1、Save-to-transform as a catalyst for embracing digital disruptionDeloittes second biennial global cost surveyApril 2019ContentsExecutive summary 4 About the study 8 Key global insights 12Other catalysts of cost reduction 26Digital and technology solutions applied to cost management 30Save-to-transfor
2、m as a catalyst for embracing digital disruption 38Looking ahead 50Appendix A:Global insights from key industries 54Appendix B:Zero-based budgeting 682Save-to-transform as a catalyst for embracing digital disruption|Deloittes second biennial global cost surveyDigital technology and digital disruptio
3、n have burst onto the global scene as key levers for cost management and business transformation.In Deloittes 2017 Biennial Global Cost Survey,1 digital disruption was identified as an emerging risk by respondents in the United States but was barely visible elsewhere.Now,however,digital riskincludin
4、g digital disruption and cybersecurityrank among the top external risks globally.While cost management remains a strong imperative around the world,the prevailing mindset seems to be expanding from save-to-grow to save-to-transform.Companies in all regions continue to have very positive expectations
5、 for revenue growth,and many are using cost reduction as a tool to help fund their required growth investments.However,in todays increasingly digital world,more and more businesses also recognize the need to transform their operations and capabilities with infrastructure investments in key digital i
6、nnovations such as robotic process automation,cognitive technologies,business intelligence,and cloud-based ERP systems.These digital technologies and innovations can deliver dramatic improvements in competitiveness,performance,operating efficiency and,increasingly,cost savings.Equally important,they
7、 can also strengthen a companys positioning for adverse future events,including economic downturns and digital disruption.In this highly dynamic environment where digital innovation is a critical enabler for both cost reduction and business transformation,we are delighted to share the findings from
8、our second biennial global cost survey.The study includes responses from more than 1,200 executives and senior business leaders across all major global regions,with strong representation from every major industry.This report provides an up-to-date view of the cost management practices and trends sha
9、ping the future of business globally.It also takes a detailed look at how the latest digital technologies and cost management strategies are acting as a catalyst for transformation in a world being actively redefined by digital disruption.We hope you find these insights useful and look forward to he
10、aring your thoughts and feedback.ForewordOmar Aguilar Strategic Cost Transformation Global Market Offering LeaderJason Girzadas Managing Principal,Consulting Deloitte Global1 Thriving in uncertainty in the age of digital disruption:Deloittes first biennial global cost survey report,December 20173Sav
11、e-to-transform as a catalyst for embracing digital disruption|Deloittes second biennial global cost surveyExecutive summaryKey global insightsCost management remains a global imperative.Cost reduction continues to be a standard business practice in all regions:71%are planning to undertake cost reduc
12、tion initiatives over the next 24 monthsFailure rates are also up.Globally,81%of respondents were unable to fully meet their cost reduction targets(18 percentage points worse than in 2017)Nearly 2/3of the companies that failed to meet their cost targets fell short by 25 percent or more,achieving les
13、s than 75 percent of their targeted cost savings4%of global respondents exceeded their cost targetsCost targets are up.Globally,more than 2/3of respondents are targeting total cost reductions of 10%or higher(up from 55 percent of respondents in 2017)Nearly 1/3of this years global respondents have co
14、st targets above 20%Growth expectations remain very positive.Globally,86%of respondents saw their revenues increase over the past 24 months,and the same number expect their revenues to increase over the next 24 monthsDigital risks top the list of external risks.In 2017,macroeconomic concerns were th
15、e No.1 external risk.However,that risk has now been surpassed by two digital-related risks:Digital disruption was barely on the radar in 2017,except in the United States;however,it is now recognized as a top external risk in all regions except LATAM.Information systems are the top internal risk.Reli
16、ability and functionality of information systems is the top internal risk globally,particularly in the United States and Europe.That risk is followed closely by recruitment,development,and retention of talent;and by lack of controls,processes,and systems to ensure business continuity.Save-to-grow is
17、 evolving into save-to-transform.Sales growth,product profitability,and technology implementationremain in a virtual three-way tie as the top strategic priorities globally over the next 24 months.The increasing emphasis on technology implementationalong with digital enablementreflects a new transfor
