Traditional cost cutting measures are no longer enough; Cost transformation must be interconnected with growth, sustainability and innovation

More than three-quarters of companies (76%) cut costs to survive during the pandemic; now 90% of C-suite executives say they must take a whole new approach to costs in order to transform their businesses to respond to ongoing disruption while also uncovering new growth and value, according to a new report from Accenture.

The Zero-Based Transformation: The Big Reset report, based on a global survey of 2,000 C-level executives across 15 industries, reveals an urgency to shift away from traditional cost reduction efforts that weren’t successful in the past. Executives acknowledge their current and future cost transformations must be interconnected with strategic priorities such as growth, sustainability and innovation and centered around building new technology-enabled capabilities.

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According to the report, a vast majority of executives surveyed (92%) say that these transformations are no longer driven solely by financial considerations, but also need to account for their impact on their company’s sustainability and purpose. Their priority is not only profitable but responsible growth. In addition, leaders today are looking to reset their business holistically, instead of focusing on one or two areas as in the past. Virtually all executives (96%) indicated that their cost transformation plans span all or most areas of their business.

“As companies come out of survival mode and rush to transform all aspects of the organization, leaders have quickly realized that they can no longer look at costs as just an annual budgeting exercise,” added Robert Willems, global Zero-Based Transformation lead, Accenture Strategy. “Starting with a zero-based approach that is rooted in technology allows leaders to reimagine their business, reset their cost base, and free up funds for strategic priorities that drive growth, build resilience and better meet stakeholder needs.”

The report also addresses the critical role of technology in successful cost transformations because it gives companies visibility and a forensic view of costs to manage and recalibrate in real-time, as well as plan for future scenarios. Nearly 70% of executives said they are investing in technologies including AI, digital tools and cybersecurity to optimize operations. Without these investments, 80% of executives see continued challenges to their cost transformation efforts.

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According to Accenture, there are four key aspects companies must focus on to make cost transformations succeed where past efforts have failed:

1. Gain forensic, real-time visibility with advanced analytics. Putting data and analytics at the core is critical to gaining the insights needed to make intelligent, fast and accurate decisions. It’s essential to invest in the right tools and technologies to leverage the power of data to continuously monitor, course correct and control as conditions change.
2. Start at zero and redesign the business for growth and resilience. Taking a zero-based approach allows companies to consider the tradeoffs necessary, look at costs holistically across the organization and align resources with new business priorities and capabilities.
3. Bring everyone along for the journey. One of the keys to a successful cost transformation is aligning the story from the top to minimize conflicting priorities and ensuring consistent messaging both internally and externally. In fact, nearly seven in 10 executives agree cost transformation creates opportunities for employees to grow in their careers with new capabilities and ownership.
4. Make the transformation count. Cost transformation is no longer a one and done intervention. To make it a continuous activity, companies need the right governance, data and insight capabilities to manage cost transformations in a way that ensures the benefits endure.

“We are in a perfect storm with record inflation, global volatility, supply chain challenges, and labor and material shortages. To successfully navigate this storm, company leaders have realized they need to focus on resilience, create value and deliver on sustainability simultaneously. Those who fundamentally rethink their total cost base and how they operate will move beyond cutting costs to not only survive but thrive, compete and win in the future,” said Bill Theofilou, CEO & Enterprise Strategy global lead, Accenture Strategy.