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Save-to-transform as a catalyst for embracing digital disruptionDeloitte’s second biennial global cost survey: Cost management practices and trends in Europe

Global Cost Report 2019-2020 Eu r o p e

Contents

Digital technology and digital disruption have burst onto the European marketplace as key levers for cost management and business transformation. In Deloitte’s 2017 Biennial Global Cost Survey,1 digital disruption was identified as an emerging risk by respondents in the United States but was barely visible elsewhere. Now, however, based on our latest results from Deloitte’s 2019 Biennial Global Cost Survey,2 digital risks—including digital disruption and cybersecurity—rank among the top external risks in Europe and around the world.

While cost management remains a strong imperative globally, the prevailing mind-set seems to be expanding from save-to-grow to save-to-transform. Companies in Europe continue to have very positive expectations for revenue growth, and many are using cost reduction as a tool to help fund their required growth investments. However, in today’s increasingly digital world, more and more businesses also recognize the need to transform their operations and capabilities with infrastructure investments in key digital innovations such as robotic process automation, cognitive technologies, business intelligence, and cloud-based ERP systems.

These digital technologies and innovations can deliver dramatic improvements in competitiveness, performance, operating efficiency, and increasingly, cost savings. Equally important, they can also strengthen a company’s positioning for adverse future events, including economic downturns and digital disruption.

In this highly dynamic environment where digital innovation is a critical enabler for both cost reduction and business transformation, we are delighted to present our latest European cost survey report. The study includes responses from 414 executives and senior business leaders across 11 European countries, with strong representation from every major industry.

This regional report provides an up-to-date view of the cost management practices and trends shaping the future of business in Europe and globally. It also takes a detailed look at how the latest digital technologies and cost management strategies are acting as a catalyst for transformation in a world being actively redefined by digital disruption.

We hope you find these insights useful and look forward to hearing your thoughts and feedback.

Foreword

Sam Balaji Global Consulting Leader

Executive summary 4

About the survey 8

Key differences between Europe and other regions 10

Firmographics 14

European survey results: Detailed insights 18

Digital technologies and solutions applied to cost management in Europe 34

Save-to-transform as a catalyst for embracing digital disruption 40

Appendix A: Cost management practices as a result of Brexit 44

1 Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017.2 Save-to-transform as a catalyst for embracing digital disruption: Deloitte’s second biennial global cost survey report, April 2019.

Omar Aguilar Strategic Cost Transformation Global Market Offering Leader

2 3

Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in EuropeSave-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Europe

Executive summaryKey differences between European results and other regions

Cost reduction efforts are less common in Europe than in the United States and globally; however, European cost targets tend to be more aggressive.

Save-to-transform has surpassed save-to-grow as the predominant Cost reduction mindset in Europe; however, the shift is less pronounced than in the United States and globally.

Technology implementation levels in Europe are higher than in the United States but lower than the global averages.

The failure rate for European cost programs is slightly higher (83%) than in the United States (82%) and globally (81%).

Cost management tends to be less mature in Europe, with less than a third of European companies (29%) reporting a high level of maturity in cost management—six percentage points lower than the global average (35%) and 21 percentage points lower than US companies (50%).

European survey results: Detailed insights

Growth expectations are high. European companies have a very positive growth outlook, with

84%

of respondents reporting revenue growth over the past 24 months and

83%

expecting revenue growth over the next 24 months.

Tactical cost actions have been slightly favored in Europe.The most frequently implemented cost reduction actions were tactical in nature:

33% tactical vs. 31% strategic

The two most common actions reported are:

36%streamlined business processes and

36%improved policy compliance.

Digital disruption is now the top external risk.Other top external risks among respondents are commodity price fluctuations and cybersecurity.

Strategic cost actions are catching up. Over the next 24 months, European companies surveyed expect to implement tactical and strategic cost actions in equal measure (61% in-process or planned).

Growth and competition remain the top drivers of cost reduction. In Europe, past and future drivers of cost reduction center around growth initiatives and competition.

Reliability and functionality of information systems is the top internal risk. Other top internal risks are recruitment, development, and retention of talent and lack of controls for business continuity.

Top barriers to effective cost management. In Europe, the top barriers to successful cost reduction are:

61%management challenges in implementing initiatives

60%erosion of savings due to infeasible target setting

59%lack of an effective ERP system


Cost reduction is prevalent in Europe, but less than elsewhere.

66%of European companies surveyed plan to undertake cost reduction initiatives over the next 24 months; however, that number is significantly lower than the averages of

71%for companies globally and

84%in the United States.

Cost program failure rates are up significantly.The average failure rate for European cost programs is

83%,

up 26 percentage points from 2016.

Cost reduction targets in Europe are up significantly.On average,

2/3(67%) of European companies surveyed have overall cost reduction targets

above 10%

1/3

(34%) have targets

above 20%,

more than double the number from 20163 (13%).

Europe’s strategic priorities align with save-to-transform.The top four strategic priorities over the next 24 months are:

70% technology implementation

69%product

profitability

67%sales growth

67% digital enablement

These priorities indicate a save-to-transform mindset.

3 Thriving in uncertainty. Deloitte’s first biennial cost survey: cost improvement practices and trends in Europe, October 2016.

4 5

Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Europe Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Europe


Lessons learned in Europe.The top lessons for effective cost management are:

68%invest in technology improvements to enable data availability, reliability, and decision-making processes

67%

design a solid tracking and reporting process

65%

assess, validate, and adjust targets reasonably to reflect reality throughout the implementation phase and

65%deploy change-management activities to raise awareness, acceptance, and benefits of initiatives

Cost management maturity varies widely across the continent.Countries with the largest proportion of companies reporting a high maturity level are:

56% Italy

and

42% France

Companies in Denmark and Sweden reported the lowest maturity levels.

Cloud soars above the rest.Among the breakthrough technologies covered in our survey, the most widely implemented by European companies were

50%cloud

32%business intelligence

Digital technologies and solutions applied to cost management in Europe

Most technology implementations meet or exceed expectations. At least

70% of European respondents say their expectations were met or exceeded when implementing the various technologies covered in the survey.

