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ZBB and beyondSeven ways to be more successful with ZBB and thrive in uncertainty
Implications
Align ZBB initiatives to business strategy
Dedicated Executive Oversight
32% of companies surveyed created a dedicated executive position to oversee cost reduction
Fuel for Growth
Only 34% of executives believe the reinvestment of cost savings is aligned with business strategy
Get to meaningful cost savings faster
From Tactical to Structural
63% of planned cost initiatives are tactical (e.g., reduce external spend) — Focus on more strategic approaches such as reconfiguring the operating model
Accelerated, Data Driven Process
52% of companies surveyed complained about the long ZBB process — accelerate and inform the cascade of achievable objectives with advanced analytics and tools
Create sustainable solutions by focusing on capabilities
Next Gen Operating Model Changes
42% of Consumer Goods companies plan to change their operating model — focus on creating a more agile operating model enabled by digital, analytical, and technological innovations and supported by the right management model and culture
Cross-Functional FocusMove from a siloed ZBB approach, focusing on functions to a cross-functional approach that is driven by capabilities
Measurement and IncentivesCreate a closed-loop objectives/ measurement system to drive the right behavior and focus at the individual level
Success in meeting cost targets Average target for ZBB companies vs. different cost approach onesBarriers to effective cost reduction
65%
57%
26%
28%
9%
15%
-53%
-44%
-34%
Zero Based Budgeting
Different Cost Approach
Sources: Deloitte’s fourth biennial cost survey, April 2016
53% 55%
47%
22%
41%
35%
41%
23%
32%
21%
Diff
eren
t Co
st A
ppro
ach
Zero
Bas
ed B
udge
ting
Challenges inimplementing
initiatives
Weak business case
Lack of understanding
Poor designand tracking
Erosion ofsavings
Poor design of the ZBB program leads to unsustainable
cost savings
Weak business case that leads to unrealistic goals
is one of the main barriers
Did not meet goals
Met goals
Exceeded goals
Wrong Tool forthe Job?
ZBB appears to be seen as a silver bullet for those
companies targeting more aggressive cost reduction.
59% of these companies had targets greater than 20% yet nearly two thirds did not meet
those targets
ZBB — the good, the bad and the uglyWhat works well and how to improve the ZBB approach
ZB
B Approach
CP Industry
All IndustriesFuel for GrowthConsumer Goods
companies are freeing cash and reducing cost
with a steady eye towards fueling growth ambitions
New Operating Models
Consumer Goods companies are focusing
more on operating model, organization, and
labor model
Sales Growth ProductProfitability
CostReduction
BalanceSheet
Management
Organization& Talent
Reduce External Spend
StreamlineBusiness
Processes
Change Operating
Model
IncreaseCentralization
Outsource/Off-shoreBusiness Processes
StreamlineOrganization
ImprovePolicy
Compliance
Source: Deloitte’s fourth biennial cost survey, April 2016
46%
42%
46% 45%
42%
29%
38%
31%
38%
30%
35% 34%
31%
36%
Cost activities likely in the next 24 monthsStrategic priorities in the next 24 months
56%
51%
44%42%
33%35%
30%
36%
22%25%
Consumer goods industry — thriving in uncertaintyNeed to simultaneously focus on growth, cost, liquidity, and talent to thrive in uncertainty
Industry Issues
Zero-Based Budgeting (ZBB)What works and what doesn’t...