18、mation mindset for cost management.Growth and competition remain the primary drivers.Over the next 24 months,the top three drivers for cost management globally are expected to be:1.Required investment in growth areas2.Intensified competition among peer group3.Increased international growth opportuni
19、tiescybersecurity digital disruption4Save-to-transform as a catalyst for embracing digital disruption|Deloittes second biennial global cost surveyKey global insightsTechnology capabilities are the primary development focus.In developing their capabilities,surveyed companies have primarily been focus
20、ing on cognitive and artificial intelligence(AI),ERP infrastructure,and especially automation.This focus on technology is consistent with a save-to-transform mindset,with companies investing more time,money,and effort in capabilities that contribute to digital enablement and digital transformation.B
21、arriers and lessons learned.Implementation challenges remain the top barrier to successful cost reduction initiatives,followed by lack of effective ERP systems and infeasible targets.The top lessons learned are:invest in technology improvements to enable data availability,reliability,and decision ma
22、king;design a solid tracking and reporting process;and assess,validate,and adjust targets to fit the realities of implementation.Top cost reduction actions have been mostly tactical,but strategic actions are expected to gain ground.The most common cost reduction action over the past 24 months was st
23、reamlined business processes,followed by streamlined organization structure and improved policy compliance.However,strategic cost actions are expected to gain ground over the next 24 months,to a point that the mix of tactical and strategic actions will be more closely balanced.Other catalysts of cos
24、t reductionCost management maturity levels have room to grow.Roughly 2/3of companies globally do not have highly mature cost management practices.The United States leads the way with:50%of US respondents reporting a high level of maturity where cost policies and procedures are continually reviewed a
25、nd examined to ensure best practices around efficiency and cost management.Impact of M&A activity on cost reduction efforts.Similar to new CEOs,there is a common belief that merger and acquisition(M&A)activity increases the likelihood of cost reduction as companies pursue efficiencies and savings fr
26、om a merger.However,the global survey results indicate M&A only increases the likelihood of cost reduction by:7%,relatively(in the US,the likelihood increases to 11%)Impact of a new CEO on cost reduction efforts.Despite a common belief that appointment of a new CEO makes cost reduction more likely,o
27、ur global survey results show it only increases the likelihood of cost reduction by:1%,relatively(the US is the only region showing a more positive difference,at 10%)5Save-to-transform as a catalyst for embracing digital disruption|Deloittes second biennial global cost surveyCloud leads the pack.Glo
28、bally,cloud is the most widely implemented digital technology covered by our survey,well ahead of business intelligence,automation,and cognitive/AI.49%Cloud35%Business intelligence 25%Automation25%Cognitive/AIDigital and technology solutions applied to cost managementDigital leaders make a differenc
29、e.Companies with a designated digital leader report much higher levels of technology implementation on average:140%higher(across all four technologies reviewed)Why cloud?The two top reasons globally for using cloud are:Number 1 at:64%Tighten data security and business control Number 2 at:63%Reduce c
30、osts and increase productivity Cloud implementations are reported to have a very high success rate in meeting expectations globally(85 percent),with 56 percent of respondents indicating cloud met expectations and 29 percent indicating it exceeded expectations.Why cognitive and AI?As with RPA,the two
31、 top reasons globally for applying cognitive/AI solutions are:Number 1 at:76%Reduce costs and increase productivity Number 2 at:68%Tighten data security and business control The overall success rate in meeting expectations for cognitive/AI is reported to be nearly as high as clouds(83 percent),with
32、36 percent of global respondents indicating cognitive/AI met expectations and 47 percent indicating cognitive/AI exceeded expectations.Why robotic process automation?Globally,and in all regions,the most common reasons for using robotic process automation(RPA)are:Number 1 at:80%Reduce costs and incre
33、ase productivity Number 2 at:69%Tighten data security and business control RPA implementations are reported to have a high success rate in meeting expectations globally(76 percent),with 41 percent of respondents indicating RPA met expectations and 35 percent indicating RPA exceeded expectations.In g