Top reasons for applying digital technologies. In Europe, the top reasons for respondents using cloud are tightening data security and improving business control. The top reasons for using automation and cognitive technologies are reducing costs and increasing productivity.

Digital leaders make a difference.On average, the level of technology implementation is

187% higher

when European companies designate a digital leader.

Technology implementation is lower in Europe than globally. Over the next 24 months, implementation levels (in-process or planned) for all the surveyed technologies are expected to be lower in Europe than globally, but it is higher than in the United States.

Digital rises to the top of the agenda. In 2016, digital disruption was seen as a significant external risk in the United States but was barely on the radar in Europe. Now,

62% of European companies surveyed cite digital disruption as a key external risk, which represents a

933% increase in awareness.

Save-to-grow evolves into save-to-transform. Save-to-grow used to be the primary cost management mindset for respondents in Europe, with cost and growth as the main levers, and talent (including capabilities) as another key component. Now, that mindset is expanding into save-to-transform, which includes an additional focus on technologies and digital enablement. Save-to-transform can help a company capitalize on digital opportunities, while at the same time positioning itself for potential adversity by using digital innovations to unlock new levels of cost savings.

Save-to-transform as a catalyst for embracing digital disruption

6 7


Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Europe

Deloitte Consulting LLP (Deloitte or Deloitte Consulting) engaged Dynata to conduct a cost management survey in Europe and around the world to better understand business leaders’ perspectives on current and future cost reduction initiatives within large companies, multinationals, and companies representative of regions surveyed.

Study objectives

Understand factors, approaches, actions, and targets related to cost initiatives

Assess the effectiveness of the cost actions, including lessons learned from previous efforts

Understand the drivers and scope of past and future cost initiatives

Provide context on how digital disruption and advanced digital technologies are affecting cost management

Assess industry results, and provide insights on different behaviors related to cost reduction

MethodologyData was collected through detailed online surveys conducted between November and December 2018.

January February March April May June July August September October November December

About the survey

UK100 responses

Italy41 responses

France50 responses

Belgium15 responses

Netherlands40 responses

Norway4

13 responses

Denmark4

10 responses

Sweden4

10 responsesFinland4

15 responses

Germany70 responsesSpain50 responses

FirmographicsThe survey included responses from 414 executives directly involved in cost management in their organizations. Respondents were from 11 European countries.

4 These countries were grouped under Nordics.

8 998


Key differences between Europe and other regions


In most cases, the results from this year’s global survey are generally consistent across all major regions. However, there are a number of key differences between the survey findings for Europe compared to the US and global findings:

1. A lower proportion of European companies plan to undertake cost reduction initiatives (–5 percentage points versus the global average); however, a higher proportion (+3 percentage points) set cost targets above 20%.

2. The percentage of European cost programs that fail to fully meet their targets is slightly higher (83%) than the average for companies in the United States (82%) and globally (81%).

3. Many companies surveyed in Europe are adopting a save-to-transform mindset, but the trend lags behind the United States and global average.

4. A smaller proportion of European companies report high levels of cost management maturity (17% below the global average and 42% below US companies).

5. In Europe, expected levels of digital technology implementation over the next 24 months are slightly lower than the global average for cognitive, RPA (Robotic Process Automation), and business intelligence (–3, –2, and –1 percentage points, respectively), but the expected level of cloud implementation is the same.

Here is a closer look at each of these key differences.

Two-thirds of the European companies surveyed (66%) plan to undertake cost reduction initiatives over the next 24 months (see figure 1). That number is lower than the averages for companies globally (71%) and in the United States (84%). However, a larger percentage of European companies (34%) have set aggressive

cost reduction targets of more than 20%, a proportion that is larger than the average globally (31%) and in the United States (27%). At the other end of the spectrum, the average percentage of companies with cost reduction targets of less than 10% is identical in Europe (30%), the United States (30%), and globally (30%).

Likely Neutral Unlikely0

10

20

30

40

50

60

70

80

90

100

71%

84%

66%

20%

10%

24%

8%6%

10%

Global US Europe

Likelihood

% o

f tot

al r

espo

nden

ts

66% of European respondents plan to undertake cost-reduction initiatives

Less than 10% 10% to less than 20% More than 20%0

10

20

30

40

50

60

70

80

90

100

30% 30% 30%33%

31%

Cost targets

% o

f tot

al r

espo

nden

ts

34% of European respondents have targets above 20%

37%

42%

27%

34%

Figure 1. Cost reduction trends

Cost reduction efforts are less common in Europe, but cost targets are higher

1110


Cost management tends to be less mature in EuropeA smaller proportion of European companies (29%) report high levels of cost management maturity. That number is 17% lower than the global average, and 42% lower than the average for companies in the the United States (see figure 4).

Technology implementation levels in Europe over the next 24 months are expected to be relatively high: automation (60% implemented or in-process); cognitive (60% implemented or in-process); and business intelligence (58% implemented or in-process) (see figure 5). Those numbers are higher than for US

A high level of cost management maturity is characterized by cost policies and procedures that are continually reviewed and examined to ensure best practices around efficiency and cost management.

companies, but lower than the global averages: automation (3% lower); cognitive (5% lower); and business intelligence (2% lower). The level of technology implementation for cloud is expected to be the same in Europe and globally (47% implemented or in-process).

Global US Europe0

10

20

30

40

50

60

70

80

63%59%

47%

Next 24 months

% o

f tot

al r

espo

nden

ts

62%

38%

24%

39%

24% 20%

39%

14%

33%

0

10

20

30

40

50

60

70

80

57%

50%

33%

59%

43%

15%

36%

21% 15%

35%

9%

24%

0

10

20

30

40

50

60

70

80

60% 58%

47%

60%

34%

26%

36%

24% 23%

35%

16%

31%

In process of implementation

Not implemented but planned

Business intelligence (not including cognitive or AI)

Cloud solutionsAutomation: Robotic process automation

Cognitive technologies: AI and machine learning

-5%-2%

-3%

Figure 4. Cost management maturity

Figure 5. Technology implementation levels

Cost program failure rates in Europe are slightly higher than elsewhereThe percentage of cost programs in Europe that fail to fully meet their targets is slightly higher (83%) than the average for companies in the United States (82%) and globally (81%) (see figure 2).

