Save-to-transform as a catalyst

for embracing digital disruption Deloitte’s

second biennial global cost survey
Global Cost Report 2019-2020
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Contents Foreword

Executive summary 4 Digital technology and digital disruption have burst onto the
global scene as key levers for cost management and business
About the study 8
transformation. In Deloitte’s 2017 Biennial Global Cost Survey,1
Key global insights 12 digital disruption was identified as an emerging risk by respondents
Other catalysts of cost reduction 26 in the United States but was barely visible elsewhere. Now, however,
digital risk—including digital disruption and cybersecurity—rank
Digital and technology solutions applied to cost management 30
among the top external risks globally.
Save-to-transform as a catalyst for embracing digital disruption 38
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
Looking ahead 50
expectations for revenue growth, and many are using cost reduction as a tool to help fund their required
growth investments. However, in today’s increasingly digital world, more and more businesses also recognize
Appendix A: Global insights from key industries 54
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-
Appendix B: Zero-based budgeting 68
based ERP systems.

These digital technologies and innovations can deliver dramatic improvements in competitiveness,
performance, operating efficiency and, increasingly, cost savings. Equally important, they can also strengthen
a company’s 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 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 shaping 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 hearing your thoughts and feedback.

Omar Aguilar Jason Girzadas

Strategic Cost Transformation Managing Principal, Consulting
Global Market Offering Leader Deloitte Global

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Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Executive summary
Key global insights Key global insights

Cost Cost targets are up. Failure rates are also up. Technology capabilities are the Top cost reduction actions Barriers and lessons learned.
management Globally, more than Globally, primary development focus. have been mostly tactical, but Implementation challenges remain
remains a global In developing their capabilities, surveyed
strategic actions are expected the top barrier to successful cost
imperative. 2/3 81% to gain ground.
companies have primarily been reduction initiatives, followed by lack
of respondents are targeting of respondents were unable to fully meet their cost
Cost reduction reduction targets focusing on cognitive and artificial The most common cost reduction of effective ERP systems and infeasible
continues to be a total cost reductions of intelligence (AI), ERP infrastructure, action over the past 24 months was targets. The top lessons learned are:
(18 percentage points worse than in 2017)
standard business and especially automation. This focus streamlined business processes, invest in technology improvements
practice in all regions:
10% or higher
on technology is consistent with a save- followed by streamlined organization to enable data availability, reliability,
(up from 55 percent of
to-transform mindset, with companies structure and improved policy and decision making; design a solid
71% respondents in 2017) Nearly
investing more time, money, and effort compliance. However, strategic cost tracking and reporting process; and
are planning to 2/3 in capabilities that contribute to digital actions are expected to gain ground assess, validate, and adjust targets
undertake cost of the companies that failed to meet their cost targets enablement and digital transformation. over the next 24 months, to a point that to fit the realities of implementation.
Nearly
reduction initiatives fell short by 25 percent or more, achieving less the mix of tactical and strategic actions
than 75 percent of their targeted cost savings
over the next 1/3 will be more closely balanced.
24 months
of this year’s global
respondents have cost
targets above 4%
of global respondents exceeded their cost targets
20%
Other catalysts of cost reduction

Growth expectations remain very positive. Digital risks top the list of external risks. Cost management maturity Impact of a new CEO on cost Impact of M&A activity on cost
Globally, In 2017, macroeconomic concerns were the No. 1 external
levels have room to grow. reduction efforts. reduction efforts.
risk. However, that risk has now been surpassed by two Roughly Despite a common belief that Similar to new CEOs, there is a common
86% digital-related risks: appointment of a new CEO makes belief that merger and acquisition
of respondents saw their revenues increase over 2/3 cost reduction more likely, our (M&A) activity increases the likelihood
cybersecurity digital disruption
the past 24 months, and the same number expect of companies globally do not global survey results show it only of cost reduction as companies pursue
their revenues to increase over the next 24 months Digital disruption was barely on the radar in 2017, except in the increases the likelihood of cost efficiencies and savings from a merger.
have highly mature cost
United States; however, it is now recognized as a top external risk reduction by: However, the global survey results
management practices.
in all regions except LATAM. indicate M&A only increases the
1%, relatively likelihood of cost reduction by:
(the US is the only region showing
The United States leads the way with: a more positive difference, at 10%) 7%, relatively
Information systems are the Save-to-grow is evolving into Growth and competition
top internal risk. save-to-transform. remain the primary drivers. 50% (in the US, the likelihood increases to 11%)

of US respondents reporting a high

Reliability and functionality of Sales growth, product profitability, Over the next 24 months, the top three
level of maturity where cost policies
information systems is the top and technology implementation drivers for cost management globally
and procedures are continually reviewed
internal risk globally, particularly remain in a virtual three-way tie are expected to be:
and examined to ensure best practices
in the United States and Europe. That as the top strategic priorities globally
1. R
 equired investment around efficiency and cost management.
risk is followed closely by recruitment, over the next 24 months. The
in growth areas
development, and retention of talent; increasing emphasis on technology
2. Intensified competition
and by lack of controls, processes, and implementation—along with
among peer group
systems to ensure business continuity. digital enablement—reflects a new
3. Increased international
transformation mindset for
growth opportunities
cost management.

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Digital and technology solutions Save-to-transform as a catalyst for

applied to cost management embracing digital disruption

Cloud leads the pack. Digital risks zoom to Digital disruption and innovation are driving technology implementation
Globally, cloud is the most widely implemented digital technology In general, the United States has the highest the top. Implementation of numerous digital technologies is expected to skyrocket over the next
covered by our survey, well ahead of business intelligence, implementation rates for all of the technologies, Digital disruption is now 24 months.
automation, and cognitive/AI. while LATAM has the lowest. widely recognized as a top
external risk cited by:
49% 35% 25% 25% All technologies 63% 62%
reviewed are expected
Cloud Business Automation Cognitive/AI 61% to be implemented at Cognitive/AI Automation
intelligence (of this year’s global respondents) a level of
up from just The technology expected to be the most actively
47% or higher implemented is cognitive (planned or in-process), followed
6% over the next 24 months closely by automation.
Why cloud? Why robotic process Why cognitive and AI? (in 2017)

The two top reasons globally for using

automation? As with RPA, the two top reasons globally
cloud are: Globally, and in all regions, the most for applying cognitive/AI solutions are:
common reasons for using robotic Cybersecurity received similar Digital solutions are the most advanced level of cost management.
Number 1 at: Number 2 at: Number 1 at: Number 2 at:
process automation (RPA) are: recognition with:
Cost management practices and approaches have grown increasingly sophisticated over time,
64% 63% 76% 68% 62% with digital cost solutions—although still maturing—now representing the most advanced level
Number 1 at: Number 2 at:
Tighten data security Reduce costs and Reduce costs and Tighten data security of cost management. Companies that relied on more traditional cost management methods in
and business control increase productivity 80% 69% increase productivity and business control ranking it at or near the
the past are now finding that digital solutions can open the door to a whole new level of savings,
top of the external risks list
Reduce costs and Tighten data security as well as enabling new and more innovative business models.
Cloud implementations are reported to both globally and in all regions
increase productivity and business control
have a very high success rate in meeting The overall success rate in meeting
except LATAM.
expectations globally (85 percent), with expectations for cognitive/AI is
56 percent of respondents indicating RPA implementations are reported to reported to be nearly as high as cloud’s
cloud met expectations and 29 percent have a high success rate in meeting (83 percent), with 36 percent of global
Transformation is an emerging focus. Automation and other digital
indicating it exceeded expectations. expectations globally (76 percent), with 41 respondents indicating cognitive/AI met
Our 2017 survey found many companies around the world were managing
technologies take a lead role in
percent of respondents indicating RPA met expectations and 47 percent indicating
costs with a save-to-grow mindset, pursuing cost savings to fund their
capabilities developed.
expectations and 35 percent indicating RPA cognitive/AI exceeded expectations.
exceeded expectations. growth strategies in an improving economy. This year’s survey results show RPA and cognitive technologies such as AI and
the save-to-grow mindset expanding into a save-to-transform mindset. machine learning (ML) have emerged over the
With save-to-transform, technology becomes a key lever (in addition to past 24 months as the most common digital
cost, growth, and talent). Companies in this mode continue to focus on capabilities developed to reduce costs.
Digital leaders make a difference. cost reduction as a way to fund their growth strategies; however, they also ERP infrastructure is also receiving significant
Companies with a designated digital leader report much invest in IT and innovation that can transform the business and help it effort and attention, with many companies
higher levels of technology implementation on average: survive and thrive in a world of digital disruption. making the transition to cloud-based ERP.

140% higher
(across all four technologies reviewed) Save-to-transform provides both growth Digital disruption and innovation are
and defense. reshaping the business landscape
This year’s survey respondents continue to have a very positive
globally—and their impact is only
business outlook, bolstered by one of the longest periods of
increasing.
economic expansion in history. However, economies are cyclical, Companies today need to harness the transformational
and even the strongest expansion can defy gravity for only so power of digital technologies to streamline their cost
long. Potential warning signs are starting to emerge in the survey structures and generate strategic cost savings that are
data, including: both significant and sustainable. These improvements
can help a company achieve its immediate growth
97% 20% objectives while preparing for the inevitable ups and
increase in global respondents increase in US respondents who expect
downs of the economic cycle. They can also position the
concerned about macroeconomic risk a significant reduction in consumer
over the next 24 months demand over the same period
company to capitalize on digital disruption—becoming
the disrupter, rather than the disrupted.

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

About the survey

Deloitte Consulting LLP (Deloitte or Deloitte Consulting) engaged Research Now to The countries represented in the survey account for 87 percent of the world’s
conduct a global cost management survey in order to better understand business economy as measured by Gross Domestic Product (GDP). Outside the United States,
leaders’ perspectives on current and future cost reduction initiatives within large respondents represented 66 percent to 82 percent of their regional economies as
companies and multinationals. measured by GDP.
Figure 1. Respondents’ coverage and representation of regions and the world economy
Study objectives
Survey sample coverage Survey sample coverage1
% of respondent’s economic footprint by % of respondent’s economic footprint by 2016 GDP per region
Comparison to 2017 Global
Understand factors, Assess the Understand the Provide context on Assess industry 2016 GDP
Cost Survey results2
approaches, actions, effectiveness of the drivers and scope how digital disruption results, and provide 100
and targets related to cost actions, including of past and future and advanced insights on different 13% 18% 17% 2017 global cost report included
34% 1,013 responses, whereas this
cost initiatives lessons learned from cost initiatives digital technologies behaviors related to 80
year 1,219 responses were
Survey
previous efforts are affecting cost cost reduction gathered, which represents a
respondents 60
management represent 20% increase.
100%
87% 87%
of the world’s 40 Respondents to the 2017 survey
economy 66% 82% 83% represented 85% of the world's
20 economy, whereas this year's
respondents represent 87%.
Methodology 0
USA* LATAM** Europe APAC
Data was collected through detailed online surveys conducted between November and December 2018.
GDP of countries surveyed Surveyed Not Surveyed
GDP of potential countries not surveyed
* US Survey is the only country-based survey
Source: The World Bank – GDP 2016
January February March April May June July August September October November December ** Only two countries Brazil and Mexico represent 61% of the regional economy, and Chile represents 5%
1
This sample excludes responses from Canada and South Africa, although responses have been included
in global averages
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Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report

Firmographics
Only relevant executive positions with responsibility for cost management
The 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: decisions were surveyed. Almost 25 percent of responses were from presidents
Europe representation:
or CEOs; more than 20 percent were from CFOs and COOs; the rest were from
United States Europe UK; Germany; France; Spain; other executive management positions.
(226 responses) (414 responses) Netherlands; Italy; Belgium; Finland;
Canada Norway; Denmark; Sweden Figure 2. Respondents’ management level
(50 responses)
Management level breakdown1 Breakdown of management level
% of respondents by level % of respondents by level
100
18%
24% 27% 23%
24%
80
APAC Almost 25% of 12%
responses were from 19% 10%
representation: president or CEO roles,
21% 25% In general, C-suite
60
India; China 42% more than 20% from and executive
14% management-level
(incl. Hong CFO & COO roles, and 14% 14%
the rest from other 40 response profiles
Kong); executive management 60% were maintained in
Australia; positions 21% all regions
20 42% 38% 37%
LATAM representation: Japan; New
Mexico; Brazil; Chile Zealand; 14%
Singapore 0
USA LATAM Europe APAC
Latin America (LATAM)
(167 responses)
South Africa Asia Pacific (APAC) President, CEO CFO, COO
(30 responses) (332 responses) Executive Management (business units) 1
This sample includes responses from Canada and South Africa
Executive Management (enabling functions)

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Industry-specific information was collected to provide meaningful insights for six In the United States, 55 percent of respondents had more than 10,000 employees.
major industries: Consumer & Industrial Products (C&IP); Financial Services On average, 58 percent of respondents in LATAM, Europe, and APAC had more than
(FS); Technology, Media & Telecommunications (TMT); Energy & Resources 5,000 employees.
(E&R); Life Sciences & Health Care (LSHC); and Public Sector (PS).
Figure 5: Respondents’ employee headcount
Figure 3: Industry breakdown

Industry breakdown1 Industry breakdown by region In the US, 55% of respondents had more than 10K employees On average, 58% of respondents had more than 5K employees in LATAM, Europe, and APAC
% of total respondents Number and percentage of responses by industry 25
23% 30

