attract the skills of the future? How do we make the potential of the costs we already have visible?
Costs are now also a leadership tool
Understanding costs is no longer just about balancing the budget. It is a way to understand where value is disappearing, where it can be created anew and how to build a resilient, sustainable and innovative organization. When costs are seen as a key to creativity, innovation and transformation, the entire view of what financial management can be changes. And then even a focus on costs can be the beginning of something much bigger than just a balance sheet. It can be about redistribution of resources. About innovation.
Dare to let a new approach to costs guide you towards innovation.