Save-to-transform uses cost reduction as a means to fund investments in growth and transformational digital technologies, while in turn applying many of those same technologies to boost the efficiency and effectiveness of cost reduction programs. Many companies in Europe are adopting a save-to-transform mindset, which is characterized by a simultaneous strategic focus on sales growth, cost reduction, technology implementation, and digital

enablement (see figure 3). However, this mindset—while present in Europe—is currently less pronounced than in the United States and globally. Specifically, relative to the global averages, European companies seem less focused on the strategic priorities associated with save-to-transform: growth (–6 percentage points), cost (–4 percentage points), technology (–3 percentage points), and digital enablement (–2 percentage points).

Did not meet goals Met goals Exceeded goals0

10

20

30

40

50

60

70

80

90

100

81% 82% 83%

13% 12%5% 5% 5%

Global US Europe

% o

f tot

al r

espo

nden

ts

83% of European respondents failed to meet fully their targets

5 Thriving in uncertainty. Deloitte’s first biennial cost survey: Cost improvement practices and trends in Europe, October 2016.

14%

0

10

20

30

40

50

60

70

8073% 73% 73%

78% 76% 76%70%

75%71%

60%

69% 70%

Sales growth Cost reduction Balance sheet management

Product profitability Organization and talent

Technology implementation

Digital enablement

% o

f tot

al r

espo

nden

ts

61%

Next 24 months

Global US Europe

67%64%64%

69% 69%69% 67%65%

Figure 2. Cost program success and failure

Figure 3. Strategic priorities and save-to-transform

% o

f res

pond

ents

Lowest High

High

Intermediate

Low

Lowest

Cost policies and procedures are continually reviewed and examined to ensure best practices around efficiency and cost management

Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply

There may be written cost policies and procedures documented but not readily available and essentially not followed

Few or no formal cost policies or procedures are employed or documented, or they are significantly fragmented

15% 20% 31% 35%

35%9%6%

19% 28% 25% 29%

50% -17%

-42%

Global

US

Europe

Comparison to 2016 cost survey results in Europe5

1. Failure rates increased 26 percentage points on average, due mainly to a decrease in meeting goals (down 20 percentage points)

2. Countries/regions with the most significant increases in failure rates:• Nordics (+50 percentage

points)• Spain (+41 percentage points)

Save-to-transform is the predominant cost reduction mindset

Technology implementation levels in Europe are higher than in the United States but lower than global results

12 13



Firmographics

82%

(% of respondents based on 2017 global GDP)

Survey respondents

represent 82% of the European

economy

GDP of European countries surveyed

18%

Survey sample coverage6Map of Europe—surveyed countries

UK100 responses

Italy41 responses

France50 responses

Belgium15 responses

Netherlands40 responses

Norway6

13 responses

Denmark6

10 responses

Sweden6

10 responsesFinland6

15 responses

Germany70 responsesSpain50 responses

GDP of European countries not surveyed

The European respondents in this year’s survey accurately represent the overall European economy, in terms of both country distribution and their countries’ combined impact on the European GDP (see figure 6).

Figure 6. Geographic representation and GDP impact

6 These countries were grouped under Nordics.

Management-level breakdown(% of respondents by level)

Management-level breakdown(% of respondents by level and country)

0

20

40

60

80

100

UKSwedenSpainNorwayNetherlandsItalyGermanyFranceFinlandDenmarkBelgium

7%

13%

40%

40%

27%

38%

Almost 27% of responses were from

president or CEO roles, more than 20% from CFO and COO roles, and the rest

from other executive management

positions

14%

21%

President, CEOExecutive Management (business units)Executive Management (enabling functions) CFO, COO

20%

60%

20%

42%

14%

42%

2%

20%

20%

30%

30%

22%

5%

29%

44%

10%

24%

33%

33%

31%

23%

23%

23%

18%

14%

40%

28%

10%

40%

50%

20%

14%

41%

25%

20%

60%

20%

Only relevant executives with direct involvement in cost management decisions were included in the survey (see figure 7).

Figure 7. Respondent breakdown by management level and country

14 1514


15


Industry breakdown:Total respondents (%)

Industry breakdown: Number of responses by industry and country

26%

11%

8%

2%

12% Industry representation

ranged from 12% to 26%, except for public sector at 8%; consumer &

industrial products was the most highly

represented

16%24%

Public sector Other

Financial services Technology, media and telecommunications

Life science and health care

Consumer and industrial products

Energy and resources

0 20 40 60 80 100

Belgium

Denmark

Finland

France

Germany

Italy

Netherlands

Norway

Spain

Sweden

UK

Total

15

10

15

50

70

41

40

13

50

10

100

5 2 3 3 2

2 2 1 2 1 2

2 2 2 1 6 2

12 10 9 66 34

18 14 15 16 511

11 10 6 54 5

10 5 8 15 56

3 4 2 22

11 20 5 5 54

4 2 2 2

31 29 15 10 58 2

Industry-specific information was collected to provide meaningful insights around six major industries. Industry representation ranges from 12% to 26%, except for public sector (8%). Consumer & industrial products is the most highly represented industry (26%) (see figure 8).

