Posted: 28 Aug. 2020 4 min.

Here is how 1110 C-level executives are trying to save money right now

Topic: Supply Chain & Cost Reduction

There are many great things about being a partner in a global consulting firm – one of them is having our huge muscle of business research and analysis, which is free at our disposal here in Denmark.

Admitted, sometimes these publications are more nice-to-read than have-to-read, but this latest survey, titled ‘Save-to-thrive’, definitely provides food for thought. Here, we have asked almost 1110 executives around the world, including Denmark, how they are adjusting their cost structure in the wake of the pandemic in order to boost performance and build long-term competitiveness.

First, here is to give you a picture of the seriousness of the situation:

  • Although most companies globally have effectively responded to the immediate crisis and are now starting to focus on recovery, COVID-19 has created a massive focus on cost reduction. Two out of three companies (66%) now expect to pursue cost reduction over the next 12 months, up from just 38% reported before COVID-19.
  • At the same time, quickly adjusting cost structure is considered the number one internal challenge. On top of this, companies face external challenges, including a drop in consumer demand (74%); shift in consumer behaviour (67%); cyber security vulnerabilities (65%), and supply chain challenges (65%).

Like me, you are probably not very surprised by these numbers. Reducing cost is an obvious consequence of the global economic crisis, also among Danish companies where many are already pursuing aggressive cost reduction targets to ensure business continuity or, for some, to encounter a lack of liquidity or lack of credit.

But here is the interesting question: After cutting costs, how will executives pave the way for new revenue streams to move from recovering to thriving in the next normal?

  • Globally and across all regions, roughly two out of three companies expect to pursue automation in all three stages of respond, recover and thrive, making it the clear leader in transformation actions arising from the COVID-19 crisis
  • The fastest growing revenue sources in the future will be digital channels (vs. physical channels); new products and services (vs. existing pre-COVID offerings); and domestic operations (vs. international operations) in order to counter the risks of global supply chains.
  • The top operating model priorities during the next normal are expected to be enhanced IT infrastructure (78%), the enabling of remote work (76%) and the pursuit of pre-sale, sale, and post-sale activities through digital channels (72%).

What all of this tells me are two things – both of which are vital parts of the conversations I am having with our clients right now:

Firstly, the discipline of strategic cost efficiency is back on the table to an extent that we never thought it would be before the pandemic. This means identifying exactly which parts of the business are profitable, and which parts are not in order to cut away loss-making activities, improve cash flows and quickly re-focusing the organisation.

Secondly, after having made these (sometimes difficult) strategic choices, what management groups are looking into right now is how to structure the underlying business in terms of production, processes and organisational setup, what I would call the ‘target operating model’ – the core of the organisation that will ultimately deliver the horsepower you need to move within, through and beyond the crisis.

And let me be blunt, because that’s what we are here for anyways: If you are in any way dealing with these kinds of challenges right now, you will get no better people to ask for help than myself and my high-powered, ambitious Strategy & Operations team here at Deloitte. For years, we have helped companies aligning business models to changing market demands through optimisation of business processes and aligning systems, organisation and governance accordingly – and I’m proud to say that we are very good at what we do.

Yep, that was a clear-cut sales pitch on top of these interesting findings, a bit unusual for these blog posts, but I hope you’re OK with that. Bottom line: as a leader there is little room for error right now when it comes to reconfiguring the organisation. If you want it, we are here to help.

More about the author

Tore Christian Jensen

Tore Christian Jensen

Partner

As a part of the Strategy & Operations practice Tore has worked with analysis, development and implementation of operational strategies. Tore has deep experience with aligning business models to changing market demands through optimisation of business processes and aligning systems, organisation and governance accordingly. He has industry experience from manufacturing, transportation, consumer products and energy. His main focus is on on the operational core processes but he also covers administrative support processes. As a program manager Tore has been leading transformation projects for international clients heading multiple parallel projects and reporting directly to executive committee members. His responsibilities cover everything from initiating assessments, identifying opportunities for improvement to building business cases and following up by designing solutions and driving teams through implementation.