Deloitte released its first "Global Cost Survey Report", unveiling insights on how disruptive technologies are presenting new cost management challenges and opportunities. In surveying more than 1,000 executive leaders across major global regions about their cost management strategies, the report found cost reduction is a focus of most companies globally (86 percent). However, while nearly half (45 percent) of organizations are pursuing cost reduction targets of less than 10 percent, nearly two-thirds (63 percent) of organizations are failing to meet their goals. As the age of digital disruption looms large, businesses have a choice: Engage new technologies and capitalize on more strategic cost management initiatives or remain hindered by outdated and ineffective models of margin improvement.
“For the first time, we are seeing the emergence of digital solutions, such as cognitive technologies, data analytics, robotics and automation, as primary drivers of effective cost savings” said Omar Aguilar, principal, Deloitte Consulting LLP, and global leader of the strategic cost transformation practice.
"The future of cost management has arrived; companies that fail to keep stride with the pace of innovation and remain complacent with traditional cost management practices will undoubtedly lag behind and fall to more forward-looking competitors."
The rise of digital disruption has manifested both as an emerging external threat and as a profound opportunity for competitive growth. In the United States, 15 percent of all survey respondents view digital disruption as a significant risk to the viability of their business, but the percentages in other regions were significantly lower. That could change very quickly given the exponential nature of technology that will drive digital disruption across all global regions, heightening the need for companies to capitalize on opportunities now to transition toward more innovative cost management strategies.
Deloitte's report provides a forward-looking point of view on how digital innovation and next-generation technologies are emerging as key drivers to reduce business costs to improve margins and enhance bottom-line revenues. However, many global business leaders fail to recognize the sizable advantages provided by unleashing digital solutions, potentially losing significant value by relying on outdated and inefficient cost management models.
Today's organizations operate in a highly challenging and fluid global business environment. Yet, Deloitte finds many global companies (40 percent) continue to use the same basic approaches to cost management — relying on inflexible tactical actions such as streamlining business processes or reducing external spend. These initiatives are likely inadequate in meeting the ever-shifting dynamics of today's fast-paced and uncertain business ecosystem.
“At Deloitte Consulting, we help global and national companies transform their businesses, including implementing cost management and margin improvement strategies that embrace the next-generation technologies impacting costs around the globe” said Jim Moffatt, head of Deloitte Global Consulting.
"As the report uncovers, to take margin improvement to the next level of innovation, organizations must capitalize on the value of exponential digital technologies when managing cost reduction and margin improvement strategies."
Transitioning to the Digital Age
Companies actively engaging digital technologies, such as cognitive data analytics and robotics and automation, can expect strategic impacts that disrupt entire industries and may deliver sustainable cost savings of 30 percent or higher. However, most global companies are operating far below optimal performance when it comes to the arena of cost management. Fortunately, there are several steps companies can begin exploring to capitalize on these transformative opportunities:
- Embrace cognitive/analytics and automation – These digital technologies can perform far beyond human ability, empowering companies to analyze mountains of data and identify key costs savings opportunities. These technologies will help increase efficiency and effectiveness — evolving new platforms and driving cost improvement across the entire enterprise.
- Gain knowledge and expertise – Operating at the forefront of next-generation digital solutions requires the right know-how for proper implementation. Arm your company with specialists in digital analytics, data science and automation and prepare management to adopt the latest and emerging strategic practices in determining effective cost reduction.
- Disrupt – Explore new tools, engage new opportunities for growth, and empower more dynamic strategies to improve cost margins. Disrupt traditional and outdated operating models, and adopt the latest innovations in digital solutions.
In an increasingly competitive and rapidly transforming global business environment, effective cost management is becoming a truly strategic differentiator for innovative companies. By embracing new digital solutions and understanding the value of investing in next-gen cost and margin improvement solutions, business leaders can position their companies to evolve through disruption and capture the opportunities of the future.
For additional information on Deloitte's “Global Cost Survey Report” click on the link https://goo.gl/oXtrif.