Save-to-transform as a catalyst for embracing digital disruption

Cost-management remains a strong imperative around the world. Companies continue to have positive expectations for revenue growth, with many reducing costs to allow for necessary growth. However, in today’s increasingly digital world, businesses also recognize the need to transform their operations and capabilities with infrastructure investments in key digital innovations—shifting from a save-to-grow to a save-to-transform mindset.

Cost cutting, growth, transformation, and digital technologies converge in cost survey results. More and more, businesses are recognizing the need to transform their operations and capabilities with infrastructure investments in key digital innovations 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.

Based on our survey of more than 1,200 senior executives across all major global regions and industries, we found that cost-reduction remains a global imperative as it continues to be a standard business practice in all regions, with the large majority of global survey respondents (71 percent) planning to undertake cost- reduction initiatives over the next 24 months.

But the story gets more interesting as the prevailing mindset among executives has shifted. Whereas we previously saw a "save-to-grow" mentality with cost- management, we are now seeing the emergence of "save-to-transform." 

Save-to-transform as a catalyst for embracing digital disruption

• Digital risks zoom to the top. Digital disruption is now widely recognized as a top external risk, cited by 61 percent of this year’s global respondents—up from just six percent in 2017.
• Digital disruption and innovation are driving technology implementation. Implementation 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 solutions—although still maturing—now representing the most advanced level of cost management.
• Transformation 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 year’s survey results show the save-to-grow mindset expanding into a save-to-transform mindset.
• Automation and other digital technologies take a lead role in cost reduction. RPA and cognitive technologies such as AI and ML have emerged over the past 24 months as the most common digital capabilities developed to reduce costs.

Save-to-transform provides both growth and defense

• Digital disruption and innovation are reshaping the business landscape globally—and their impact is only increasing.
• Companies today need to harness the transformational power of digital technologies to streamline 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 capitalize on digital disruption—becoming the disrupter, rather than the disrupted.

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Cost management moving forward: A save-to-transform playbook

The save-to-transform playbook includes investment in digital technologies and innovations that can improve every aspect of a business, from business and operating models to market reach, service quality, operating efficiency, use of talent, and the overall customer experience. In addition to fueling both cost savings and revenue growth, these improvements can make a business more resistant to digital disruption and economic downturns by providing a stronger foundation for defense-oriented cost management activities—activities that are sure to be needed at some point in the future.

Although no one knows exactly when the next downturn will occur, it is only a matter of time. Companies today would be well-advised to continue capitalizing on current economic strength while being vigilant and prepared for future economic weakness through a save-to-transform mindset.
 

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Get in touch

David Wu

Partner and China Operations Transformation Leader, Deloitte China

Email: davidwwu@deloitte.com.hk

Phillip Savio

Consulting Director, Deloitte China 

Email: psaviojr@deloitte.com.hk