🍃 Part 2: Why impact so often leads to lower costs

In this series, I am exploring a simple but often overlooked idea.

That impact does not sit in opposition to competitiveness.

When approached deliberately, impact often creates it.

So far, I have looked at how impact drives innovation by changing perspective.

Today, I want to focus on the second area.

How impact drives cost reduction.

At the heart of this sits a relationship that is both simple and surprisingly underused.

Impact is tightly linked to how resources flow through a business.

And resource flows are tightly linked to cost.

Whenever a material is extracted, shaped, transported, assembled, used, and eventually discarded or recycled, impact is created along the way.

That impact might show up as emissions.

- As waste.
- As pollution.
- Or as lost value.

But what often simply disappears in the daily grind is that every one of those moments also represents cost.

This is why focusing on impact almost inevitably leads to a closer look at resource use.

And when leaders start to look seriously at how resources move through their products, processes, or value chains, cost reduction tends to follow.

What makes this more striking is how little strategic attention resource flows receive today.

For much of the period between the 1950s and the early 1970s, businesses operated in a world of seemingly abundant and cheap energy and materials.

As prices fell and availability increased, resources slowly disappeared as a strategic focus.

They moved from being a leadership concern to being treated as a simple operational cost.

Over time, this shift showed up in leadership literature, training, and education.

Most leaders today have never been trained to think strategically about the flow of resources through their business.

That would be less concerning if resources were a minor cost driver.

They are not.

Around 10 years ago, I asked Denmark’s national statistical authorities a simple question.

In an average manufacturing company, how much of total cost is tied to raw materials and components, and how much is tied to salaries?

The answer surprised almost everyone I shared it with.

Slightly more than 50 percent of total costs were linked to raw materials and components.

Less than 25 percent were linked to salaries.

And yet, most cost reduction efforts focus almost entirely on people, time, or efficiency, rather than on the largest cost driver in the system.

When leaders begin to look at their business through the lens of resource flows, the effect is often immediate.

- Wasteful processes become visible.
- Unnecessary material movement stands out.
- Losses that were previously accepted as “normal” suddenly look avoidable.

In manufacturing especially, it is not uncommon to see value chains quietly bleeding money in multiple places at once.

When those leaks are identified and addressed, the financial impact can be significant.

This is why impact-driven cost reduction rarely feels like cutting corners.

It feels like removing friction.

And it explains why efforts to reduce impact so often improve margins at the same time.

In the broader context of this series, cost reduction is another way impact translates into competitiveness.

In the next newsletter, I will turn to the third area: how impact strengthens engagement, both inside organisations and across teams.

If you missed the first part of this series, just reply with “Part 1” and I’ll send it your way.

Best,
Jasper