2% Total 21%
20%
25
20
7% US 63 39 41 41 28 11 3 226 22%
21%
19%

Total respondents (%)

19%

Total respondents (%)

12% 27% 20
18%
15
14% 17%
Europe 109 100 68 45 50 32 10 414 12% 15%15% 15%
14%
15 13% 13%
12% 12%
10
8% 10%10% 10%
13% APAC 77 68 72 39 46 23 7 332 10
8% 8%
7% 7%
11% 6%
5

21%
5
3%
LATAM 61 37 27 20 7 8 7 167
18% 0
0
Less 5,000 10,000 25,000 50,000 More Less 1,000 2,500 5,000 10,000 25,000 50,000 More
0% 20% 40% 60% 80% 100%
than to to to to than than to to to to to to than
Consumer & Industrial Products Financial Services Technology, Media & Telecommunications Life Sciences & Health Care 5,000 9,999 24,999 49,999 99,999 100,000 1,000 2,499 4,999 9,999 24,999 49,999 99,999 100,000

Energy & Resources Public Sector Other US LATAM Europe APAC

1
This sample includes responses from Canada and South Africa This sample excludes responses from Canada and South Africa

Among the participating US companies, 67 percent reported revenues greater than

At the global level, revenue generated by North America and Europe is highest at
$5 billion. Among the participating companies from APAC, LATAM, and Europe, on
30 percent and 32 percent, respectively.
average 60 percent reported revenues greater than $1 billion.
Figure 6: Revenue generation by geography

Figure 4: Respondents’ annual revenue 6% 5%

11% 7%
8%
12% 30%
8%
25 17%
22%
30

20% 21% Global US 60% LATAM 41%

23% 24%
20 25

15% 18%
15% 20
18% 17%
15
13% 16% 16%
15% 14% 15% 14% 32% 30%
15
13% 13%
11%
10
10% 9% 8%8% 8% 5%
6% 10
7% 7% 7% 7%
5% 6% 8%
5
3% 4% 4%
3% 3% 21%
5

11% 36%
0 0

$1B $3B $5B $10B $20B $30B Over $200M $500M $1B $3B $5B $10B $20B $30B Over $60B Europe APAC
to less to less to less to less to less to less $60B to to to to to to to to
than than than than than than less than less than less than less than less than less than less than less than 58%
$3B $5B $10B $20B $30B $60B $500M $1B $3B $5B $10B $20B $30B $60B 18% 16%
20%
US LATAM Europe APAC

Note: Europe, LATAM, and APAC Survey were conducted in local currency – for analysis purposes they have been converted to US dollars
North America Europe APAC LATAM Middle East & Africa

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Cost management remains a global imperative

Cost reduction continues to be a standard business practice in These shifts may stem from the relatively positive economic
all regions, with the large majority of global survey respondents conditions globally, underpinned by strong economic performance
(71 percent) planning to undertake cost reduction initiatives over in the United States.

Key global insights

the next 24 months (see figure 7). This number is down from 86
percent in 2017, largely due to changes in LATAM where there was On average, US companies are the most likely to undertake
a shift in the number of responses from “likely” to “neutral,” and in cost reduction actions (84 percent). The likelihood is significantly
Europe where there was a similar shift from “neutral” to “unlikely.” lower for APAC (70 percent), Europe (66 percent), and LATAM
(65 percent).

Figure 7. Likelihood of cost reduction in the next 24 months

Globally, 71% of respondents plan to undertake cost reduction initiatives

84% Likelihood Comparison to 2017 Global Cost
71% Survey results1

Total respondents (%)

70%
66% 65%
Global likelihood has decreased
from 86% to 71%, mainly due to
respondents shifting from “likely” to
2
“neutral” in LATAM, and from
24% 23% 22% 3 “neutral” to “unlikely” in Europe
1 20%
10% 9% 10% 12%
6% 8% “Neutral” and “unlikely” positions
both increased 7 percentage points
Likely Neutral Unlikely
Global US Europe LATAM APAC
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

Key findings
On average, 71% of respondents plan to undertake cost reduction initiatives, with the US the highest at 84% and LATAM and Europe
the lowest at 65% and 66%, respectively
On average 2 out of 10 respondents are neutral with regard to cost reduction initiatives
Only 1 out of 10 respondents are unlikely to pursue cost reduction in the next 24 months

Cost targets are up

Globally, more than two-thirds of respondents (68 percent) are A relatively large percentage of respondents in LATAM (37 percent)
targeting total cost reductions of 10 percent or higher—up from and Europe (34 percent) have cost targets above 20 percent. This
55 percent of respondents in 2017. Nearly one-third of this year’s is particularly noteworthy for Europe, where past cost targets were
global respondents (31 percent) have cost targets above 20 significantly less aggressive than the global average. Economic
100
percent, while a slightly smaller number (30 percent) have cost performance and challenges in the region may be driving this shift.
targets
90 of less than 10 percent (see figure 8).
80

Figure 8. Cost reduction targets1

70

60
Most respondents (68%) reported targets above 10% Comparison to 2017 Global Cost
Cost targets
Survey results2

Total respondents (%)

50
42% 40%
40 37% 35% 37%
30% 30% 30% 33% 34% The number of respondents with cost
32% 31%

Globally, more than two-thirds

27% 27% targets above 10% has increased
30 3 3 25%
significantly (~15 percentage points),
20
mainly due to:
2 1 1

of respondents (68 percent) are

10 16% nominal increase in the US in
0 the 10 to 20% range
Less than 10% 10% to 20% More than 20%

targeting total cost reductions of

21% nominal increase in Europe
Global US Europe LATAM APAC
in the more than 20% range
1
Respondents that selected “no specific targets were established” were not tabulated in results
2
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

10 percent or higher—up from 55 Key findings

percent of respondents in 2017.

On average, 68% of respondents plan to pursue cost reduction targets above 10%
Only 27% to 32% of companies across regions reported cost reduction targets of less than 10%
Within cost targets of more than 20%, LATAM and European respondents are pursuing targets above the average, with
37% and 34% respectively

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Failure rates are also up Falling far short of targeted savings

Globally, 81 percent of respondents were unable to fully meet their Respondents from Europe had the highest overall failure rate (83 This year’s survey included an additional question to help (65 percent) of the companies that failed to meet their cost targets
cost reduction targets (18 percentage points worse than in 2017). percent), perhaps at least partly due to the fact that they recently determine the extent to which respondents partially succeeded in fell short by 25 percent or more, achieving less than 75 percent of
Only 4 percent of global respondents exceeded their cost targets established higher targets. LATAM had the lowest overall failure meeting their cost targets. The results show that nearly two-thirds their targeted cost savings (see figure 10).
(see figure 9). rate (77 percent); however, the percentage of LATAM respondents
that exceeded their goals also declined sharply, from 16 percent in
2017 to only 1 percent in this year’s survey. Figure 10. A closer look at failure rates

Figure 9. Success in meeting cost targets

1% 1%

10% 16%
81% of respondents globally are unable to fully meet their cost reduction target 22%
30% 40% 1 32%
Success in meeting targets 1% US 30% 3 LATAM 16%
1 Comparison to 2017 Global
81% 82% 83% 80% Cost Survey results1
80
11% 29% 45%
72% 31%
Failure rates increased 18 2
Total respondents (%)

77%
70
percentage points2 on average. 69%
34%
Some of the main reasons are:
60

• Significant decrease in 20%

50

meeting goals in Europe (21 Global

40 2% 2%
3 percentage points) and the
US (15 percentage points)
30
22% 13% 9%
15% 13% • Significant decline in 1%-74% of
20
12% 14% 33% 32%
exceeding goals in LATAM savings 1%-49% 41% 15%
10 4% 5% 5% 6% (16% to 1%) 34% of savings Europe 19% APAC
1% 24%
0
1
33% 3
Did not meet goals Met goals Exceeded goals 33% 2
65%
Global US Europe LATAM APAC 2
65% 57%

1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
2
This year, a new range in not meeting goals was considered (75-99%); please see next graph for further details Realized 0% of savings Realized 1%-24% of savings Realized 25%-49% of savings

Realized 50%-74% of savings Realized 75%-99% of savings

Key findings Key findings

Failure rate is 81% globally; Europe has the highest failure rate (83%) and LATAM the lowest (72%) APAC is the region with the highest proportion of companies (41%) realizing 75%-99% of targets; LATAM is lowest at 22%
Only 4% of respondents across regions reported exceeding targets 77% of respondents in LATAM met 1%-74% of goals, the highest percentage across regions; APAC was lowest at 57%
LATAM is the region with highest success in meeting targets (22%) US has 40% of respondents with savings realization of 1%-49%, the highest result, in contrast to APAC at 24%

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 Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Growth expectations remain very positive Digital risks top the list of external risks
Globally, 86 percent of respondents saw their revenues increase year’s numbers for past revenue performance and future revenue In 2017, macroeconomic concerns were the No. 1 external risk. Digital disruption was barely on respondents’ radar in 2017,
over the past 24 months, and the same number expect their expectations are virtually identical to the numbers from 2017 However, that risk has now been surpassed by two digital-related except in the United States where it was identified as a rapidly
revenues to increase over the next 24 months. In all regions, this (see figure 11). risks: cybersecurity (62 percent) and digital disruption (61 percent), emerging issue. However, digital disruption is now recognized as a
with macroeconomic concerns falling to third place (59 percent) top external risk in all regions except LATAM, which is lagging a
in a three-way tie with political climate and commodity price bit behind.
Figure 11. Revenue performance and expectations fluctuations (see figure 12).

100

90% Revenue change over past 24 months Figure 12. External risks
86% 86% 87%
90 84% Comparison to 2017
80 Global Cost Survey
Total respondents (%)

results1
Top external risks
70

60 Results from prior survey 1

were virtually the same, 69%
50 showing only 1%-2% 70.000000

1 difference across regions

40
66%
2
30
3 1 64% 64% 64%
65.833333

59% 63% 63%

20

Total responses (%)

62% 62% 62% 62%
7% 7% 8% 7% 7% 7% 8% 7% 6% 61% 61%
10 3% 61.666667

60%
0
59% 59% 59% 59% 59% Top external risks
58% 58% 58%
Increased Remained the same Decreased 57% 57% 57% 57%
1 56%
57.500000

56%
55% 69% 55% 55% 55%
Most respondents continue to foresee a positive revenue outlook in the next 24 months 54%
54%
70.000000

53% 53%
100 3
52%
91% Revenue change over next 24 months 66%
Global
53.333333

86% 86% 87% US Europe 51% 51% 51%

83% 2
90
1 64% 64% 64%
65.833333

80
LATAM APAC 59% 63% 63%

Total responses (%)

Total respondents (%)

62% 62% 62% 62%

61%
49.166667

61%
70 61.666667

60%
60 59% 59% 59% 59% 59%
58% 58% 58%
Global
57% US LATAM 57% 57% Europe APAC
45.000000

57%
50 56%
57.500000

56%
1 2 55% 55% 55% 55%
40 Political climate Macroeconimic concerns Currency fluctuations Commodity price fluctuations
54%
54%
53% 53%
Credit risks Cybersecurity concerns New market entrants 3 Digital disruption
30 53.333333
52%
51% 51% 51%
20
3
8% 9% 10%
10 5% 6% 6% 4% 6% 4% 6% Comparison to 2017 Global Cost Survey results1
Key findings
49.166667

0 “Macroeconomic concerns” was rated the highest external risk globally in the previous survey
Increased Remainded the same Decreased Cybersecurity is was
Digital disruption nownot
the top riskasglobally,
recognized particularly
a major risk in the
previously, but United
it is now Stateshighest risk globally
the second
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
45.000000

On average,
Global APAC reports higher external
US risks in all areas than other regions
LATAM Europe APAC

Thriving
Digital in disruption
uncertainty in is
therecognized
age of digital disruption:
as a top Deloitte’s first biennial
risk globally exceptglobal cost survey report, December 2017
in LATAM
1
Political climate Macroeconimic concerns Currency fluctuations Commodity price fluctuations
Credit risks Cybersecurity concerns New market entrants Digital disruption
Key findings
Global respondents reported similar increases (86%) for both past and expected future revenue growth
LATAM reports a slightly more positive outlook (91%) compared to the global average (86%) Comparison to 2017 Global Cost Survey results1
“Macroeconomic concerns” was rated the highest external risk globally in the previous survey
In all regions, the number of respondents who expect future revenue to decline is slightly lower than the number who experienced a Digital disruption was not recognized as a major risk previously, but it is now the second highest risk globally
decline in the past
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