Figure 8. Industry breakdown

$200M to less than $500M

Belgium Denmark Finland France Germany Italy Netherlands Norway Spain Sweden

0

10

20

30

40

50

60

UK

$500M to less than $1B

$1B to less than $5B



Over $60B

27%27%

7%10%

20%

28%26%

10%8% 8%

13%

0%

7%

16%14%

41%

8%

23%

12%

20%

29%

13%

0%0%

14%14%

20% 20%

8%

20%

0%

8%

13%10%

7%

16%

11%

20%23%

0%

22%

0%

14%

8%

20%

30% 29%

16%

20%16%

60%

33%33%

20%

10%13%

16%

21%

2%

13%

30%

54%

10%

30%

4%7%

69% of European respondents reported revenues above US$1B, with almost 15% reporting revenues above US$60B

Note: The survey was conducted in local currencies – for analysis purposes figures have been converted to US dollars

Less than 1,000

Belgium Denmark Finland France Germany Italy Netherlands Norway Spain Sweden

0

10

20

30

40

50

UK

1,000 to 2,499 2,500 to 4,999 5,000 to 9,999 10,000 to 24,999 More than 100,000

18%

23%20%

12%

20%

27%30%

0%0%

16%

12%

22%20%

17%

27%

10%13%

16%13%

12%

31%

20%

14%

20%

10%

7%

23%

18%

24%

27%

10%

7%

12%10%

30%

12%13% 13%

19%

10%

18%

7%

15%

3%

20%

17%

10%

15%

4%

In Europe, 64% of respondents had more than 5K employees

25,000 to 49,999 50,000 to 99,999

0% 0%

8% 8% 8% 9%5%

4%6%

24%

10%

23%

10%10%

0%0%

7%

10%13%

6%7%

15%

8%6%

0%

10%

16%

7%

0%

10%

20%

15%

20%

16%

0%0%

18%

Survey respondents are an accurate representation of major companies in Europe, based on revenue (see figure 9).

Survey respondents are an accurate representation of major companies in Europe, based on headcount (see figure 10).

Figure 9. Revenue breakdown

Figure 10. Headcount breakdown

16 1716


17

A large number of European companies surveyed (66%) plan to undertake cost reduction initiatives over the next 24 months (see figure 11). However, that number is significantly lower than the averages for companies globally (71%) and in the United States (84%).

Likely Neutral Unlikely

Global US Europe Germany UK France Italy Nordics Belgium and Netherlands Spain

Among all European respondents, 66% plan to undertake cost initiatives

71%

84%

66%

60%

73%

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

80

90

49%50%

80%

20%

10%

24%

30%

22%

15%

6%10% 10%

8% 6%

12%

19%15%

4%

16%

31%

36%

16%

8%

78%

1

22

33

3

3

70%

Among the European countries included in this year’s survey, the likelihood of cost reduction is highest in Spain (80%) and France (78%), and lowest in the Nordics (50%), Belgium, and Netherlands (49%).European survey results:

Detailed insights Figure 11. Likelihood of cost reduction over the next 24 months

Survey findings On average, 66% of European respondents plan to undertake cost reduction initiatives over the next 24 months, a relatively low

number compared to the United States (84%) and the global average (71%).

Regarding the likelihood of cost initiatives, Spain (80%) and France (78%) are closest to the United States (84%); those two countries, along with Italy (73%) and the United Kingdom (70%) are closest to the global average (71%).

In Europe, neutral and unlikely expectations for cost initiatives are higher than the global average and the United States; the countries where cost initiatives are most unlikely are the Nordics (19%) and Belgium & Netherlands (15%).


• Likelihood of cost reduction initiatives in Europe decreased from 83% in 2016 to 66% this year, with significant decreases in:

– The Nordics (–42 percentage points)

– Belgium and Netherlands (–39 percentage points)

– Germany (–27 percentage points)

Cost reduction is prevalent in Europe, but less than elsewhere

7 Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Europe, October 2016.


18 19


Cost reduction targets in Europe are up significantlyOn average, 67% of European companies have overall cost reduction targets above 10%, which is similar to the survey results for companies globally (68%) and in the United States (69%) (see figure 12). Among the European companies with cost targets above 10%, roughly a third (34%) has more aggressive targets of more than 20%. The latter percentage (34%) has more than

Survey findings On average, 67% of European respondents hope to achieve cost reduction targets above 10%, a similar number to the United States

(69%) and global average (68%).

All European countries except France and Germany have a higher proportion of respondents with targets above 20% (compared to the global average of 31%).

Compared to the European average (33%), a higher proportion of companies in Germany (46%), France (40%), and Spain (34%) have set cost targets between 10% and 20%.

doubled from just 13% in our 2016 survey. European countries that saw the greatest percentage increases in the number of companies with cost targets above 20% are Italy (+40 percentage points); the Nordics (+34 percentage points); and Belgium & Netherlands (+30 percentage points).

10% to less than 20% More than 20%

30% 30% 30%

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

23%

Less than 10%

17%

29% 28%

37%

42%

33%

46%

29%

40%

27%27%29%

34%

27%

34%30% 31%

16%

56%

42%

36%36%34%

Most respondents (67%) reported targets above 10%

1 12

2

3

3

3

31%

42%

31%


Figure 12. Cost targets across Europe8


• Cost targets above 20% have increased from 13% in 2016 to 34% this year, with significant increases in:

– Italy (+40 percentage points)

– Nordics (+34 percentage points)

– Belgium and Netherlands (+30 percentage points)

8 Respondents that selected “no specific targets were established” were not included in results. 9 Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Europe, October 2016.

Survey findings Failure rates in the Nordics (92%) and Germany (89%) are higher than the European average (83%), global average (81%), and

United States (82%); Italy has the lowest failure rate at 71%.

In the United States, Europe, and globally, the same percentage of companies exceeded their goals (5%); Italy had the highest percentage of companies that exceeded their goals (12%).

On average, European companies at 12% have lower rates of meeting their cost goals than the global average (14%) and the United States (13%)—largely due to low rates in Germany (7%) and the Nordics (6%).

Cost program failure rates in Europe are up significantlyThe percentage of European cost programs that failed to fully meet their targets is high (83%), which is 26 percentage points higher than in 2016. Failure rates are highest in the Nordics (92%) and Germany (89%), and lowest in Italy (71%). The countries with the

largest jumps in cost program failure rates are the Nordics (+50 percentage points) and Spain (+41 percentage points) (see figure 13).

