Strategic Cost Management: What CFOs Are Actually Doing to Protect Margins

CXO India Research conducted an in-depth analysis of margin performance across 120 Indian companies over a five-year period, correlating financial outcomes with the presence or absence of formal strategic cost management frameworks. The results are stark: companies with embedded cost management disciplines — where cost optimisation is a continuous process rather than a response to profitability stress — outperformed their peers by an average of 4.2 percentage points in EBITDA margin over the period. What distinguishes strategic cost management from periodic cost-cutting? Three characteristics stand out consistently in the outperforming companies. First, granularity: they understand their cost structure at a level of detail that allows them to distinguish clearly between value-creating costs (those that drive revenue, quality, or customer experience) and cost-of-complexity costs (those that exist because of organisational history, vendor inertia, or process inefficiency rather than strategic choice). Most large Indian companies have a surprising amount of cost-of-complexity that is invisible to standard management reporting. Second, cadence: the outperforming companies review their cost base against strategic benchmarks on a quarterly basis, not annually or episodically. This regularity means that cost discipline is embedded in management rhythms rather than being a special programme that requires a mandate from the board. Third, accountability: cost management in outperforming companies has clear executive ownership — typically the CFO in partnership with the COO — with defined targets, visible tracking, and consequences for underperformance. Companies that treat cost management as a finance initiative rather than a cross-functional leadership priority rarely sustain the gains beyond the first year.