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 Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Information systems are the top internal risk Save-to-grow is evolving into save-to-transform
To supplement our findings on external risk, we added a new Internal risk rankings in LATAM vary significantly from other Sales growth, product profitability, and technology implementation This increasing emphasis on technology implementation and
question this year focused on internal risks. According to the regions, with lack of strategic plans/execution at the top of the remain in a virtual three-way tie as the top strategic priorities digital enablement globally reflects a new cost management
survey results, reliability and functionality of information systems list (23 percent), followed by liquidity and financial position globally over the next 24 months. However, technology mindset. Deloitte’s 2017 survey highlighted an overall save-to-
is the No. 1 internal risk globally (26 percent), particularly in the (22 percent). implementation is rising as a priority in Europe, APAC, and grow mindset, with many companies around the world using cost
United States (34 percent) and Europe (27 percent). That top risk especially LATAM (see figure 14). reduction to help fund their growth initiatives in an improving
is followed closely by recruitment, development, and retention of In APAC, ratings for the top six internal risks are much more tightly economy. Now, we are seeing “save-to-grow” evolve into a mindset
talent (25 percent) and lack of controls, processes, and systems to clustered than elsewhere, ranging from 22 percent to 26 percent, In the United States, which tends to be a leading indicator for digital we call “save-to-transform,” in which companies continue to pursue
ensure business continuity (24 percent) (see figure 13). with talent being the biggest concern. business trends, digital enablement is the fastest-rising priority, growth while specifically investing in transformative technologies
climbing from 65 percent over the past 24 months to 71 percent and infrastructure that can help them operate more efficiently
Figure 13. Internal risks1 over the next 24 months. and compete more effectively in an increasingly digital
business environment.
34% 2
Figure 14. Strategic priorities

29% 3
1 Past 24 months
27% 27%
26% 2
4 26%
25% 25% 25% 79% 77% 77%
24% 24% 73% 74% 72% 68% 78%76% 73% 73% 72%
76% 73%
23% 69% 70% 69% 70%

Total responses (%)

23% 23% 23% 23% 23%23% 23% 66% 65% 65% 65% 66%66% 68% 67% 68% 68%
22% 22% 22% 22% 62% 62%
59% 56% 56% 59%
21% 54%
20%
19% 19%
Total responses (%)

16% 16% 16%

Global US LATAM Europe APAC

Next 24 months +9% +7% +5% +8% +11%

1 1 1
3 B
A 3 A A C 2
78% 76% 76% 77% B
73% 73% 75% 76% 73% 73% 76%
73% 70%
69% 69% 69% 70% 71% 68% 69%70% 67% 65% 69% 67% 67% 70% 71%

Total responses (%)

64%
Global US LATAM Europe APAC 61% 60%
65% 60% 64% 61%

Lack of stategic plans or execution Liquidity and financial position to Recruitment, development and retention of
to provide clear direction support business plans required talent to support business initiatives

Reliability and functionality of Lack of controls, processes and Lack of regulatory, legal and/or
information systems to support systems to ensure business continuity management controls
business processes and decisions

1
Responses based on risks identified as having the highest impact for respondents' companies Global US LATAM Europe APAC

Sales growth Cost reduction Balance sheet management Product profitability

Organization and talent Technology implementation Digital enablement
Key findings
Top three internal risks globally are: reliability and functionality of information systems to support business processes and
decisions; recruitment, development and retention of required talent to support business initiatives; and lack of controls, processes
Key findings
and systems to ensure business continuity
Product profitability, technology implementation, and sales growth are the top three global priorities over the next 24 months, with
The United States reported on average higher percentage of risk for reliability and functionality of information systems in comparison similar reported levels (73%)
to other regions; LATAM reported the opposite behavior
Europe and APAC were the only regions that reported technology implementation as the No. 1 priority over the next 24 months
Reliability and functionality of information systems is a major concern in Europe and even more so in the United States
Cost reduction is a top-4 priority globally and a top-3 priority in the United States over the next 24 months

4 LATAM reports different risks compared to other regions, centered around lack of strategic plans and liquidity; respondents in APAC

reported human resources-related issues, which also remained a key internal risk across all regions, except for LATAM

Comparing strategic priorities from the past 24 months with those projected for the next 24 months
A. The top three priorities remain the same globally
B. Digital enablement has grown significantly in the United States, as has balance sheet management in Europe (+9% and +11%, respectively)
C. Technology implementation has shown a similar behavior in LATAM (+8%)

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Growth and competition are the main drivers, with Technology capabilities are the primary development focus
emerging concerns about declining demand In developing their capabilities, surveyed companies have primarily Zero-based budgeting (ZBB) capabilities may be receiving more
Drivers of cost management initiatives, both past and future, in consumer demand (55 percent), higher than over the past been focusing on automation (48 percent), cognitive/AI (42 percent), attention than in the past, particularly in Europe and LATAM.
continue to revolve around growth and competition. Over the 24 months (46 percent). In LATAM, the expectation of reduced and ERP infrastructure (41 percent), with automation far above the However, ZBB continues to be the least developed of all the
next 24 months, the top three drivers globally are expected to consumer demand is directionally similar (54 percent expect to rest (see figure 16). capabilities covered by our survey, with only 12 percent of global
be: required investment in growth areas (67 percent), intensified see a significant reduction in the future, up from 48 percent in the respondents having implemented a ZBB system or process (refer to
competition among peer group (66 percent), and increased past). This may be an early warning sign of an economic slowdown. This focus on technology—especially automation—is consistent Appendix B for an analysis on global ZBB status and trends).
international growth opportunities (65 percent). Those same cost with a save-to-transform mindset, with companies investing more
management drivers occupy the top three spots for all regions, That being said, in all regions, liquidity/credit concerns currently time, money, and effort in capability areas that contribute to digital
except in LATAM where unfavorable cost position relative to peer rank as the least common driver for pursuing cost management. enablement, digital disruption, and digital transformation.
group (62 percent) edges out increased international growth This suggests relatively few companies are currently in distress
opportunities (61 percent) for third place (see figure 15). and there is relatively little need for companies to pursue cost
Figure 16. Developed capabilities over past 24 months
reduction with a primary focus on liquidity and working capital.
According to US respondents, cost initiatives over the next 24
months will be increasingly driven by a significant reduction
53% 2 54% 2
1 49% 50%
Figure 15. Drivers of cost management initiatives 48% 49%
48%
45%
45%
Past 24 months 41% 42% 41% 42%
41%
40% 40% 40% 40%
70% 67% 70% 69% 38%
66% 65% 66% 65% 63% 67%
63% 34% 34% 35% 35%
62%64%

Total responses (%)

62% 34%
59% 57% 57% 58%
56% 56% 56% 31% 31%
54% 54% 54%
52% 52% 50% 51% 51% 52% 51% 29%
48% 47% 49% 28%
Total responses (%)

46% 26%
23%

3
16% 16%
12% 11%
10%

Global US LATAM Europe APAC

Next 24 months Global US LATAM Europe APAC

+20% +7% +13% ~18% +6%
A A Created a new executive position Set-up or improved Developed or implemented Developed or implemented
1 2 A C and/or full time positions to drive ERP infrastructure Automation technologies cognitive and artificial intelligence
A B C C 70% 70% 72% cost management technologies
67% 66% 67% 67% 66%
3 65% 62%63% 2 62% 63% 58% 64%
57% 61% 60% 62%61% 61% 61%
55% 59% 58% Implemented new policies and Improved processes for forecasting, Implemented zero-based
55% 53% 54% 54% 55% 55%
51% 51% 52% 52% procedures, and strengthened the budgeting and reporting to enable budgeting, system or process
compliance mechanisms effective cost management
Total responses (%)

Key findings
Cognitive/automation solutions and ERP, along with new policy implementation, are the top developed capabilities
The US and APAC have, on average, higher levels of developed capabilities than Europe and LATAM

Global US LATAM Europe APAC

ZBB continues to be the least developed capability (12% of respondents on average)

Significant Decrease in liquidity Unfavorable cost Changed regulatory Required Intensified Increased
reduction in and tighter credit position relative to structure investment in competition international growth A. Comparison to 2017 Global Cost Survey results1
consumer demand peer group growth areas among peer group opportunities
• Implementation of ZBB increased globally, but especially in Europe and LATAM – up 8 percentage points in both cases
Key findings • Set-up or improved ERP infrastructure has decreased globally (down 8 percentage points), with a significant decrease in LATAM
Investment in growth areas, competition among peer group, and international growth opportunities are top drivers globally over the
next 24 months 1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
The top three global drivers are in most cases also the top three drivers in each major region – except for LATAM
Liquidity has become the driver with the least impact on triggering cost management initiatives (53%), followed by reduction in
consumer demand (55%)

Comparison to past 24 months

A. The top four drivers remain exactly the same
B. Reduction in consumer demand has increased in the United States (+20%)
C. Similarly, unfavorable cost position (+27%), competition among peer group (+24%) and growth opportunities (+20%) have increased in LATAM as well

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 Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Top cost reduction actions globally were mostly tactical Tactical and strategic actions are expected to balance out
The most common cost reduction action over the past 24 months In the United States and LATAM, two of the top cost reduction Over the next 24 months, strategic cost actions are expected to Globally, but particularly in the United States, the most common
was streamlined business processes (38 percent), followed by actions were strategic in nature: (1) increased centralization, and (2) gain ground to a point that the mix of tactical and strategic actions cost action over the next 24 months is expected to be changed
streamlined organization structure (36 percent) and improved changed business configuration. Globally, increased centralization will be closely balanced. In many cases, the expected actions are business configuration, which is strategic. In APAC, implementation
policy compliance (36 percent) (see figure 17). was the most commonly implemented strategic cost action already underway; in other cases, they are planned but not yet being of advanced technologies tops the list.
(35 percent). implemented (see figure 18).

Figure 17. Cost reduction actions over the past 24 months1 Figure 18. Cost reduction actions over the next 24 months1
100
90
80 Global US LATAM Europe APAC Global US LATAM Europe APAC
70 100
Strategic Tactical Strategic Tactical Strategic Tactical Strategic Tactical Strategic Tactical
90 Strategic Tactical Strategic Tactical Strategic Tactical Strategic Tactical Strategic Tactical
60 32% 34% 38% 39% 32% 29% 31% 33% 28% 33%
62% 61% 56% 55% 69% 64% 61% 63% 61% 64% 3
50 1 2 1
80
3 1 2
Total responses (%)

70

Total responses (%)

40
30 60 25% 17% 18%
21% 19% 22% 16% 16% 14% 18%
32% 45% 34% 16% 11% 18% 18%
32% 36% 36% 43% 31% 37% 50 19% 16% 18% 19% 18% 22% 26% 25% 26% 17% 23% 20% 15% 17%
20 35% 38% 29% 41% 46% 39% 41%
21%
37%
34% 31% 30% 30% 33% 36% 33% 31% 29% 33% 30% 32% 13% 22% 22% 22% 20% 22%
20%
29% 31% 22% 10% 15% 19%
25% 26% 26% 30% 33% 36% 34% 28% 24% 34% 38% 30% 40 15% 20%
10
30
44% 42% 40% 41% 40% 35% 48% 35% 47% 51% 44% 49% 38% 45% 43% 39% 44% 45% 47% 47%
20 42% 43% 46% 43% 48% 42% 35% 33% 41% 39% 39% 38% 38% 42% 41% 40% 47% 47% 44% 51%

10

0 0

Act .1

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1
Responses based on implemented actions for respondents’ companies Not implemented but planned

In process of implementation
Action 1 Increased centralization—Integrated business units and functions into the corporate center
1
Respondents who had planned to implement those actions or were in process of implementation are represented in this tabulation
Action 2 Changed business configuration—Divested underperforming assets, adjusted number of products/services,
Strategic
geographies, customers, etc.
Action 3 Outsourced/Off-shored business processes to low cost service providers Comparison to past 24 months
Action 4 Streamlined organization structure—increase spans of control, and modified reporting relationships • Strategic actions have gained slightly more emphasis over tactical actions

Action 5 Streamlined business processes

Action 6 Improved policy compliance
Tactical Action 1 Increase centralization—Integrate business units and functions into the corporate center
Action 7 Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials
and services Action 2 Change business configuration—Divest underperforming assets, adjusted number of products/services, geographies,
Strategic
customers, etc.
Action 8 Implementation of specific automation or cognitive technologies
Action 3 Outsource/Offshore business processes to low cost service providers
Action 9 Aligned incentives of executives or employees to cost reduction objectives
Action 4 Streamline organization structure—Increase spans of control, and modified reporting relationships
Action 5 Streamline business processes
Key findings Action 6 Improve policy compliance
LATAM and the United States had some of their top actions oriented toward the strategic side, particularly increased centralization Tactical
Action 7 Reduce external spend by leveraging scale to source purchased materials/services and reduce demand for materials
On average, the United States shows a higher percentage across all actions relative to other regions and services

Increased centralization was the most implemented strategic action globally over the past 24 months Action 8 Implementation of specific automation or cognitive technologies

Key findings
Aggregating respondents in the process of implementation and those planning to implement as a single group, “change
business configuration” is the top action globally over next 24 months (65%)
The United States shows a preference for changing the business configuration
APAC is the region in which implementation of advanced technologies is higher

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Barriers to successful cost reduction Lessons learned

As was the case in 20171, implementation challenges are the infeasible targets (61 percent). Lack of understanding was a top-3 The top three lessons learned globally are: (1) invest in technology Designating a full-time position to drive efficiency and cost
top barrier to successful cost reduction initiatives (65 percent), barrier in 2017, but has fallen to No. 5 globally (see figure 19). improvements to enable data availability, reliability, and decision improvement is the least common lesson learned globally, except
followed by lack of effective ERP systems (62 percent), and making (72 percent); (2) design a solid tracking and reporting in APAC where it almost makes the top three.
process (70 percent); and (3) assess, validate, and adjust targets to
fit the realities of implementation (69 percent). These are also the
Figure 19. Top barriers to successful cost reduction
top three lessons learned for each individual region, although the
specific order and ratings vary (see figure 20).