Met goals Exceeded goals

0

10

20

30

40

50

60

70

80

90

100

Did not meet goals

81% 82% 83%

14%13%12%

5% 5% 5% 4% 4%6%

12%

2% 4% 4%7%

13%14%17%

6%

16%14%

89%

80%

92%

80%82%

71%

11

1

33

3

2

2

% o

f tot

al r

espo

nden

ts

83%


Figure 13. Cost program success and failure analysis


• Failure rates increased an average of 26 percentage points, with significant increases in:

– Nordics (+50 percentage points)

– Spain (+41 percentage points)


20 21


Survey findings Cybersecurity is the top-rated risk in the global and US results, but is No. 3 in Europe, behind digital disruption and

commodity price fluctuations.

Digital disruption ranks lower in some countries, especially the United Kingdom and Belgium and Netherlands, which are more worried about commodity price fluctuations, the political climate, and macroeconomic factors.

The top concern in Italy and Spain is credit risks.

Digital disruption is now the top external riskThe top external risks among respondents in Europe are digital disruption (62%), commodity price fluctuations (61%), and cybersecurity (58%) (see figure 15). The ascendance of digital disruption is particularly noteworthy, since “macroeconomic concerns” was the top-rated external risk in our 2016 survey and digital disruption was barely on the radar.

US Europe

Political climate Macroeconomic concerns Currency fluctuations Commodity price fluctuationsCredit risks Cyber security concerns New market entrants Digital disruption

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80

Global

% o

f tot

al r

espo

nden

ts

Germany UK France Italy SpainNordics Belgium & Netherlands

58% 57%54%55%

52%

69%

56%58%59% 59% 59% 59%59%

57%62% 61%

57% 57%55%

61%

55%58%

54%

62%

2

1

3

53%56%

51%53%

57%59%

67%63%

57%

66%69%

56%

65%

56%

64% 62% 60%

54%

58%56%

54%

60%66%

59%

66%68%

71%

66%63%

66%

40%

54%

42%

69%

52%

60%

54%

67%

55%51%

38% 40%

47%

58%

50%

58%56%

66%

56%52%

58%

% o

f tot

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espo

nden

ts

2

3

Cybersecurity is a much bigger concern for US respondents, who rated it far higher than any other external risk (69% vs. 59% for political climate, which was second).

Figure 15. Top external risks


• “Macroeconomic concerns” was the highest rated external risk in the previous survey

• Digital disruption was not recognized as a major risk at the time, but is now the top risk

Growth expectations are highEuropean companies surveyed have a very positive growth outlook, with 84% reporting revenue growth over the past 24 months and 83% expecting revenue growth over the next 24 months. Those numbers are just slightly lower than the averages for companies in the United States and globally (see figure 14). Looking back at the past 24 months, the surveyed countries with the lowest growth results were the United Kingdom (77%),

Survey findings Over the past 24 months, Germany, the United Kingdom, and Belgium and Netherlands had a lower percentage of respondents with

positive revenue growth than the European average (84%), the global average (86%), and the United States (86%).

Over the next 24 months, Spain has the most positive revenue outlook, with 98% of respondents expecting growth; Belgium and Netherlands are at the opposite end of the spectrum, with only 65% of respondents expecting growth.

Compared to the past 24 months, Italy, the Nordics, and Belgium and Netherlands show a decline in the percentage of respondents with a positive revenue outlook for the next 24 months. Belgium and Netherlands show the largest decline (13 percentage points).

Belgium & Netherlands (78%), and Germany (80%)—well below the global average (86%). Looking ahead, Spain has the most positive growth outlook, with 98% of its companies expecting revenue growth over the next 24 months. Belgium and Netherlands is at the other end of the spectrum, with only 65% of companies in that region expecting positive revenue growth.

0

10

20

30

40

50

60

70

80

90

100

86% 86% 84%80% 77%

84%

95%90%

78%

94%

7% 7% 8% 9% 10% 10%2% 6%

11%

2%7% 7% 8% 11% 13%

6%2% 4%

11%4%

1 1 1

3 3 3

79%

90%

79%

98%

9% 10%

32

0

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Past 24 months

% o

f tot

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espo

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ts%

of t

otal

res

pond

ents

Next 24 months

Increased Remained the same Decreased

Increase Anticipate flat top line Decrease

86% 86%83%

65%

6%

15%

6%

15%

2%

18%

6% 4% 6% 6% 5% 4% 2%6%

16%

0%

88%89%

8% 7%


32

Figure 14. Revenue performance and expectations for growth


22 23


% of total respondents

Sales growth Cost reduction Balance sheet managementProduct profitability Organization and talent

Technology implementation Digital enablement

US

Europe

Global

0 10 20 30 40 50 60 70 800 10 20 30 40 50 60 70 80 90

66%66%

54%69%

62%

A

40%

65%60%

69%

67%

A

1

69%73%

73%

61%73%

69%

69%

64%

78%76%

76%

75%

71%

70%


Next 24 monthsPast 24 months Next 24 monthsPast 24 months

0 10 20 30 40 50 60 70 80 90 0 10 20 30 40 50 60 70 80

73%69%

59%74%

56%72%

68%

65%

73%

78%76%

79%

77%65%

68%

67%

64%70%+3%

67% B

Next 24 monthsPast 24 months Next 24 monthsPast 24 months


56%

57%57%

69%61%

71%74%

63%60%

69%76%

2

63%

59%56%

67%74%

62%75%

67%66%68%

71%72%

65%73%

65%74%

72%

B

32+9%

+6%

76%78%

46%72%

52%60%

48%

76%70%

52%64%

60%

68%68%

3

B

C

+13%+42% C

Germany

UK

France

Italy

Spain

Nordics

Belgium & Netherlands

85%

78%

71%80%78%80%

78%

80%73%

80%78%

78%

80%73%

50%50%48%

63%

65%58%

50%

52%

58%60%

69%58%

56%67%+3%

58%45%

56%60%

60%53%

56%49%

55%60%

51%

53%

55%

3

+4%

76%76%

52%66%

60%74%

66%

76%68%

60%80%

72%76%

72%+9%C

Survey findings Technology implementation, product profitability, sales

growth, and digital enablement are the top four priorities in Europe over the next 24 months.

