The secret to low costs? It’s NOT what you think.

Some think low-cost leadership is all about cutting costs.

They picture slashed budgets and strict efficiency programs.

But that’s not the whole story.

Today let’s dive into an interesting article I came across in the March 2025 issue of the ‘Harvard Business Review’.

The top low-cost businesses have a different perspective.

They invest in their people.

They serve their customers in smarter ways.

They don’t just spend less—they change how business works.

The most successful share three fundamental characteristics:

1. Leadership, Organization, and Culture

? Bold, Hands-On Leaders

Their leaders aren’t chasing short-term wins.

They treat the business like their life’s work.

They have a long-term goal. They trust their people to make decisions and keep the structure flat.

Example:

David Overton (Cheesecake Factory) tastes new dishes himself before they hit the menu.

? Taking Smart Risks

They don’t avoid risk.

They break it down.

They test ideas.

If something doesn’t work, they change course and move on.

Example:

Joe Coulombe (Trader Joe’s) cut out wine distributors and bought straight from vineyards. It let him sell great wine for less—and customers loved it.

? Investing in Talent

They don’t cut costs by paying people less.

They hire better people and pay them well.

They keep them longer and trust them with big jobs.

Example:

• Toyota’s purchasing team manages entire supplier relationships, saving time and building trust.

2. Smart, Efficient Operations

These companies keep costs low without cutting quality. Here’s how.

? Breaking Industry Rules

They question old ways of doing things.

They cut out steps that add cost without adding value.

Example:

• Southwest Airlines flew point-to-point instead of hub-and-spoke routes. It cut delays and saved money.

? Tight Design and Execution

Their product design and operations work hand in hand.

keeps things moving quickly and minimizes waste.

Example:

• Cheesecake Factory’s kitchen runs like a Chinese restaurant. Dishes follow the same cooking steps, saving time and cutting waste.

? Building Their Own Tools

They don’t settle for off-the-shelf tech. They build systems that fit their needs and drive efficiency.

Examples:

• TSMC made its own coding language. It pushed chip production ahead of competitors.

? Speed and Consistency

They work fast and keep things steady. Shorter, more predictable cycles lower costs and boost efficiency.

Examples:

• TSMC has R&D engineers working every shift. It speeds up innovation and fixes problems faster.

3. What It All Means

? It’s More Than Cutting Costs

The best low-cost companies rethink how business works.

They invest in people and build better processes.

? Leaders Must Be Bold and Involved

Great leaders stay hands-on.

They stick around and push for constant improvement.

? Operations Must Be Tight

Efficiency isn’t just about one piece—it's about the whole system.

Product, process, and tech have to work together.

Here are some key excerpts and their meanings:

Conventional Wisdom

Meaning

• A commonly accepted belief or opinion, often assumed to be true without question.
• It represents traditional ideas that people generally agree with.

Excerpt from the article

Conventional wisdom says that low-cost leadership in an industry can be achieved using one-off programs aimed at efficiency improvement and waste reduction."

Real-Life Usage

Conventional wisdom suggests that increasing advertising leads to more sales, but some companies succeed with minimal marketing.

Stems from

Meaning

• Comes from, originates from, or is caused by something.

Excerpt from the article

Achieving the lowest-cost position is mainly about people and creativity. It almost always stems from some powerful customer-centric ideas that are exceptionally well executed.

Real-Life Usage

The company’s recent success stems from its focus on customer experience and innovation.

Stumbled

Meaning

• Made a mistake, faced a challenge, or encountered an unexpected difficulty.

Excerpt from the article

"Most are well known, and while a number of them have stumbled at some point—and some are struggling now—they have all enjoyed extraordinarily long stretches of success."

Real-Life Usage

The startup stumbled in its early years but eventually became a market leader.

Exemplars

Meaning

• Outstanding examples or models of excellence that others can learn from.

Excerpt from the article

Low-cost exemplars enable the employees doing the work, regardless of their level in the organization, to solve the problems they confront."

Real-Life Usage

Apple is often seen as an exemplar of innovative product design and marketing.

Penny-Pinching

Meaning

• Extreme frugality or an excessive focus on saving money, often in a negative way.

Excerpt from the article

Many people assume that their position stems mainly from advantages in efficiency or scale and maybe a fanatical devotion to penny-pinching measures."

Real-Life Usage

The company’s penny-pinching approach resulted in low-quality products and unhappy customers.

The Fallacy

Meaning

• A mistaken belief or flawed reasoning, often based on incorrect logic.

Excerpt from the article

See 'The Fallacy of the Overhead Quick Fix,' HBR July-August 1991.

Real-Life Usage

Believing that more hours always lead to better results is a common fallacy in workplace productivity.

At the Helm

Meaning

• In charge or in control of an organization or group.

Excerpt from the article

In his nearly 30 years at the helm, Romoff built the UPMC system into a behemoth."

Real-Life Usage

Since she took the helm as CEO, the company’s profits have doubled.

Behemoth

Meaning

• A huge and powerful entity, often referring to a large corporation or organization.

Excerpt from the article

In his nearly 30 years at the helm, Romoff built the UPMC system into a behemoth, with 40 hospitals and 100,000 employees."

Real-Life Usage

Amazon has grown into a global behemoth, dominating e-commerce and cloud computing.

Sri