1 2 3
2 71% Figure 20. Lessons learned
65% 67%
64% 65%
62% 62% 64% 64% 63% 62%
57% 57% 58% 61% 58% 60% 59% 60% 59% 61% 60%
55% 56% 55% 55%
53% 54% 55%
Total responses (%)

51%

2 2
1 3 2
75% 73% 76% 2 75%
72% 72%
70% 69% 69% 69% 69% 70% 69% 70%
66% 67% 68% 68%
65% 65% 65% 66% 66%
61% 62% 63%

Total responses (%)

57% 59% 59%
55%

Global US LATAM Europe APAC

Weak/unclear business case for Lack of understanding/acceptance Poorly designed reporting and tracking
cost improvement of the solution by the audience

Erosion of savings due to infeasible Lack of an effective ERP system Management challenges in implementing initiatives
target setting Global US LATAM Europe APAC

Key findings Designate a full-time position to drive Develop, validate, and sponsor a clear Deploy change management activities to raise
efficiency and cost improvement initiatives business case for cost improvement awareness, acceptance, and benefits of initiatives
Management challenges in implementing initiatives is higher than all other barriers (65% average globally)
Design a solid tracking and Assess, validate, and adjust targets Invest in technology improvements to enable data
Lack of an effective ERP and erosion of savings due to infeasible target setting are the second and third barriers
reporting process reasonably according to the reality availability, reliability, and decision-making process
globally, with the latter having higher relevance in LATAM throughout the implementation phase
APAC generally reports higher levels of challenges than other regions
Key findings
Invest in technology improvements, design a solid tracking and reporting process, and adjust targets reasonably are the three top
Comparison to 2017 Global Cost Survey results1 lessons learned
• Implementation challenges remain the top barrier
The top three lessons learned are consistent globally and for each region
• Lack of understanding is no longer a top-3 barrier in any region
APAC is the region that emphasizes designating a full-time position to drive efficiency and cost improvement initiatives
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Cost management maturity levels have room to grow

Looking at cost management maturity levels, roughly two-thirds examined to ensure best practices around efficiency and cost
of companies globally (65 percent) do not have highly mature cost management. Overall, LATAM has the lowest maturity levels. APAC
management practices. The United States leads the way, with and Europe fall in the middle, with APAC being noticeably ahead—

Other catalysts of
50 percent of US respondents reporting a high level of maturity particularly in terms of respondents that report a high maturity
where cost policies and procedures are continually reviewed and level (39 percent) (see figure 21).

cost reduction
Figure 21. Cost management maturity level

Lowest High

15% 20% 1 31% 35% Global

2 6% 9% 35% 50% 2 US

% of respondents
23% 4% 56% 2 17% LATAM

19% 28% 25% 29% 3 Europe

12% 24% 24% 39% 3 APAC

High Cost policies and procedures are continually reviewed and examined to ensure best practices around efficiency and cost management
Intermediate Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply
Low There may be written cost policies and procedures documented but not readily available and essentially not followed
Lowest Few or no formal cost policies or procedures are employed or documented, or they are significantly fragmented

Key findings
On average, roughly two-thirds of companies globally do not have a high level of maturity in cost management
The United States is the region with the largest proportion of companies with high maturity in cost management and the smallest
proportion of low mature companies; LATAM is the opposite
Europe and APAC results are similar, although APAC has a larger proportion of high maturity companies

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 Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Impact of a new CEO on cost reduction efforts Impact of M&A activity on cost reduction efforts
There is a common belief that new CEOs make cost reduction more Globally, the impact of a new CEO on cost reduction is negligible Similar to new CEOs, there is a common belief that M&A activity Globally, M&A increases the likelihood of cost reduction by 7
likely, presumably because they need to “right the ship” or want to (only 1 percent); however, the impact varies significantly by region, also increases the likelihood of cost reduction as companies percent. The United States, Europe, and APAC all show a positive
put their mark on the organization quickly. Yet the survey results with the likelihood of cost reduction being higher in the United pursue efficiencies and savings from a merger. Yet the survey correlation between M&A activity and cost reduction; however,
show appointment of a new CEO has surprisingly little impact on States (10 percent), LATAM (5 percent), and APAC (3 percent), but results indicate M&A has a surprisingly small impact on the pursuit the impact is relatively insignificant except in the United States
the likelihood a company will pursue cost reduction. lower in Europe (-6 percent) (see figure 22). of cost reduction—although not as small as the impact of a (11 percent). In LATAM, there appears to be a small negative
new CEO. correlation, with M&A activity slightly reducing the likelihood of
cost reduction (see figure 23).
Figure 22. Impact of a new CEO on cost reduction initiatives

Figure 23. Impact of M&A activity on cost reduction initiatives

Likelihood to undertake cost improvement initiatives Likelihood to undertake cost improvement initiatives
(did not appoint a new CEO) (appointed a new CEO)

Likelihood to undertake cost improvement initiatives Likelihood to undertake cost improvement initiatives
(have not acquired or been acquired) (have acquired or been acquired)
100

88%

80% 100
80
71% 2 72% 2 71% 88%
68% 69% 67%
64% 64%
79%
80
% of total respondents

60 74% 73%
69% 68%
66% 67%
64% 64%

% of total respondents
10% increase
60
40
1 1
1
40
20

7% increase
20
0
11% increase
Likely Likely

Global US LATAM Europe APAC 0

Likely Likely

Key findings Global US LATAM Europe APAC

Globally, there is negligible difference in the likelihood of undertaking cost improvement initiatives after a new CEO is appointed
(only a 1% relative increase)
Key findings
The likelihood relatively increases in the United States (by 10%), LATAM (by 5%), and APAC (by 3%) but relatively decreases in Europe
The likelihood of pursuing cost improvement initiatives after M&A activity is only moderately higher in the United States (by 11%) and
(by -6%)
globally (by 7%) relatively
LATAM, Europe, and APAC show similar levels of cost reduction activity regardless of whether an acquisition has occurred

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Cloud leads the pack

Globally, cloud is the most widely implemented digital technology implementation rates for all of the technologies, while LATAM has
covered by the survey (49 percent), well ahead of business the lowest. Specific numbers vary by region; however, all regions
intelligence (35 percent), automation (25 percent), and cognitive/ exhibit a similar pattern—except for relatively higher rates of

Digital and technology solutions

AI (25 percent). In general, the United States has the highest implementation for cognitive technologies in Europe (see figure 24).

Figure 24. Implementation of technologies (past 24 months)

applied to cost management 100

80
3

Total responses (%)

1
62%
60 49% 50%
49%
2 3 41% 2 43%
35% 2 32%
40 30% 27% 2 32%
25% 25% 25% 27% 26% 24%
23%
20 17% 17%

0
Global US LATAM Europe APAC

Automation: Robotic process automation Business intelligence (not including cognitive or AI)

Cognitive technologies: AI and machine learning Cloud solutions

Key findings
Of the implemented technologies, cloud was widely cited by respondents (almost 50%) across all the regions, followed by
business intelligence
Technology implementation levels follow a similar pattern across regions, with automation and cognitive the least implemented
The United States is the region with the highest level of implementation across technologies, especially cloud and business
intelligence; on the opposite end, LATAM shows the lowest level of implementation

Why cloud?
The two top reasons globally for using cloud are to tighten data Enhancing product/service capabilities (48 percent) and increasing

In developing their capabilities, surveyed security and business control (64 percent) and to reduce costs and
increase productivity (63 percent). In LATAM, the order of those
revenue (43 percent) are less common reasons for applying cloud;
however, they are still significant and likely to grow.

companies have primarily been focusing

two reasons is reversed, with a significantly greater emphasis on
cost reduction and productivity (71 percent vs. 60 percent for
security and control) (see figure 25).

on cognitive and artificial intelligence Figure 25. Reasons for applying cloud (past 24 months)

(AI), ERP infrastructure, and especially 100

automation. This focus on technology

2
Total responses (%)
80
1
71% 67% 68%
63% 64% 63% 60% 63%
57% 58% 54%

is consistent with a save-to-transform

60
48% 47% 48% 46%
43% 43%
40% 40%
40 37%

mindset, with companies investing more 20

time, money, and effort in capabilities

Global US LATAM Europe APAC
Reduce costs and increase productivity Increase revenue Enhance product/service capabilities Tighten data security and improve business control

that contribute to digital enablement Key findings

and digital transformation.

Tighten data security and improve business control are the top reasons globally and in all regions, except in LATAM
Reducing costs and increasing productivity are the top reasons in LATAM

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 Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Cloud success is reported as very high RPA success is reported as high

Cloud implementations are reported to have a very high success of respondents indicating cloud met expectations and 29 percent RPA implementations are reported to have a high success rate most success, with 40 percent exceeding expectations. At the other
rate in meeting expectations globally (85 percent), with 56 percent indicating it exceeded expectations (see figure 26). in meeting expectations globally (76 percent), with 41 percent end of the spectrum, Europe had the highest failure rate, with 29
of respondents indicating RPA met expectations and 35 percent percent falling short of expectations (see figure 28).
indicating RPA exceeded expectations. The United States had the
Figure 26. Results of implementing cloud

Figure 28. Results of implementing RPA

2% 4% 2% 1% 2%

13% 12% 7% 16% 13%

2
27% 1% 2% 0% 1% 2%
29% 27% 32% 33%
Global US LATAM Europe APAC
1 13% 29%
21% 21%
23%
59% 32% 2 30% 36%
56% 57% 56% 52% 35%
40%
Global US LATAM Europe APAC
1
45%
Results above expectations Results according to expectations Results below expectations Unable to assess results at this point 41% 41%
47% 40%

Key findings Results above expectations Results according to expectations Results below expectations Unable to assess results at this point
APAC had the highest levels of results above expectations
Europe had the highest levels of results below expectations
Key findings
The United States had the highest levels of results above expectations
Europe had the highest levels of results below expectations
Why RPA?
Globally, and in all regions, the most common reason for using The second most common reason for implementing RPA is
RPA is to reduce costs and increase productivity (80 percent), with to tighten data security and business control (69 percent)
Why cognitive and AI?
Europe and APAC both above the global average at 83 percent. (see figure 27).
As with cloud and RPA, the two top reasons globally for applying the United States, where the order of the top two was reversed.
cognitive/AI solutions are to reduce costs and increase productivity APAC showed a strong emphasis on reducing costs and increasing
(76 percent) and to tighten data security and improve business productivity (84 percent), well ahead of the global average and far
Figure 27. Reasons for applying RPA1 (past 24 months)
control (68 percent). All regions followed that same pattern except above the response rates for the other reasons (see figure 29).

100 2 2
1 Figure 29. Reasons for applying cognitive & AI (past 24 months)
80% 1 83% 83%
79%
Total responses (%)

80
71% 71% 74%
69% 70%
63% 60% 2
57% 53% 58% 56%
100
60 51% 51% 1 3
46% 48% 1 84%
80 76% 71% 71% 75%
36% 68%

Total responses (%)

40 68% 66% 67%
62%
56% 59% 55% 58% 62% 54%
58%
60
20 46%
44%
43%
40
0
Global US LATAM Europe APAC
20
Reduce costs and increase productivity Increase revenue Enhance product/service capabilities
0
Tighten data security and improve business control
Global US LATAM Europe APAC
1
Respondents who had implemented RPA were selected for this question Reduce costs and increase productivity Increase revenue Enhance product/service capabilities
Tighten data security and improve business control

Key findings
Reducing costs and increasing productivity is the top reason globally and in all regions, followed by tightening data
Key findings
security and improving business control
Reducing costs and increasing productivity is the top reason globally and in all regions—except the United States—followed by
Europe and APAC show the highest levels for reducing costs and increasing productivity
tightening data security and improving business control
Reducing costs and increasing productivity are especially high in APAC (84%)
Tightening data security and improving business control is the top reason in the United States

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Cognitive/AI success is reported as very high Digital leaders make a difference

The overall success rate in meeting expectations for cognitive/ expectations. APAC had the most success, with 44 percent Companies with a designated digital leader report much higher (77 percent), likely because the reported implementation levels
AI (83 percent) is reported as nearly as high as cloud’s, with exceeding expectations. Europe had the highest failure rate, with levels of technology implementation (on average, 140 percent for cloud are already higher than for the other technologies,
36 percent of global respondents indicating cognitive/AI met 21 percent falling short of expectations (see figure 30). higher across all four technologies). The impact is greatest for regardless of whether a digital leader is designated and perhaps
expectations and 47 percent indicating cognitive/AI exceeded automation (222 percent), followed by cognitive/AI (190 percent) because cloud may be more directly affected by chief information
and business intelligence (129 percent). Cloud is the least affected officers (see figure 32).