Germany and the United Kingdom are the only regions that rank technology implementation as the top priority over the next 24 months.

Cost reduction is a top three priority in the United Kingdom, France, and Belgium and Netherlands.

Europe’s strategic priorities align with save-to-transformIn Europe, the top-four strategic priorities over the next 24 months are technology implementation (70%), product profitability (69%), sales growth (67%), and digital enablement (67%). Cost reduction is a top priority in the United Kingdom, France, and Belgium & Netherlands (see figure 17). These priorities are generally consistent with a save-to-transform mindset, which uses cost reduction to fund investments in growth and transformational digital technologies, while in turn applying many of those same

technologies to boost the efficiency and effectiveness of cost reduction programs.

As evidence of this shift, technology implementation increased by 3% across the region, with the largest increases in France (+13%) and the United Kingdom (+9%). Digital enablement increased dramatically in France (+42%), with smaller but still significant increases in Spain (+9%) and the United Kingdom (+6%).

Figure 17. Strategic priorities

Comparison to past 24 months

A. The top four priorities remain the same in Europe

B. Technology implementation has increased by an average of 3% across Europe, with even larger increases in France (+13%) and the United Kingdom (+9%)

C. Digital enablement has increased in Spain (+9%), the United Kingdom (+6%), and especially France (+42%)

Survey findings This year’s top three internal risks are the same as in 2016 and are consistent in Europe, the United States, and globally.

On average, risk ratings tend to be higher in the United Kingdom and Italy than elsewhere.

Respondents in Belgium and Netherlands are worried about different risks than those in other European countries, with liquidity concerns at the top of the list.

The top internal risks among respondents in Europe are reliability and functionality of information systems (27%); recruitment, development, and retention of talent (25%); and lack of controls

for business continuity (25%) (see figure 16). Those rankings are generally consistent with the 2016 survey results and with this year’s global and US results.

Figure 16. Top internal risks

US Europe

Lack of strategic plans or execution to provide clear direction to the business Liquidity and financial position to support business plans

Liquidity and financial position to support business plans Reliability and functionality of information systems to support business processes and decisions

Lack of controls, processes, and systems to ensure business continuity Lack of regulatory, legal, and/or management controls

0

10

20

30

40

50

0

10

20

30

40

50

Global

23%23%25%26%

24%22% 21%

22%25%

27%25%

20%

24%

38%

33%

27%25%

12%

16%18%

28%

20%

12%

37%

24%

34%

22%

39%

17% 16%

22%

13%

20%

15%15%

1

2

2

3

% o

f tot

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espo

nden

ts

Germany UK France Italy SpainNordics Belgium & Netherlands

26%

% o

f tot

al r

espo

nden

ts

19%

23%

29%

34%

27%

23%

19%

24%23%

26%

23%

19%

15%17%

19%

25%23%

21%18%

22%24%

28%30%

26%

Reliability and functionality of information systems is the top internal risk

24 25


Survey findings The top developed capabilities are automation/cognitive solutions, ERP, and new policy implementation.

France and Italy have, on average, higher levels of developed capabilities than other countries.

ZBB continues to be the least developed capability in Europe (only 10% of respondents, on average).

Technology-related capabilities are the primary focusIn Europe, the top cost management capabilities developed over the past 24 months are automation (45%), cognitive (40%), ERP (38%), and new policy implementation (35%) (see figure 19). Technology-related capabilities tend to rank highest, with

% o

f tot

al r

espo

nden

ts

Created a new executive position and/or full time positions to drive cost management

Set-up or improved ERP infrastructure

Developed or implemented Automation technologies

Developed or implemented cognitive and Artificial Intelligence technologies

Implemented new policies and procedures, and strengthened the compliance mechanisms

Improved processes for forecasting, budgeting and reporting to enable effective cost management

Implemented zero-based budgeting system or process

0

10

20

30

40

50

60

70

US EuropeGlobal Germany UK France Italy SpainNordics Belgium & Netherlands

31%

44%

48%

53%

49%

28%

38%

45%

40%

35%

26%

29%

34%

51%

31%

10%

23%

36%

41%

34%36%

24%

28%

8%

42%44%

46%

42%

30%

10%

29%

51%

59%

46%44%

24%

15%

27%29%

48%

31%

27%

13%

22%

33%

47%

40%

27%

40%38%

7%

50%

30%

42%

20%

12%

42%

34%

12%

31%

42%40%

11%

30%

12

2

41% 40% 39%

21%

31%

10%

3

automation being the most developed, especially in Italy (59%) and Spain (50%). ZBB continues to be the least developed of the cost management capabilities in the survey, only cited by 10% of European respondents.

Figure 19. Development of cost management capabilities


• Implementation of ZBB increased by 7 percentage points

• Set up or improved ERP infrastructure decreased by 4 percentage points


Growth and competition remain the top drivers of cost reductionIn Europe, past and future drivers of cost reduction center around growth initiatives and competition, with a slight increase expected over the next 24 months (see figure 18). The top-rated drivers in that period are expected to be investment in growth areas (67%), competition among peer group (66%), and international growth

Next 24 monthsPast 24 months


Significant reduction in consumer demand

Decrease in liquidity and tighter credit

Unfavorable cost position relative to peer group

Changed regulatory structure

Required investment in growth areas

Intensified competition among peer group

Increased international growth opportunities

Next 24 monthsPast 24 months

Global

52%52%

56%59%

65%63%

66%

55%53%

57%61%

67%66%65%

US

54%

70%

46%50%

57%

66%67%

54%

62%63%

51%55%

60%67%

Europe

52%51%54%58%

55%53%52%

52%55%

59%67%66%

61%

52%

A

1

3

A+3%+5%

Germany

63%

59%51%

61%

53%69%

56%54%

63%60%60%60%61%

60%

+18%

UK

51%51%51%

58%73%

66%72%

52%57%

53%

57%

263%

72%72%

+8%

+9%

France

52%44%

52%62%64%

68%66%

42%

52%44%

64%72%

70%64%

Italy

61%66%

73%63%

78%76%

80% 80%

78%71%

76%73%

83%89% 2

B

+13%

Nordics

29%48%

52%63%

48%

63%40%

33%46%

44%

48% C

C

B

50%58%

40%+38%

+25%

+21%


42%

40%40%

49%49%

56%45%

40%40%

49%51%53%

44%

44%


Spain

62%54%58%

66%70%

60%60%

58%52%

58%58%

72%

62%70%+17%

opportunities (61%). The least cited cost drivers in the survey continue to be liquidity (52%) and consumer demand (52%), although the latter has increased significantly since 2016 in the Nordics (+38%) and Italy (+28%).