34、eneral,the United States has the highest implementation rates for all of the technologies,while LATAM has the lowest.6Save-to-transform as a catalyst for embracing digital disruption|Deloittes second biennial global cost surveyDigital disruption and innovation are driving technology implementation I
35、mplementation of numerous digital technologies is expected to skyrocket over the next 24 months.Digital solutions are the most advanced level of cost management.Cost management practices and approaches have grown increasingly sophisticated over time,with digital cost solutionsalthough still maturing
36、now representing the most advanced level of cost management.Companies that relied on more traditional cost management methods in the past are now finding that digital solutions can open the door to a whole new level of savings,as well as enabling new and more innovative business models.Transformatio
37、n is an emerging focus.Our 2017 survey found many companies around the world were managing costs with a save-to-grow mindset,pursuing cost savings to fund their growth strategies in an improving economy.This years survey results show the save-to-grow mindset expanding into a save-to-transform mindse
38、t.With save-to-transform,technology becomes a key lever(in addition to cost,growth,and talent).Companies in this mode continue to focus on cost reduction as a way to fund their growth strategies;however,they also invest in IT and innovation that can transform the business and help it survive and thr
39、ive in a world of digital disruption.Automation and other digital technologies take a lead role in capabilities developed.RPA and cognitive technologies such as AI and machine learning(ML)have emerged over the past 24 months as the most common digital capabilities developed to reduce costs.ERP infra
40、structure is also receiving significant effort and attention,with many companies making the transition to cloud-based ERP.Save-to-transform provides both growth and defense.This years survey respondents continue to have a very positive business outlook,bolstered by one of the longest periods of econ
41、omic expansion in history.However,economies are cyclical,and even the strongest expansion can defy gravity for only so long.Potential warning signs are starting to emerge in the survey data,including:97%increase in global respondents concerned about macroeconomic risk over the next 24 months20%incre
42、ase in US respondents who expect a significant reduction in consumer demand over the same periodDigital disruption and innovation are reshaping the business landscape globallyand their impact is only increasing.Companies today need to harness the transformational power of digital technologies to str
43、eamline their cost structures and generate strategic cost savings that are both significant and sustainable.These improvements can help a company achieve its immediate growth objectives while preparing for the inevitable ups and downs of the economic cycle.They can also position the company to capit
44、alize on digital disruptionbecoming the disrupter,rather than the disrupted.Digital risks zoom to the top.Digital disruption is now widely recognized as a top external risk cited by:61%(of this years global respondents)up from just6%(in 2017)Cybersecurity received similar recognition with:62%ranking
45、 it at or near the top of the external risks list both globally and in all regions except LATAM.Save-to-transform as a catalyst for embracing digital disruptionAll technologies reviewed are expected to be implemented at a level of 47%or higher over the next 24 months63%Cognitive/AI 62%Automation The
46、 technology expected to be the most actively implemented is cognitive(planned or in-process),followed closely by automation.7Save-to-transform as a catalyst for embracing digital disruption|Deloittes second biennial global cost surveyDeloitte Consulting LLP(Deloitte or Deloitte Consulting)engaged Re
47、search Now to conduct a global cost management survey in order to better understand business leaders perspectives on current and future cost reduction initiatives within large companies and multinationals.Study objectivesUnderstand factors,approaches,actions,and targets related to cost initiativesAs
48、sess the effectiveness of the cost actions,including lessons learned from previous effortsUnderstand the drivers and scope of past and future cost initiativesProvide context on how digital disruption and advanced digital technologies are affecting cost managementAssess industry results,and provide i
49、nsights on different behaviors related to cost reductionMethodologyData was collected through detailed online surveys conducted between November and December 2018.JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberUnited States(226 responses)Europe(414 responses)Asia Pacific(A
50、PAC)(332 responses)Canada(50 responses)Latin America(LATAM)(167 responses)South Africa(30 responses)FirmographicsThe survey included responses from 1,219 executives directly involved in cost management in their organizations.Respondents were from 24 countries representing all major regions,including