Figure 30. Results of implementing cognitive & AI

Figure 32. Impact of a designated digital leader on implementation levels

1% 2% 1%

11% 2 Level of technology implementation (no designated leader)

16% 14% 14%
21%
29% 30% 100
36% 34%
Global US LATEM Europe APAC 44%
80

% of total respondents
1
42%
47% 53%
57% 48%
60 2
Results above expectations Results according to expectations Results below expectations Unable to assess results at this point
39%
40 34%
30% 28%
Key findings 21% 21% 18%
20 16% 17% 16% 16%
APAC had the highest levels of results above expectations 12%
9% 7% 10% 9% 9%
5% 6%
2%
Europe had the highest levels of results below expectations 10

+140%
Implementation of technologies is expected to continue
Level of technology implementation (designated leader)
at a high level
All technologies reviewed are expected to be implemented at 100 3
Regionally, expected implementation levels in APAC and Europe 222% 190% 129% 77%
a level of 47 percent or higher over the next 24 months. The for all of the technologies are similar to the global average, while
technology expected to be the most actively implemented is LATAM trends higher than average and the United States 80 2

% of total respondents
cognitive (63 percent, planned or in-process), followed closely by trends lower. 67%
automation (62 percent) and business intelligence (59 percent) 60 54% 53% 53% 54%
(see figure 31).
45%
39%
40 36% 35%
Figure 31. Implementation of technologies (next 24 months) 29% 31% 29% 30% 31% 30%
100 28% 29% 27%
90 23% 21%
3
80 1 2 2 20
73% 71%
70 63% 64% 65% 63%
62% 60% 60% 62%
59% 58% 57% 58%
Total responses

60 35% 26% 54% 53%

50%
22% 47% 26% 20% 0
50 24% 24% 47% 15% 23%
20% 26% 24%
21% 15% 17% 23% 12% Automation: Robotic Cognitive technologies: AI Business intelligence Cloud solutions
40 14%
(%)

33% 16% Process Automation (not including Cognitive or AI)

and machine learning
30 9%
38% 39% 39% 33% 43% 36% 35% 38% 45% 42% 39% 39% 43%
20 34% 36% 35% 41% Global US LATAM Europe APAC
37%
10 24% 31%
0

Global US LATAM Europe APAC

Key findings
In process of Automation: Robotic Cognitive technologies: AI Business intelligence (not Cloud solutions
The impact of a digital leader on the level of technology implementation varies across technologies, but on average is 140% higher
implementation process automation and machine learning including cognitive or AI)
Cloud is the technology with the highest level of implementation, regardless of whether a digital leader was designated (30% vs 53%); it
Not implemented
but planned is also the least affected by having a designated leader, although the impact is still very positive (+77%)
RPA is the most affected by designating a digital leader (+222%)
Key findings
Automation and cognitive are expected to be the most actively implemented technologies over the next 24 months—both for
companies that plan to implement, and those that are already in the process of implementation
Technology implementation patterns are similar across Europe and APAC over the next 24 months; however, on average, LATAM shows
higher levels of implementation and the US shows lower levels
35% of respondents in LATAM plan to implement Automation over the next 24 months—significantly more than in the other regions

34 35
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Case study: Reducing application costs through Case study: Digital transformation enabled by cloud
cloud migration

Financial Impact on TCO and Cost Structure

A US-based Fortune Global 100 insurance company was on a A US regional insurance company was struggling to scale rapidly Financial impact on TCO and cost structure
100%
multi-year cost reduction journey, with a significant portion of the and remain competitive in the marketplace due to growing
targeted savings expected to come from moving a key mainframe Data Center (DC) technology debt, high capital expenses and a traditional IT

Indirect Expense
Infrastucture
application to cloud. operating model. To address the problem, the company needed -27%

DC Service to proactively transform its IT infrastructure from in-house data

Allocations ~65% 100%
The total cost of ownership (TCO) for the application was having a Cloud
center to cloud-leveraging the capabilities of a public cloud vendor
significant negative impact on the P&Ls of the countries using it. DC Labor Alloc. to drive business agility and scalability at a lower
DC Service
Although the application was originally built for multiple countries, Allocations cost structure.
it was only deployed to a few of those countries. Yet, costly on- DC Labor Alloc.
Depreciation The company started its cloud adoption journey by modernizing
premise infrastructure assets had been commissioned to support
its core business platforms, turning the IT function into a modern 73%
all the planned countries. Software Licenses
Direct Expense
“as a service” organization. Based on an assessment of business Capex
Software Licenses
needs and the current IT landscape, a holistic cloud transformation 61%
To reduce cost pressure and provide relief to the countries using Software Licenses program was undertaken. The multi-year program encompassed
the application, the company wanted to explore the idea of moving
Labor
people, process and technology, with the following business
the application from on-premise data centers to the public cloud. Labor objectives:
The main objective of the effort was to reduce application TCO
while aligning with the company’s overall IT strategy, which relied • Undertake a cloud-first strategy 57%
Before Cloud After Cloud
on cloud as a critical enabler to help the business respond to Migration Migration • Rightsize infrastructure
changing needs.
• Transform and scale the DevOps operating model Opex
Overall impact
The company’s cloud transformation journey had the following • Implement automation
• Reduced TCO, rightsizing the infrastructure for the application 39%
overall business objectives: by moving to cloud. • Unlock digital capabilities
• Optimized infrastructure footprint by moving the application • Improved flexibility to scale the application to dynamic 16%
Overall impact
from the current over-provisioned and under-utilized mainframe business requirements, fluctuating bandwidth demands,
infrastructure. and future needs. Migrating to a consumption-based model. • Consistent experience for agents and insured through an
TCO Before TCO After
agile, fault-tolerant platform that advances brand and
• Architecture modernization by introducing design patterns • Better alignment to the overall IT strategic direction. customer retention
that could transform the application architecture and make it
more suitable for cloud. • Reduced future infrastructure CapEx and general • Faster time-to-market for new products/features/state The cloud transformation enabled the company to leapfrog
operating expenses. rollouts due to improved speed, quality, operational efficiency
• Reliable application performance by making the solution technology debt and shift the cost structure from CapEx to
• Enhanced performance to meet business requirements. and productivity OpEx. Also, it established a digital backbone to help the company
architecture scalable to shifting performance demands.
• Significant shift from CapEx to OpEx (~40% expenses shifted implement next-generation capabilities such as data and analytics,
• Reduction in application costs by assessing and implementing Key Lessons Learned
to OpEx) and ~30% savings on TCO over five years artificial intelligence, machine learning and IoT.
opportunities targeted at reducing expenses.
• Successful cloud migration requires rigorous planning, close
partnership and shared ownership between business, IT, and
As a part of the effort, a cloud migration strategy was developed affected functions in order to manage risks, resolve issues quickly
and executed. Activities included: and align expectations.
• Review historical TCO data and future cost structure • Cloud migration impacts the culture of the technology group as
associated with the application. roles, methods and processes change to realize the full benefits
• Assess, analyze and recommend options to upgrade the of cloud.
technology platform and lower TCO by moving to cloud. • Understanding system and application dependencies is
• Need for upfront detailed target state architecture the biggest challenge, followed by navigating a complex
diagrams and migration plans to drive smoother execution and enterprise environment.
avoid delays during implementation. • Leverage techniques such as software-defined infrastructure
solutions to enable standardization, efficiency and effectiveness
versus simply using as a cost efficiency play.
• Determine key success factors at the start of the program and
monitor them throughout the entire cloud migration.

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

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 6 percent
in 2017. Cybersecurity received similar recognition (62 percent), ranking at or near the top of the external risks list both globally and in all regions
except LATAM (see figure 33).

Save-to-transform as a catalyst Figure 33. Digital disruption and cybersecurity risks

for embracing digital disruption Digital disruption’s evolution as an external risk Cybersecurity2 perceived as an external risk in 2019

Cyber security is now a

Digital disruption is
recognized as a risk by 61% of 69% top external risk,
70 70
particularly in the US
+917% companies in 2019, compared 66%
to only 6% in 2017 64%
62% 62%
61%
60 A 58% 60 58%

51% 51%
50 50

% of total respondents
40 40

30 30

1 2
B
20 20
15%

10 10
6% 6%

1% 2%
0 0
Global US LATAM Europe APAC Global US LATAM Europe APAC

Cost management practices and

Digital disruption 20171 Digital disruption 20192

approaches have grown increasingly

1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
2
Cybersecurity was included for the first time in the 2019 report

sophisticated over time with digital A. The vast majority of companies were starting to recognize
the potentially disruptive impact of digital technologies in
1. Cybersecurity is now a top external risk globally
2. Cybersecurity is not yet perceived as a top external risk

solutions, although still maturing,

2017 but it exploded over the next 24 months, with a in LATAM, as compared to other global regions
917% increase
B. In 2017, digital disruption was mostly recognized in the

now representing the most advanced United States

level of cost management. This year’s

survey results show the save-to-grow
mindset from 2017 expanding into a
save-to-transform mindset.

39
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Digital disruption and innovation are driving technology implementation Digital solutions are the most advanced level of cost management
Implementation of numerous digital technologies is expected to skyrocket over the next 24 months. Globally, implementation of cognitive Cost management practices and approaches have grown increasingly sophisticated over time with digital solutions, although still maturing, now
technologies such as AI and ML is expected to more than double, from 25 percent over the past two years to 63 percent over the next two representing the most advanced level of cost management. Companies that relied on more traditional cost management methods in the past
years. The same is true for implementation of automation, which is expected to increase from 25 percent to 62 percent. Business intelligence are now finding that digital solutions can open the door to a whole new level of savings—as well as enable new and more innovative business
implementation is also expected to rise sharply, from 35 percent to 59 percent globally (see figure 34). models. It is important to note that companies do not have to work through the entire evolutionary sequence in order to reap the benefits of
digital cost solutions. Rather, they can implement digital technologies immediately as stand-alone cost solutions, or they can mix and match
traditional and digital cost management solutions in whatever way makes the most sense from a business perspective (see figure 35).

Figure 34. Technology implementation (past and future)

Implementation of technologies (past 24 months) Implementation of technologies (next 24 months) Figure 35. The evolution of cost management1
100 100

1980s–Present 2008–2017 2017+

80 80 2
1 Structural cost management:
73%
71% Traditional cost management: Advanced cost management:
62% of respondents have
1 Operating models and
64% 65% Cost categories and processes Digital cost solutions
62% implemented cloud in the US 62% 63% 62% 63% governance
59% 59% 60% 60%
60 60 58%
57%
A 54% 54%

49% 49% 50% 50%

47% 47% Maximizing traditional cost levers Alternative operating models Analytics and cognitive solutions
B 43%
41% • Focus on cost categories • Separation of G&A and ops/ • Cognitive solutions to
40
35%
40 • Continuous improvement commercial models increase effectiveness
32% 32% 33% • Process reengineering • Globalized operating model • Cognitive technologies to
30%
27% 27% • Globalized governance supplement labor
25% 25% 25% 26%
23% 24%

20 17% 17% 20
Traditional external spend Alternative service delivery models Automation
reduction levers and demand management • RCA to increase efficiency and
• Indirect and direct sourcing • Global/regional/local delivery eliminate/supplement labor
• More effective supply • GBS/alternative-sourcing
0 0
chain integration • Demand management and policies
Global US LATAM Europe APAC Global US LATAM Europe APAC
• Introduction of CPO as cost levers

Automotation: robotic process automation Cognitive technologies: AI and machine learning Business intelligence (not including cognitive or AI) Cloud solutions
Cloud
• Cloud capabilities to increase
flexibility and competitiveness
A. Cloud is the technology with the highest level of 1. Automation and cognitive are expected to be the most
implementation over the past 24 months (49%) actively implemented technologies over the next 24 months Maturity: Low High
B. Business intelligence is the second most implemented 2. 73% of respondents in LATAM expect to implement
technology (35%) automation over the next 24 months, significantly more
1
Source: Deloitte Consulting LLP
than in other regions

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Save-to-grow was the dominant mindset in 2017 Transformation is an emerging focus

The 2017 survey found many companies around the world were managing costs with a save-to-grow mindset, pursuing cost savings to fund their This year’s survey results show the save-to-grow mindset from 2017 expanding into a save-to-transform mindset. Over the next 24 months, the
growth strategies in an improving economy. Revenue growth and cost were the primary strategic levers, with a secondary but still significant top strategic priorities globally are sales growth (73 percent), product profitability (73 percent), and technology implementation (73 percent),
focus on talent—a key enabler for growth (see figure 36). followed closely by cost reduction (69 percent), organization and talent (69 percent), and digital enablement (69 percent) (see figure 37).

Technology implementation and digital enablement are new focus areas that signal a strategic expansion from growth to transformation.

Figure 36. Four approaches to cost management1

Figure 37. Strategic priorities1 (past and future)

Turnaround Past 24 months

Turnaround Fund Grow Transform
Save-to-turnaround. Focus on immediate
100
actions to reduce costs, maximize liquidity,
achieve stability, and capture savings to 1 1 1 1
79%
avoid further deterioration of the business. 80
73% 74%
78% 76%
73%
77%
73%
77% 76%
73%
72% 70% 72% 70%
69%

Total responses (%)

68% 69% 68% 67% 68% 68%
66% 65% 65% 65% 66%66%
62% 62%
Fund 60
59%
56% 56% 54%
59%

Save-to-fund. Focus on actions that help

improve cost and competitive position; 40
avoid cuts that might inhibit future growth
rebalance costs to fund investment in
20
business strategy enablers.

