Global cost management trend: from Save-to-Grow to Save-to-Transform
Deloitte Global Cost Survey 2019
Deloitte has studied cost management surveys in a row of years regionally, and has now completed the second Global Cost Survey 2019 with most of the world economy covered. The respondents broadly represent the CXO level thinking. Most of the respondents have cost transformation programs in sight, and most of them have also completed programs during the recent years, yet with quite high failure rates: companies seem to enter cost programs with high targets, but generally fail to deliver the expected results.
Successful cost programs involve also larger scale technology transformations - The traditional, tactical level cost improvement means have been largely used by the companies, as well as the more strategic structural and business portfolio related means, too. Interestingly, the respondents with the highest success rates have additionally employed larger scale technology transformations as part of their programs.
From Save-to-Grow to Save-to-Transform - This leads to the key theme of this year’s study: “Save-to-transform as a catalyst for facing digital disruption”. Results show evidence of how digital disruption and innovation are reshaping the business landscape globally. This new mindset requires savings to invest in digital technologies and technology infrastructure to make operations more efficient and effective. It enables new and more agile business models to prosper in a digitally disrupted market.
Think technology as the disruptor - The key difference between today’s technology driven transformations and the ones in the past, is the fact that the technology can now really enable new business models, exponential growth and scalability leading to radically different cost structures and returns. However, this is only true if you dare to think technology as the disruptor (do different things and do the current things differently), not as the newer version of what you already do, i.e. technology replacements or rationalizations or robotization of current processes.
Value from ecosystems - One element of new thinking is also the coverage: thinking of your complete value network or ecosystem rather than only your immediate organization when initiating cost related transformations. This may be risky and complex from power play perspective, but this is also the only way to make big impact for you and for the whole value network. This way your cost management program positions itself in a larger context and may help you in positive disruption of the ecosystem you are in.
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