Figure 18. Past and future cost reduction drivers

Survey findings The top drivers over the next 24 months are investment

in growth areas, competition among peer group, and international growth opportunities.

Cost-driver percentages in Italy and the UK for the next 24 months tend to be higher than in other European respondents’ countries.

The surveyed cost drivers that continue to be cited least frequently are liquidity (52%) and reduction in consumer demand (52%).

Comparison to past 24 months

A. The top three drivers remain the same as before

B. “Reduction in consumer demand” has increased significantly as a cost driver in the Nordics (+38%) and Italy (+28%)

C. Other drivers that increased in the Nordics include: competition among peer group (+25%), and investment in growth areas (+21%)

26 27


Survey findings Top actions for Europe (in-process or planned) are “improve policy compliance” (63%) and “implementation of technologies” (63%).

Although tactical and strategic cost actions are expected to be implemented almost equally over the next 24 months for Europe as a whole, there is a greater focus on strategic actions in the United Kingdom, Italy, and the Nordics.

Expected implementation of automation/cognitive technologies is higher in Europe (63%) than in the United States (53%), and on par with the global average (53%).

Strategic cost actions are catching upLooking ahead, respondents in Europe expect to implement tactical and strategic cost actions in equal measure (61% in-process or planned) over the next 24 months (see figure 21). The most common expected cost actions are to improve policy compliance (63%), implement technologies (63%), and change business configuration (62%).

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80

62%

Global EuropeUS

61% 55% 61%

63% 56% 66% 43% 66% 69% 59%

56% 61%

63%60% 46% 69% 63%61% 57%

Strategic In process of implementationNot implemented but planned

Averages

42% 44

%43

%42

% 46%

40% 43

%41

%

19% 21

%16

%18

%16

%19

%18

% 22%

3

40% 48

%35

% 42% 48

%35

%35

%33

%

10%

19%

15% 13

% 11%

15% 19

%20

%

38% 40

%22

% 22%

17%

36%

34%

44%

44%

36% 40

% 44%

46%

22%

18% 16

%10

%18

%24

%16

% 18%

30%

50%

37% 40

% 46%

39%

50%

40%

23%

28%

21% 25

% 25%

24%

23%

34%

2

47%

47%

44%

35% 38

% 42%

31%

41%

24%

20%

25% 37

%24

% 24%

33% 26

%

Germany UK France Italy Nordics Belgium & Netherlands Spain

2

34%

34%

46%

39%

34%

32%

22% 27

%

12%

5%5%

12%

7% 15%

15% 15

%

34%

36% 38%

56%

46% 53

%40

% 44%

34%

26%

16%

18%

22%

12%

16%

24%

2

36%

45% 48%

31%

42%

38% 40

%39

%

23% 21

%15

%18

% 11% 21

%18

%21

%

46%

33% 36

% 41%

51%

41%

39%

37%

17%

30%

20% 17

%17

%27

%21

%23

%

1 1

3

42%

40% 43%

41%

39%

40%

20%

18% 22%

20% 23

%

The countries leaning toward strategic cost actions over the next 24 months are the UK (63% strategic vs. 56% tactical), the Nordics (69% strategic vs. 66% tactical), and Italy (46% strategic vs. 43% tactical).

Figure 21. Expected cost reduction actions over the next 24 months14

Survey findings The top actions in most countries were tactical in nature (33%), except in Belgium and Netherlands, which focused more

on strategic actions (27% strategic vs. 20% tactical).

On average, percentage ratings for Italy and Spain are higher than for other European countries.

The most commonly implemented strategic action over the past 24 months was outsourcing/offshoring business processes to low-cost service providers.

Tactical cost actions have been slightly favoredThe most frequently implemented cost reduction actions throughout most of Europe were tactical in nature (33% tactical vs. 31% strategic)—including the two most common actions: streamlined business processes (36%) and improved policy compliance (36%) (see figure 20). The exception is Belgium and Netherlands, which was the rare subregion where strategic cost reduction predominated (27% strategic vs. 20% tactical).

Tactical actions tend to produce incremental improvements and relatively small cost savings, whereas strategic actions have a much

broader and deeper impact. Examples of strategic actions include centralizing business activities (Act. 1 in the chart); structurally reconfiguring the business (Act. 2); and outsourcing/offshoring (Act. 3).

In Europe, the most common strategic action over the past 24 months was outsourcing/offshoring business processes to low-cost service providers (33%).

Figure 20. Cost reduction actions over the past 24 months13

12 2

1Averages

Averages

100

Global EuropeUS

Germany UK France Italy Nordics Belgium & Netherlands Spain

0

10

20

30

40

50

60

0

10

20

30

40

50

60

35%

31%

31% 36

%

37%

37%

32%

32%

30%

43%

41%

31%

46%

45%

39%

41%

34%

29%

3

30%

30% 33

%33

% 36%

36%

34%

33%

28%

31% 34

%31

%

33% 37

%36

%26

% 30%

31% 35

% 40% 45

%35

% 38%

36%

32%

20%

30% 34

%26

%24

%

44%

37% 41

% 46%

46% 49

% 54%

49%

41%

15%

33%

27%

25%

35%

25% 31

%27

%23

%33

%20

% 27%

18% 24

%

18%

31%

11%

20%

42%

40%

36%

36% 40

%

36%

52%

46%

30%

31%

31%

20%

30%

30%

24%

34% 39% 33%

28%38%32% 41% 28% 40%20%

32% 38% 31%

23%32% 32% 41% 25% 39%27%

Action 1 Increased centralization - Integrated business units and functions into the corporate center

StrategicAction 2 Changed business configuration - Divested underperforming assets, adjusted number of products/services, geographies, customers, etc.

