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Companies that fail to keep stride with the pace of innovation and remain complacent with traditional cost management practices will undoubtedly lag behind and fall to more forward-looking competitors.
Deloitte’s first ever “Global Cost Survey Report” indicates that digital disruption – and the exponential technologies that drive it – are increasingly becoming key factors that companies need to consider as they strive to reduce costs and improve margins.

In surveying more than 1 000 executive leaders across major global regions about their cost management strategies, the report found that cost reduction is a focus of most companies globally (86%).

However, many global business leaders fail to recognise the sizable advantages provided by unleashing digital solutions, potentially losing significant value as a result of relying on outdated and inefficient cost management models.

Organisations are pursuing cost reduction targets of less than 10% with nearly two-thirds (63%) of organisations failing to meet their goals.

Daryl Elliott, associate director of Monitor Deloitte, says: “The general trend that we are seeing is that a large percentage of companies are not meeting their targets because they are not driving cost reduction through strategic means, focusing instead on tactical cost management approaches.

“The low targets and high failure rates suggest that cost programmes both global and local are not as effective as they could be, and this provides an opportunity to significantly improve how companies manage costs.”

In the survey, Deloitte found that many global companies (40%) continue to use the same basic approaches to cost management — relying on inflexible tactical actions such as streamlining business processes or reducing external spend.

These initiatives are likely inadequate in meeting the ever-shifting dynamics of today’s fast-paced and uncertain business ecosystem.

As the age of digital disruption looms large, businesses have a choice: engage new technologies and capitalise on more strategic cost management initiatives or remain hindered by outdated and ineffective models of margin improvement.

Companies will be better served by applying approaches that are more strategic and transformational in nature and are thus more likely to deliver scalable and sustainable cost savings in excess of 10%.

“Companies need to understand the disruptive impact that digital platforms have on business, and the impact of digital as a cost enabler,” says Elliott. “It is a huge lever to pull in positioning themselves to capitalise on the opportunities, particularly with regards to automation, robotics and cognitive data analytics technology, which will likely be the first innovation areas to emerge.”

Companies actively engaging digital technologies, such as cognitive data analytics and robotics and automation, can expect strategic impacts that disrupt entire industries and may deliver sustainable cost savings of 30% or higher.

However, most global companies are operating far below optimal performance when it comes to the arena of cost management.

Deloitte recommends several steps companies can begin exploring to capitalise on these transformative opportunities:

* Embrace cognitive/analytics and automation – These digital technologies can perform far beyond human ability, empowering companies to analyse mountains of data and identify key costs savings opportunities. These technologies will help increase efficiency and effectiveness — evolving new platforms and driving cost improvement across the entire enterprise.

* Gain knowledge and expertise – Operating at the forefront of next-generation digital solutions requires the right know-how for proper implementation. Arm your company with specialists in digital analytics, data science and automation and prepare management to adopt the latest and emerging strategic practices in determining effective cost reduction.

* Disrupt – Explore new tools, engage new opportunities for growth, and empower more dynamic strategies to improve cost margins. Disrupt traditional and outdated operating models and adopt the latest innovations in digital solutions.