Grow 0

Save-to-grow. Enable or develop a Next 24 months

scalable cost/business platform to fuel +9% +8%
100
growth and investment in core capabilities A A
while supporting a differentiated business 2 2 2 2
B
78% 77%
80
strategy. 73% 73% 73%
76% 76% 75%
71%
76%
73% 73%
76%
71%
69% 69% 69% 70% 69% 70% 69% 70% 70%

Total responses (%)

68% 67% 67% 67%
64% 65% 65% 64%
61% 60% 60% 61%
Transform 60

Save-to-transform. Invest in digital Cost levers

technologies and technology infrastructure 40
to make operations more efficient and Liquidity Cost Growth Growth

effective, enabling new and more agile +

20
business models to prosper in a digitally Cost Growth Cost Cost
Priority

disrupted market.
0
Talent Talent Talent Talent Global US LATAM Europe APAC

-
Growth Liquidity Liquidity Liquidity Sales growth Cost reduction Balance sheet management Product profitability

Organization and talent Technology implementation Digital enablement

1
Source: Deloitte Consulting LLP

Key findings
Product profitability, sales growth, technology Comparison to past 24 months

implementation, and cost reduction were the top four A. Top three priorities remain the same globally
global priorities over the past 24 months B. Growth and cost continue to be the main strategic priorities in
the United States over the next 24 months
Over the next 24 months, product profitability, sales
growth, technology implementation, along with cost
reduction, digital enablement and organization, and
talent are the highest priorities globally

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

The save-to-transform playbook and key levers Automation and other digital technologies take a lead role in cost reduction
Shifting into save-to-transform mode means in addition to cost, growth, and talent, technology is a key lever. Companies in this mode RPA and cognitive technologies such as AI and ML have emerged over the past 24 months as the most common digital
continue to focus on cost reduction as a way to fund their growth strategies. However, they also invest in IT and innovation that can capabilities developed to reduce costs. ERP infrastructure is also receiving significant effort and attention, with many
transform the business and help it survive and thrive in a world of digital disruption (see figure 38). companies making the transition to cloud-based ERP (see figure 39). Cloud is being widely applied because it can
provide tighter data security and improved business control, along with enhanced product/service capabilities and
increased revenue. A robust, cloud-based ERP infrastructure provides a solid foundation of reliable and usable data that
Figure 38. Evolving from growth to transformation1 advanced digital technologies such as AI and RPA can draw from.

Figure 39. Capabilities developed to reduce costs

1. Save to turnaround 2. Save to fund 3. Save to grow 4. Save to transform

Capabilities developed over past 24 months Reasons for applying cloud (past 24 months)

48%
Scope Narrow Broad
71%
68%
42% A A 67%
41% 41%
63% 64% 63% 63%
• Losing market share • Adjusting to demand levels 60%
58%
• Structural operating flaws • Growth concerns 57%
Competitive
• Liquidity concerns • Healthy balance sheet 34% 34% 54%
situation • Flat profit growth • Excess cash flow/reserves
B
48% 48%
• High growth potential 47%
46%
43% 43%
40% 40%
Defense-oriented playbook Growth-oriented playbook
37%
• Short-term tactics to improve balance sheet • Achieving profitable and sustainable growth through
• Cash flows structural cost efficiencies and improvements
Playbook • Stabilize business through any cost and/or liquidity • IT investments
improvements • Innovation
• Compensate sales decline • Actions to strengthen performance and competitive position 12%

2 1 2 2
New

Technology
Cost levers
Growth Talent Cost Liquidity Growth Talent Liquidity Cost Liquidity Talent Cost Growth
priority Global Global US LATAM Europe APAC

Save-to-turnaround Save-to-fund Save-to-transform levers

Created a new executive Set-up or improved ERP infrastructure Reduce costs and increase productivity
position and/or full-time
Low High Low High Low High positions to drive cost management Increase revenue

Developed or implemented Developed or implemented cognitive

Enhance product/service capabilities
1
Source: Deloitte Consulting LLP automation technologies and artificial intelligence technologies

Tighten data security and improve business control

Implemented new policies and Improved processes for forecasting,
procedures, and strengthened budgeting and reporting to enable
the compliance mechanisms effective cost management

Implemented zero-based budgeting,

system or process

Key findings Key findings

Automation is the most developed capability, globally, A Tighten data security and improve business control
over the past 24 months is the top reason globally and in all regions, except
Cognitive solutions and ERP, along with new policy in LATAM, and reduce cost and improve business
implementation, are the second and third highest controls is the second top reason globally
developed capabilities B Enhance product/service capabilities along with
increase revenue show moderately high numbers,
at 48% and 43%, respectively

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Save-to-transform provides both growth and defense The save-to-transform playbook includes investment in digital technologies and innovations that can improve every aspect of a business, from
This year’s survey respondents continue to have a very positive business outlook, bolstered by one of the longest periods of economic business and operating models to market reach, service quality, operating efficiency, use of talent, and the overall customer experience. In
expansion in history. However, economies are cyclical, and even the strongest expansion can defy gravity for only so long. Potential warning signs addition to fueling both cost savings and revenue growth, these improvements can make a business more resistant to digital disruption and
are starting to emerge in the survey data, including a 97 percent increase in global respondents concerned about macroeconomic risk over the economic downturns by providing a stronger foundation for defense-oriented cost management activities—activities that are sure to be needed
next 24 months, and a 20 percent increase in US respondents who expect a significant reduction in consumer demand over the same period at some point in the future (see figure 41).
(see figure 40).

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 Figure 41. Cost management playbooks in a downturn
continue capitalizing on current economic strength while being vigilant and prepared for future economic weakness through a
save-to-transform mindset.

1. Save to turnaround 2. Save to fund 3. Save to grow 4. Save to transform

Figure 44. Business cycle analysis and trends
Figure 40. Business cycle analysis and trends

Period of US economic expansion1 Survey macroeconomic factors

Scope Narrow Broad
Longest
Concern about macroeconomic risk Expect a significant reduction in
120 2nd Longest consumer demand
+118

3rd Longest • Losing market share • Adjusting to demand levels

• Structural operating flaws • Growth concerns
106 Competitive
• Liquidity concerns • Healthy balance sheet
situation • Flat profit growth • Excess cash flow/reserves
1
• High growth potential
92

Defense-oriented playbook Growth-oriented playbook

A B
+97% +20% • Short-term tactics to improve balance sheet • Achieving profitable and sustainable growth through
73
• Cash flows structural cost efficiencies and improvements
Playbook • Stabilize business through any cost and/or liquidity • IT investments
improvements • Innovation
59% • Compensate sales decline • Actions to strengthen performance and competitive position
2 Average: 58 months 58
55%

New
46%
45

39
37 36 Technology
30%
Cost levers
priority Growth Talent Cost Liquidity Growth Talent Liquidity Cost Liquidity Talent Cost Growth
24

12 Save-to-turnaround Save-to-fund Save-to-transform levers

Low High Low High Low High

1945– 1949– 1954– 1958– 1961– 1970– 1975– 1980– 1982– 1991– 2001– 2009– Past 24 months Next 24 months Past 24 months Next 24 months
1948 1953 1957 1960 1969 1973 1980 1981 1990 2001 2007 Ongoing

Source: National Bureau of Economic Research (NBER)

1
As of April 2019

Key findings Key findings

The current period of US economic expansion is A Macroeconomic concerns globally almost doubled over

the second longest in history at 118 months the past 24 months

(as of April 2019) B Reduction in consumer demand has increased 20% as a
The average length of US economic expansions since driver of cost reduction initiatives in the United States
1945 is ~60 months (the length has been increasing in
more recent decades)

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Case study: Using digital transformation to further

improve margins and extend best-in-class status
15+
Internal resources hired
A Fortune Global 100 biopharma company was a best-in-class leader in many areas—operational efficiency, staffing for Enterprise Hub
efficiency, cost structure and compliance/control performance. However, after a decade of extensive cost reduction (Cognitive/AI CoE)
using traditional efficiency levers—and facing continued cost pressures—the company wanted to explore the next
frontier of digital cost solutions.
10% 1
Aligned with the overall organizational transformation the company was going through, the key objective of the new
cost reduction effort was “save to transform,” further improving margins while maintaining best-in-class leadership. Savings on baseline cost Comprehensive Finance
The margin improvement strategy included transformation of the overall operating model, enabled by digital. RPA deployment
methodology created
The strategy consisted of the following elements:
• Develop a practical global digital strategy touching both the front office and back office—starting from Finance and
expanding to R&D (e.g., clinical development activities).
• Establish a scalable enterprise governance model.
• Develop and execute an ambitious transformation roadmap.
• Build an enterprise hub (AI/Cognitive center of excellence) to translate business owners’ use cases into prototypes
and production-ready solutions.
As a part of the solution, 300+ senior leaders were educated on all aspects of digital—realities, myths and everything
in between. Currently, the team is executing one of the largest digital finance programs in the world, featuring 300+ 150+
300+ automations with 100+ automations already in production. The company also executed successful pilots for
Unique automations Bot licenses
blockchain, cognitive, predictive analytics and other emerging solutions to understand their functionality, maturity
planned over 2 years
and relevance and potentially build them into a future transformation roadmap for the company.
To achieve and sustain a large-scale digital transformation, the company built and scaled a functional center
of excellence (CoE) within Finance, as well as a broader enterprise-wide AI / Cognitive CoE in IT.
2
Overall impact Functions started the digital
• Real margin improvement—transformational OpEx and tax savings; 10-15% savings on baseline cost; realization journey–Finance, R&D;
on track expanded to enterprise-wide
within a year
• RPA at global scale—300+ RPA automations in-flight, with 100+ automations in production today
• Emerging solutions incubated—successful pilots completed for emerging digital solutions (e.g., natural language
generation, blockchain) Key Lessons Learned
• Capability building—developed the company’s internal capabilities, including CoEs for Robotics and AI/Cognitive, • Large-scale RPA deployment is different than other operating model transformation work. In particular, there is considerable
both jointly operated with Deloitte complexity surrounding the degree of standardization required to deliver RPA effectively at scale, which in turn requires significant
• Controls and compliance—developed a framework to assess the impact of RPA on existing controls and internal/ resources and longer timelines to execute.
external audit • Results are generated through scale. There are no “home runs” but a lot of “singles” that collectively drive impact.
• Digital integration—infused digital into day-to-day operations through “future of work” activities, which included • Enterprise automation solutions are not just a cost efficiency play; they enable efficiency and effectiveness and
increasing adoption of digital in the workplace and defining innovative acquisition and development programs for improved controls.
digital talent
• Successful deployment of automation requires close partnership and shared ownership between business, IT, and compliance in
• Digital M&A—integrating digital into all future M&A transactions order to manage risks, resolve issues quickly and align expectations.
• Enterprise automation solutions are transformational to talent models. New skillsets and capabilities will be required in addition
to “traditional” business skillsets.

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Looking ahead

Digital disruption, technology, and

innovation are among the most
powerful forces shaping the global
marketplace and competitive
landscape. And their impact is only
increasing. Companies today need
to harness those forces to their own
advantage, using digital technologies
such as cloud, automation, business
intelligence, and cognitive to
transform how they operate—
streamlining their cost structures and
generating strategic cost savings that
are both significant and sustainable.
These improvements can help a
company achieve its immediate
growth objectives while preparing
itself to survive and thrive when the
economic cycle inevitably reverses
course. They can also position the
company to capitalize on digital
disruption, becoming the disrupter
rather than the disrupted.

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Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

Authors Contacts
Global Asia Pacific Zlatko Bazianec (Croatia) Irina Biryukova (Russia)
Partner Partner
Omar Aguilar Tony O’Donnell (Australia)
Deloitte Croatia Deloitte Russia
Principal Partner
+385 1 2351 906 +74 957870600
Deloitte Consulting LLP Deloitte Touche Tohmatsu
zbazianec@deloittece.com ibiryukova@deloitte.ru
+1 267 226 8956 +613 9671 8166
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Appendix A: Global insights from key industries

Summary Six major industries analyzed

• Global respondents were categorized into six major industry groupings—including Consumer & Industrial Products (C&IP),
Global respondents were categorized into six major industry groupings to uncover industry-specific cost
Financial Services (FS), Technology, Media & Telecommunications (TMT), Life Sciences & Health Care (LSHC), Energy & Resources management insights (see figure A-1).
(E&R) and Public Sector (PS)—to uncover industry-specific cost management insights.

• Surveyed industries reported a similarly high likelihood for cost reduction (71 percent on average, ranging from 60 percent to 79 Figure A-1. Industry presence across regions
percent), with LSHC and Public Sector showing the lowest rates.

• The majority of respondents across all industries reported cost targets of less than 20 percent, with high overall failure rates—TMT
(75 percent) and PS (73 percent) being the only two industries with failure rates below the average of 81 percent. Consumer and
industrial products 21 77 109 63 310
1
• Perspectives on revenue growth are generally similar to the past with 86 percent of respondents expecting revenues to increase.
However, growth expectations vary by industry (sometimes significantly; for example, TMT expects +4 percent nominal growth;
E&R expects -5 percent nominal growth). Financial services 37 68 100 39 244
2

• External risks are perceived differently by industry, which might be relevant to understanding the rationale and focus for cost

Number of respondents
management programs. Technology, media and 175
27 72 68 41 208
telecommunications
2

• Macroeconomic concerns and commodity price fluctuations rated first as external risks for TMT and E&R, respectively.

Life sciences and 20 39 45 41 145

• For C&IP, commodity prices (66 percent) were the most significant concern, compared to the average of 59 percent. health care 2

• Political climate risks were rated above the average (59 percent) for E&R (63 percent), TMT (62 percent), and PS (61 percent).
Energy and resources 7 46 50 28 131
• Digital disruption is perceived as a top risk for TMT (65 percent) compared to the average of 61 percent; LSHC (53 percent) and PS
(56 percent) were well below average.
Public sector 8 23 32 11 74
• Cybersecurity is consistently rated as a top risk across all industries (ranging from 60–65 percent, except PS at 52 percent).

