Deloitte Survey: Companies Saving to Transform as Digital Disruption Gains Momentum Globally

MBA NewsLink Staff

April 30, 2019

Deloitte, New York, said as digital technologies continue to reinvent how businesses grow and operate, associated risks and opportunities are prompting companies to expand their cost management strategies.

The company's biennial global cost survey, Save-to-transform as a Catalyst for Embracing Digital Disruption, found while traditional cost reduction methods are still crucial, many organizations are also investing heavily in transformative digital technologies to improve operating efficiency and cost savings while also boosting overall performance and competitiveness.

Of more than 1,200 global executives and business leaders surveyed, 71% said they are planning to undertake cost reduction initiatives over the next 24 months. Sixty-eight percent reported total reductions of 10% or higher, and nearly one-third (31%) have cost improvement targets above 20%. Eighty-one percent, however, report being unable to meet fully their cost reduction goals during the past year, 18 percentage points worse than in 2017, due to implementation challenges, lack of effective systems and infeasible targets.

The report said digital disruption soared to the top of the list as the biggest external risk according to respondents at 61%, up from just 6% in 2017. Digital disruption was surpassed only by another technology-related risk, cybersecurity, which at 62% ranks at or near the top of the risk list globally and in all regions except Latin America. Internally, reliability and functionality of information systems was identified as a top risk.

"In today's highly dynamic and competitive landscape, digital disruption is changing how companies view every aspect of their business, including cost management practices," said Omar Aguilar, principal and global strategic cost transformation leader with Deloitte Consulting LLP. "Businesses are now recognizing they must save-to-transform, using investments in digital infrastructure to drive dramatic improvements in future performance, efficiency and market position."

The survey said digital risks are spurring organizations to use cost reduction as a mechanism to fund technological transformation. Application of artificial intelligence and machine learning is expected to more than double from 25% to 63%. Findings also show similar growth is expected for automation (25% to 62%) and business intelligence (35% to 59%). Cloud continues to be the most widely implemented digital technology covered by the survey at 49% and is expected to remain popular due to its ability to tighten data security, as well as to reduce costs and improve productivity. However, all technologies in the survey are expected to be implemented at a level of 47% or higher over the next 24 months, signaling the widespread business impact of technology innovation.

The survey also found companies are well-positioned to undergo this type of transformation, with 86% of respondents reporting increased revenue over the past two years. This optimistic outlook continues into the future, with the same number of respondents expecting revenue growth over the next 24 months as businesses around the world enjoy one of the longest periods of economic expansion in history.

"Companies have an enormous opportunity to capitalize on current economic strengths and leverage cost management practices to transform and innovate their businesses," said Jason Girzadas, managing principal with Deloitte Consulting LLP.

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