Increasing agility to fuel growth and competitiveness

Although 82 % of business leaders want to free up funds by reducing costs to invest in growth, most of the nearly 700 senior executives participating in an Accenture study believe their companies are failing to align growth and cost reduction strategies.
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The Accenture study, Increasing Agility to Fuel Growth and Competitiveness, which included C-levels and direct reports across 13 industries worldwide, found that only 21 % of respondents are confident that their leadership has the right initiatives in place to reach cost reduction targets. Just 23 % said their company consistently identifies and terminates business activities and investments that do not add value to the organization. As a result, less than one-third (30 %) of respondents said the reinvestment of cost savings is aligned with their company’s business strategy.

“A company should directly integrate its cost reduction strategy with how savings are reinvested in order to achieve sustainable growth,” said Kris Timmermans, senior managing director, Accenture Strategy, Operations. “As our study shows, many companies are falling short.

To avoid cost cutting becoming an end in itself, management needs to know from the outset what contributes to their company’s growth, what does not, and where to reinvest savings

Illustrating the challenges associated with strategic cost management, only 36 % strongly agree that their business sustains the benefits of cost reductions. Less than one quarter (24 %) believe their company has the flexible operating model its needs to adapt and consistently deliver on their business strategy, or to focus on activities that result in growth and profitability.

It’s also a question of leadership alignement

Compounding the situation is a lack of alignment between CEOs and CFOs. Nearly half (51 %) of CEOs strongly agreed that their business prioritizes and allocates resources to activities that drive value for the organization, compared to just 34 % of CFOs. Seventy % of CEOs indicated that their organization assesses the return on reinvested cost savings with formal reviews of their investment success, yet only 49 % of CFOs agree. And while 20 % of CEOs admit that reinvestment priorities are driven by the fastest return on investment, a larger 30 % of CFOs hold that view.

The study also showed consensus among respondents around investment in digital, with more than 54 % investing in it and 61 % acknowledging that the increased use of technology would enable their operating model to operate at half its base cost. Eighty-five % said digital business is an enabler of strategic growth. Nearly as many (82 %) agreed that digital strategies enable new operating models.

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Author: Steve Craen