• Concerns about currency fluctuations were above the average of 58 percent in E&R (64 percent), TMT (61 percent) and C&IP
0 50 100 150 200 250 300 350
(61 percent).

• Cloud is the most implemented technology in all industries, especially C&IP. LATAM APAC EMEA USA

1. Consumer & Industrial products is the most represented industry globally, with 25% of total respondents
2. Across regions, Consumer & Industrial Products, Financial Services, and TMT are the three most represented industries—
with the exception of the United States, where LSHC ranks as the third-most represented industry

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Cost reduction is prevalent in all industries All industries had overall failure rates of at least
All industries reported a similarly high likelihood for cost reduction, ranging from 60 percent to 79 percent,
with LSHC and PS reporting the lowest rates at 60 percent and 61 percent, respectively
73 percent
(see figure A-2). The majority of respondents across all industries reported cost targets of less than 20 percent, with high
overall failure rates—TMT (75 percent) and PS (73 percent) being the only two industries with failure rates
below the average of 81 percent (see figure A-3).
Figure A-2. Likelihood of cost reduction in next 24 months
Figure A-3. Cost reduction targets
On average, 71% of respondents across
100 industries plan to undertake cost
reduction initiatives Annual cost reduction targets Success in meeting cost targets1
Comparison to 2017
1 1 Global Cost Survey
79%
results1 81% of respondents reported not meeting their
78%
80
All industries have goals, with all industries except TMT and Public
71% 70%
68% decreased in Sector rating above or equal to the average
100
likelihood—especially
60% 61% LSHC, which declined 2
60 from 86% to 1 Comparison to 2017
60%—mainly due to a 86% 85% Global Cost Survey
84%
shift in numbers from 82% results1
81%
neutral to unlikely TMT and E&R respondents reported the
80
highest targets among all industries 75% Significant global
40 73%
decrease
(15 points) in the
28% 29%
percentage
23% of respondents with
20% 19% targets
2 2 2 60
20 15% below 10%
15%
12% 12%
9% 10%
7% 7% 6% 50 LHSC is the only
industry not showing
43%
41% an increase in
0 3 respondents with
40 37% 37% 40

% of total respondents
3
35%36% 35% targets
Likely Neutral Unlikely 33% 34%
31% 31% 31%33% 32% above 20%
30% 29%28% 30%
30 28% 27% 27%
24% 25% Failure rates
Global average Consumer & Industrial Products Financial Services Technology, Media & Telecommunications
increased across all
19% 18%
20 20 industries, especially
Life Sciences & Health Care Energy & Resources Public Sector 16% 15% in LSHC and E&R (+27
14%
percentage points in
10 both cases)
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

0 0
Key findings Less than 10% 10% to 20% More than 20% Did not meet goals Met or exceeded goals

C&IP (79%) and TMT (78%) have the highest percentage of respondents likely to undertake cost reduction initiatives
LSHC (12%), E&R (12%), and Public Sector (10%) have the highest percentage of respondents unlikely to undertake cost reduction Global average Consumer and industrial products Financial services Technology, media and telecommunications

Life sciences and health care Energy and resources Public sector

1. Respondents that selected “no specific targets were established” were not plotted in the graph

Key findings
Respondents in all industries generally fell short of their cost reduction targets (average of 81% failure across all industries, range
from 73%-86%)
LSHC and E&R reported the highest failure rates (86% and 85% respectively)
TMT (34%) and E&R (32%) had the highest percentage of respondents with targets above 20%

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Detailed failure rates vary widely Growth expectations are consistently positive
Percentage of savings realized varies widely by industry, except for FS and LSHC, which show similar results Perspectives on revenue growth are generally similar to the past, with 86 percent of respondents expecting
(see figure A-4). revenues to increase. However, growth expectations vary by industry (see figure A-5).
Figure A-4. A closer look at failure rates
Figure A-5. Revenue trends and projections
1% 1%

Annual revenue growth over past 24 months Annual revenue growth projections over next 24 months
1%
15% 11%
29% On average, 86% of respondents cited
35% increase in revenues in the future as
16%
11% 3
C&IP FS 27% 100 well as in the past 100
23% 2
38%
31% 1 90%
87%
86% 86% 86% 86%86% 86% 87% 86%
85%
34% 32% 37% 83%
80% 81%

20% 80 80
Global
70% 64%

% of total respondents
1%-74% 60 60
of savings 1%-49%
of 1% 1%
34% savings

11% 7% 40 40
30% 16%
65% 36%
41% 19%
TMT LSHC
23%
20 20
13%
28%
11% 10% 11% 3 3
40% 7% 7% 7% 8% 8% 8%
9% 8% 9%
7%
5%
7% 7% 6% 7% 6% 6% 7% 6% 5%
5% 5% 5% 5%

58% 63% 0 0
Increase Remain the same Decreased Increase Remain the same Decreased

3% Global average Consumer and industrial products Financial services Technology, media and telecommunications Life sciences and health care

Energy and resources Public sector

6%
1 17%
27% 1
28%
22%
35%
42% PS
E&R Key findings
18%
Global respondents reported similar increases (86%) for both past and expected future revenue growth
45% 20% Technology, media and telecommunications reports a slightly more positive outlook (90%) compared to the global average (86%)
Life sciences and health care and Energy and resources are the only industries that project a revenue decline over the next 24
55% 2
73% 2 months, at 1% and 5%, respectively

Realized 0% of savings Realized 1%-24% of savings Realized 25%-49% of savings Realized 50%-74% of savings Realized 75%-99% of savings

Key findings
At 42%, PS has the highest proportion of companies realizing 75%-99% of targets; E&R has the lowest at 27%
73% of respondents in E&R met only 1%-74% of goals, the highest percentage in this range across industries; PS had the lowest
percentage in this range (55%)
C&IP has 38% of respondents with savings realization of 1%-49%, the highest all sectors for this range

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Perceived external risks vary significantly Cloud implementation dominates

External risks are perceived differently by industry, which might be relevant in understanding the rationale Cloud is the most widely implemented technology across all industries, especially in C&IP (see figure A-7).
and focus for cost management programs (see figure A-6).

Macroeconomic concerns and commodity price fluctuations rated first as external risks for TMT and E&R, Figure A-7. Implementation of technologies1 (past 24 months)
respectively. For C&IP, commodity prices (66 percent) were the most significant concern, compared to the
average of 59 percent. Political climate risks were rated above the average (59 percent) for E&R (63 percent),
TMT (62 percent), and PS (61 percent). Concerns about currency fluctuations were above the average of 58 1

percent in E&R (64 percent), TMT (61 percent), and C&IP (61 percent). 57%

Digital disruption is perceived as a top risk for TMT (65 percent) compared to the average of 61 percent; LSHC 1 1 3
49%
(53 percent) and PS (56 percent) were well below average. Cybersecurity is consistently rated as a top risk 48% 1

across all industries (ranging from 60–65 percent, except PS at 52 percent). 45% 1
43% 1
42%

39%
Figure A-6. External risks 2
36% 2
35% 35%
34%
2
2
Consumer & Industrial Products Financial Services TMT 2 30% 30%
29%
70 28%
66% 62% 57% 63% 66% 27%
65% 64% 58% 65% 65% 2
64% 60% 57% 63% 62% 2 2
60 62% 54% 55% 61%
25%
60% 61% 61% 61% 60%
23% 2
50 2 2 22%
21%
40 19% 2 19%
18%
30 3 2 1 1 1 1 3 1 1

20 13%
10
0

Life Sciences & Health Care Energy & Resources Public Sector
70 66% 64%
63% 61%
60% 58% 61% 62% 59%
60 59% 56%
54% 54%
49% 51% 53% 53% 53% 51% 52% Consumer & Financial Services Technology, Media & Energy & Resources Life Science & Public Sector
50 47% 47% 46% Industrial Products Telecommunications Health Care
44%
40
1 1 2 3
Automation: Robotic Process Automation Cognitive technologies: AI and machine learning Business intelligence (not including Cognitive or AI) Cloud solutions
30

20
10

0
Key findings
Macroeconomic concerns Commodity price fluctuations Political climate Digital disruption Cloud is the most widely implemented technology across industries, followed by business intelligence
Currency fluctuations Credit risks Cybersecurity concerns New market entrant Level of technology implementation follows a similar pattern across sectors, with automation and cognitive the
least implemented

Key findings TMT has the highest implementation levels across all technologies except for cloud, which is implemented more in C&IP
Cybersecurity and digital disruption are some of the top risks for C&IP, Financial Services, TMT, and Life Sciences & Health Care
Commodity price fluctuations is perceived as a top risk in C&IP and Energy & Resources
Macroeconomic concerns ranks high in C&IP, TMT and Public Sector

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Cost management insights by individual industry

Consumer & Industrial Products (C&IP) Financial Services (FS)
• Top drivers are to gain competitive advantage over peer group, • Likely cost actions of changing business configuration and • Gaining competitive advantage was the top driver, followed • Strategic priorities related to product profitability and
invest in growth areas and global expansion for growth. implementing automation/cognitive technologies ranked higher closely by investment in growth areas and global expansion (all digital enablement ranked highest, followed by technology
than other actions, which were on par with the industry average close to the averages across industries). implementation and sales growth. These priorities are similar to
• Risks beyond commodity prices focus on macroeconomics,
in most cases. other industries.
cybersecurity, and digital disruption. • Cybersecurity and digital disruption were identified as top risks,
similar to other industries. • Likely actions include changing business configuration and
• Top strategic priority is sales growth, followed by technology
adopting AI or cognitive technologies.
implementation, product profitability and cost reduction.

Figure A-8. Consumer & Industrial Products Figure A-9. Financial Services

Drivers of cost management External risks Drivers of cost management External risks
Required investment in 67% Cybersecurity 62% Required Cybersecurity 62%
growth areas 67%
concerns 64% investment in concerns
70% 64% 63%
growth areas
Intensified Digital 61% 61%
66% disruption Intensified 66% Digital
competition among 64% 62%
70% competition among disruption
peer group peer group 68%
Political 59% 59%
Increased 65% climate 60% Increased Political
international growth 65% 58%
70% international growth climate
opportunities opportunities 65%
Commodity price 59%
fluctuations 66%
+7% Commodity price 59%
Changed regulatory 61% Changed regulatory fluctuations 55%
61%
structure structure
62% Macro economic 59% 63%
concerns
+6% Macro economic 59%
-5%
65% concerns 54%
Unfavorable cost 57% Unfavorable cost
+8% 57%
position relative to
58% position relative to -5%
65% Currency 52% Currency 58%
peer group peer group
fluctuations 61% fluctuations 57%
Significant 55% Significant 55%
reduction in
60%
New market 57% reduction in -5% New market 57%
consumer demand entrants 62% 50% entrants
consumer demand 57%
Decrease in liquidity 53%
and tighter credit Credit risks 57% Decrease in liquidity 53% 57%
-5% Credit risks
59% 61% and tighter credit 48% 60%

Strategic Priority Likely cost actions Strategic Priority Likely cost actions
Sales growth 73% Change business 65% Change business 65%
Sales growth 73%
80%
+7% configuration 67% configuration 64%
71%
Implementation of 63% Implementation of
Technology 63%
73% specific automation or Technology 73% specific automation or
implementation 61% 64%
78% cognitive technologies implementation cognitive technologies
73%
Streamline business 61% Streamline business 61%
Product 73% processes 59% Product 73% processes 60%
profitability 78% profitability 75%
Reduce external 61% 61%
Reduce external
spend 59% spend 60%
Digital enablement 69% Digital enablement 69%
74% 61% 74%
+5%
Increase -5% Increase 61%
centralization 56%
-6%
centralization 55%
Cost reduction 69% Cost reduction 69%
+7% Streamline 60%
76% 66% Streamline 60%
organization structure 57% organization structure 57%
Organization 69% Organization 69%
and talent Improve policy 59%
69% compliance
and talent
67%
Improve policy 59% -5%
58% compliance 54%
Balance sheet 61% Balance sheet
Outsource/offshore 59% 61% Outsource/offshore 59%
management management
64% business processes 55% 61% business processes 59%

Top categories % Highest differences between Global Avg C&IP Top categories % Highest differences between Global Avg FS
global average and industry results global average and industry results

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Technology, Media & Telecommunications (TMT) Energy & Resources (E&R)

• Response levels for investment in growth areas and gaining • Strategic priorities for TMT are similar to other industries, with • The top driver of cost management in E&R—required investment • Product profitability and organization and talent are the top
competitive advantage drivers significantly exceeded the sales growth and technology implementation rated higher than for growth—was rated much higher than the cross-industry strategic priorities. The strategic priority of sales growth was
averages across industries. the average across all industries. average. Ratings for other drivers were similar to other industries. rated much lower than the cross-industry average.
• Risks beyond macroeconomic, cybersecurity, and digital • Top likely cost actions: increasing centralization and • Biggest perceived external risk is commodity price fluctuations. • Changing business configuration is the most likely action and was
disruption are rated equally. implementing AI and cognitive technologies. rated much higher than the average for all industries.

Figure A-10. Technology, Media and Telecommunications Figure A-11. Energy and Resources

Drivers of cost management External risks

Required investment 67% Cybersecurity 62% Drivers of cost management External risks
in growth areas +8% concerns 65%
75%
Required 67% Cybersecurity 62%
61% investment in +7% concerns 62%
Intensified Digital 74%
66%
65% +4% growth areas
competition among
75%
+9% disruption
61%
peer group Intensified 66% Digital
59% competition among disruption 59%
Political peer group 68%
Increased 65% 62%
international growth climate 59%
70% Increased 65% Political
opportunities 63%
Commodity price 59% international growth climate
fluctuations 63% opportunities 66%
Changed regulatory 61% Commodity price 59%
structure
66% fluctuations 66% +7%
Macro economic 59% Changed regulatory 61%
concerns
+7% structure
66% 67% Macro economic 59%
Unfavorable cost 57%
position relative to concerns 58%
64% Currency 58% Unfavorable cost 57%
peer group position relative to
fluctuations 61% 59% Currency 58%
Significant
peer group +6%
55% fluctuations 64%
reduction in New market 57% Significant
62% entrants 55%
consumer demand 61% reduction in New market 57%
consumer demand 59% entrants 59%
Decrease in liquidity 53% 57%
Credit risks
and tighter credit 60% Decrease in liquidity 53%
60% Credit risks 57%
and tighter credit 59% 61%

Strategic Priority Likely cost actions

Strategic Priority Likely cost actions
Sales growth 73% Change business 65%
+7% configuration -7% Sales growth 73% Change business 65%
80% 58%
configuration 73%
68%
Implementation of 63%
Technology 73% specific automation or Implementation of 63%
implementation +6% 63% Technology 73% specific automation or
79% cognitive technologies 66%
implementation cognitive technologies
71%
Streamline business 61%
Streamline business 61%
Product 73% processes 55%
Product 73% processes 68%
profitability 74% profitability 72%
Reduce external 61%
Reduce external 61%
spend 60%
Digital enablement 69% spend 70%
Digital enablement 69%
72% Increase 61% 70% Increase 61%
centralization 64% centralization 69%
Cost reduction 69% Cost reduction 69%
72% Streamline 60% -7% Streamline
62% 60%
organization structure 54% organization structure +12%
72%
Organization 69% Organization 69%
and talent Improve policy 59% and talent Improve policy 59%
73% compliance 72% compliance
+11%
55% 70%

Balance sheet 61% Balance sheet 61%

Outsource/offshore 59% Outsource/offshore 59%
management management
71% business processes 56% 63% business processes 68%

Top categories % Highest differences between Global Avg TMT Top categories % Highest differences between Global Avg Energy and Resources
global average and industry results global average and industry results

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Life Sciences & Health Care (LSHC) Public Sector (PS)

• Ratings for all the cost management drivers in LSHC differ • Sales growth was ranked as the highest strategic priority, but the • PS ratings for most of the cost management drivers differ • Given the nature of public service, sales growth and
significantly from the cross-industry averages. The top driver is rating was significantly lower than the cross-industry average. significantly from the cross-industry averages. The top drivers product profitability rated much lower, making technology
international growth opportunity. are investment in growth areas, global expansion and gaining implementation by intensified competition among peer group.
• The top likely cost actions are to change business configuration,
competitive advantage.
• The top external risk is cybersecurity, followed by digital implementation of technologies (automation/cognitive), • Streamline organization structure was rated as the most likely
disruption, currency fluctuations, and new market entrants streamline business process, reduce external spend, and • Political climate was rated as the key risk, followed by commodity cost action.
increase centralization. prices and macroeconomic concerns.

Figure A-12. Life Sciences and Healthcare Figure A-13. Public Sector

Drivers of cost management External risks Drivers of cost management External risks

Required 67% Cybersecurity 62%

Required 67% Cybersecurity 62% -10%
investment in -13% concerns 60%
investment in
56%
concerns 52%
54% growth areas
growth areas
61% Intensified Digital 61%
Intensified 66% Digital 66%
56%
competition among -12% disruption 53% competition among
56%
disruption
peer group 54% peer group
59% 59%
Increased Political Increased 65% Political 61%
65% 51% international growth climate
international growth climate 56%
opportunities 56% opportunities
Commodity price 59% Commodity price 59%
Changed regulatory fluctuations 47% -12% Changed regulatory 61%
fluctuations 54%
61% structure
structure 50%
54% Macro economic 59%
Macro economic 59%
concerns 49% concerns 54%
Unfavorable cost 57%
Unfavorable cost 57% position relative to
position relative to 45% -12% Currency 58%
46% Currency 58% peer group
peer group 53% fluctuations 51%
fluctuations
Significant Significant 55%
55% reduction in New market
New market 57%
reduction in
44%
57%
consumer demand 49% entrants -13%
consumer demand entrants 53% 44%

Decrease in liquidity Decrease in liquidity 53%

53% 57% and tighter credit Credit risks 57%
and tighter credit Credit risks
42% 51% 46%
47%

Strategic Priority Likely cost actions Strategic Priority Likely cost actions

Change business Sales growth Change business 65%

Sales growth 65% 73% -22%
73%
configuration 67%
configuration 56% -9%
67% 51%

Implementation of Implementation of 63%

63%
Technology 73% specific automation or Technology 73% specific automation or 57%
implementation -12% 67% implementation cognitive technologies
61% cognitive technologies 72%
61% Streamline business 61%
Streamline business
Product 73% processes 67%
+6% Product 73% processes 65%
profitablility
profitability 63% 59%
61% Reduce external 61%
Reduce external
spend 66%
+5% Digital spend 54%
Digital enablement 69% 69%
enablement
60% 50% Increase 61%
Increase 61% +6%
centralization 67% centralization 65%
Cost reduction 69% 69%
Cost reduction
Streamline 60% 56% Streamline 60%
64%
organization organization 67%
64% structure
structure Organization
Organization 69% 69%
Improve policy 59% and talent Improve policy 59%
and talent 63%
64% compliance compliance 65%
62%
Balance sheet Balance sheet 61%
61% 59% Outsource/offshore 59%
Outsource/offshore management
management 52% business processes 62%
51% business processes 58%

Top categories % Highest differences between Global Avg LSHC Top categories % Highest differences between Global Avg PS
global average and industry results global average and industry results

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Zero-based budgeting continues as the least developed the least active (10 percent), with the United States just slightly
capability globally higher (11 percent) (see Figure B-1).
According to the survey results, zero-based budgeting (ZBB)
Compared to 2017, the global implementation rate for ZBB
was the least developed capability over the past 24 months,
increased (+3 percentage points). Looking at individual regions,

Appendix B: Zero-based budgeting with only 12 percent of global respondents implementing it

during that time. APAC and LATAM were the most active, with
the ZBB implementation rate increased in Europe (+8 percentage
points), LATAM (+8 percentage points), and APAC (+2 percentage
both reporting implementation rates of 16 percent. Europe was
points) but held steady in the United States.

Figure B-1. ZBB implementation

80

70
Comparison to
2017 Global Cost
60 Survey results1
53% 54%
ZBB implementa-
49% 50% 49% tion globally has
50 48% 48% gone up 3
42% 45% 45%
percentage points
41% 42% 41%
41% 40% 40% 40% 40% since our prior

Total responses (%)

40 38% survey
34% 35% 35%
34% 34% ZBB increased
31% 31%
29% across regions
30 28% except in the US
26%
23% where it remained
2 2 the same (LATAM
20 +8 percentage
1 3 16% 16%
3 points, Europe +8
12% 11% percentage points,
10% APAC +2
10 percentage
points)

0
Global US LATAM Europe APAC

Created a new executive position Set up or improved ERP Developed or implemented Developed or implemented
and/or full-time positions to drive infrastructure automation technologies cognitive and artificial
cost management intelligence technologies

Implemented new policies and Improved processes for forecasting, Implemented zero-based

According to the survey results, zero-

procedures, and strengthened budgeting and reporting to enable budgeting, system or process
the compliance mechanisms effective cost management

based budgeting (ZBB) was the least

1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017

developed capability over the past 24

Key findings
Globally, only 12% of respondents implemented ZBB over the past 24 months

months, with only 12 percent of global

APAC and LATAM were the regions that focused the most on ZBB (16%)
Europe is the region that focused the least on ZBB (10%) followed closely by the United States (11%)

respondents implementing it during ZBB companies tend to have higher cost targets, but the gap 20 percent has declined by two points, while the percentage of non-ZBB

that time. Compared to 2017, the global

companies with targets above 20 percent has increased by eight points
is closing
(see Figure B-2).
Although ZBB is considered a tactical cost approach, companies that use it
generally have higher cost targets. Globally, the percentage of companies

implementation rate for ZBB increased pursuing cost targets above 20 percent is eight percentage points higher for ZBB cost targets vary widely by region. In the United States, only 26 percent
companies that use ZBB versus those that do not. However, the gap seems to of ZBB companies have targets above 20 percent, compared to 43 percent of
be closing. Since 2017, the percentage of ZBB companies with targets above ZBB companies in APAC.

(+3 percentage points).

69
 Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey

80
Figure B-2. Annual cost reduction targets (ZBB vs. non-ZBB) Key findings
70 60% of companies conducting ZBB met 1% to 74% of their savings goals, compared to 65% of non-ZBB companies
On average, 39% of respondents conducting
60 Conducting ZBB ZBB had targets above 20% 33% of ZBB companies met 1% to 49% of their savings goals, compared to 30% of non-ZBB companies
2
50
48% 1 4% of companies conducting ZBB had total failures (0% of savings realized), compared to only 1% of non-ZBB companies
41% 43% Comparison to 2017
39%
40
35% 2 35% Global Cost Survey
31% 31% 33%
28% 30% 30% results1 ZBB companies face more barriers all companies in 2017 and remains on top this year for ZBB
30 26% 27% 26%
The proportion of As was the case in the 2017 survey, companies that use companies (68 percent). However, for non-ZBB companies,
non-ZBB companies
20
with cost targets
ZBB reported higher rates on all barriers to effective cost that same barrier is now the least common (35 percent)
10 above 20% has management over the past 24 months. Management challenges (see Figure B-4).
increased (+8 in implementing initiatives was the most common barrier for
0 percentage points),
Less than 10% 10% to less than 20% More than 20% while the
proportion of Figure B-4. Barriers to effective cost management (ZBB vs. non-ZBB)
On average, 31% of respondents not ZBB companies
Not conducting ZBB with targets above
conducting ZBB had targets above 20% Barriers to effective cost management over the past 24 months
3 20% has declined
50
42% 44% (-2 percentage 80
38% 1 37% points)
40 36% 35% 35%
31% 31% 31% 33% 31% 70
27% 28%
30 Global USA
23%
60
20 LATAM EMEA
51% 50%
50 47%

Not conducting ZBB

10 APAC 45% 46% 46% 45%
44% 44% 43%44%
41% 42% 41% 42% 41%
41% 39% 40% 39%
0 40 37% 38% 38%
36% 36% 35% 36%36%
34%
Less than 10% 10% to less than 20% More than 20% 30%
30
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
1
Key findings 20

Globally, the percentage of companies pursuing cost targets above 20% is 8 percentage points higher for ZBB-companies than
10
non-ZBB companies
Only 26% of companies in the US conducting ZBB are pursuing targets above 20%, whereas 43% of APAC companies are doing so 0

On average, 38% of companies not conducting ZBB set cost targets of 10% to 20%, with non-ZBB companies in APAC and the
United States setting their targets at 44% and 42%, respectively
+45% +47% +53% +54% +67% +94%

ZBB has higher reported failure rates with only 27 percent of ZBB companies achieving 50–74 percent
Globally, the percentage of companies that achieve of their targeted savings compared to 35 percent of non-ZBB 78%
80 77%
75–99 percent of their targeted cost savings is similar for ZBB companies. Also, the rate of total failure (0 percent of savings Comparison to
71%
69%
companies (36 percent) and non-ZBB companies (34 percent). achieved) is much higher for ZBB companies (4 percent) than 70 67% 66% 65%
67% 68% 67% 67% 2017 Global Cost
64% 65% 65% 64% 65% Survey results1
63% 63% 63% 63%63% 63%
However, in the next tier down, ZBB falls significantly behind non-ZBB companies (1 percent) (see Figure B-3). 60% 60% 60%
60 58% Management
55% 55% challenges in
Figure B-3. A closer look at failure rates (ZBB vs. non-ZBB) 52% 52%
implementing
50 initiatives
Conducting ZBB Not conducting ZBB continues to be

Conducting ZBB
the top
40
barrier for
1 2 2 companies
3 30 conducting ZBB
3
However, for
1%
20 companies not
conducting ZBB,
4% it shifted from top
11% 10 barrier to lowest
13% 33% 30%

34% 0
36% 2 19% Weak/unclear Lack of understanding/ Poorly designed Erosion of savings Lack of an effective Management challenges
2
business case for acceptance of the solution reporting and tracking due to infeasible ERP system in implementing initiatives
Global Global cost improvement by the audience target setting
20%

Global USA LATAM EMEA APAC

1-49%
of 1-49%
1%-74% 1-74% of 1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
savings of
of savings
savings
savings 27% 35%

Key findings
1
1 Management challenges in implementing initiatives is the top barrier (68%) for companies conducting ZBB, whereas it is the
60% 65%
lowest barrier (35%) for companies not conducting ZBB
For companies conducting ZBB, that same barrier is rated the highest by APAC respondents (77%) and the lowest by Europe
Realized 0% of savings Realized 1%-24% of savings Realized 25%-49% of savings Realized 50%-74% of savings Realized 75%-99% of savings respondents (52%)

70 71
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