Action 3 Outsourced/offshored business processes to low cost service providers

Action 4 Streamlined organization structure - Increased spans of control, and modified reporting relationships

Tactical

Action 5 Streamlined business processes

Action 6 Improved policy compliance

Action 7 Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials and services

Action 8 Implementation of specific automation or cognitive technologies

Action 9 Aligned incentives of executives or employees to cost reduction objectives

13 Responses based on implemented actions for respondents’ companies.

14 Respondents who had planned to implement those actions or were in process of implementation are represented in this tabulation.

Action 1 Increased centralization - Integrated business units and functions into the corporate center

StrategicAction 2 Changed business configuration - Divested underperforming assets, adjusted number of products/services, geographies, customers, etc.

Action 3 Outsourced/offshored business processes to low cost service providers

Action 4 Streamlined organization structure - Increased spans of control, and modified reporting relationships

Tactical

Action 5 Streamlined business processes

Action 6 Improved policy compliance

Action 7 Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials and services

Action 8 Implementation of specific automation or cognitive technologies

28 29


Survey findings Implementation challenges are the top barrier in all countries except Germany, where unclear business case and infeasible

targets top the list.

Weak/unclear business case is ranked especially high in Italy (76%) and Germany (63%); similarly, data availability is ranked above average in Italy (83%) and Spain (70%).

Barrier ratings are higher in Italy than in other countries.

Top barriers to effective cost managementIn Europe, the top barriers to successful cost reduction for respondents are management challenges in implementing initiatives (61%); erosion of savings due to infeasible target setting (60%); and lack of an effective ERP system (59%) (see figure 22). Implementation challenges were also the top barrier in 2016.

Global US Europe

Germany UK France Italy Nordics Belgium and Netherlands

Spain

% o

f tot

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espo

nden

ts

0

10

20

30

40

50

60

70

80

0

10

20

30

40

50

60

70

80

Lack of understanding/ acceptance of the solution by the audience

Erosion of savings due to infeasible target setting

Weak/unclear business case for cost improvement

Poorly designed reporting and tracking

Lack of an effective ERP system

Management challenges inimplementing initiatives

57% 57%58%61%62%65%

51%55%56%58%60%

64%

55% 54%55%60%59% 61%

63%

47%53%

63%59%57% 58%

62%63% 63%59%

66%

42%46% 48%

60% 58%56%

76%71%73%

78%83%80%

40%

48% 46%52%50%

54%

44% 47%45%47%

38%

49%

58% 56% 56%54%

70%

62%

1

12

22

2

3

Lack of understanding/acceptance of the solution by the audience was the second-highest barrier in 2016, but in this year’s survey it is the lowest-ranked barrier, suggesting that significant progress has been made in this area.

Figure 22. Barriers to successful cost reduction


• Implementation challenges remain the top barrier

• Lack of understanding is now the lowest ranked barrier, down from number two

15 Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Europe, October 2016. Survey findings On average, percentage ratings for lessons learned are lower than global and US levels.

Investing in technology improvements is only a top lesson learned in Germany and France.

Designating a full-time position to drive cost-improvement ranks lower than other lessons learned in all countries except Spain.4 Italy generally has the highest ratings for lessons learned, especially for change-management activities.

Lessons learnedAccording to the survey, the top lessons learned for effective cost management are:

• Invest in technology improvements to enable data availability, reliability, and decision-making processes (68%)

• Design a solid tracking and reporting process (67%)

Global US Europe

Germany UK France Italy Nordics Belgium and Netherlands

Spain

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

Designate a full-time position to drive efficiency and cost improvement initiatives

Develop, validate, and sponsor a clear business case for cost improvement

Liquidity and financial position to support business plans

Design a solid tracking and reporting process

Assess, validate, and adjust targets reasonably according to the reality throughout the implementation phase

Invest in technology improvements to enable data availability, reliability, and decision-making process

61%66%

70% 69%72%

65%

57%

69%75%73%

76%

69%1

59%65%67%65%

68%63%

2

57% 59%

67%

60%

70%

54%58%

67% 67%53%

66%69%

2

56%

64%70% 70%

76%

56%

4

76%

85%

78%78%83%

73%

50%

58%58%

67%

58%56% 55%

62%

69%

53%56%60%

3

70% 68%

58%

72%68%68%

• Assess, validate, and adjust targets reasonably to reflect reality throughout the implementation phase (65%)

• Deploy change-management activities to raise awareness, acceptance, and benefits of initiatives (65%)

Among the lessons learned covered by the survey, designating a full-time position to drive cost improvement ranked among the two lowest in all countries except Spain (see figure 23).

Figure 23. Lessons learned for effective cost management

30 31


Survey findings On average, only 29% of European companies report a high level of cost management maturity in cost management—21 percentage

points lower than US companies (50%), and six percentage points lower than the global average (35%).

Italy has the largest proportion of companies with high maturity in cost management (56%), as well as the smallest proportion of companies with low maturity; Finland has the highest proportion of low maturity companies, and Sweden and Denmark have the lowest proportion of high maturity companies.

France and the United Kingdom have the second- and third-largest proportions of companies with high levels of maturity (42% and 32%, respectively).

Cost management maturity varies widely across Europe On average, less than a third of European companies (29%) reported a high level of maturity in cost management. That number is 21 percentage points lower than US companies (50%), and six percentage points lower than the global average (35%) (see figure 24).

% o

f res

pond

ents

Lowest High

1

2

2

-100 -85 -70 -55 -40 -25 -10

5

20 35 50

Europe

Belgium

Denmark

Finland

France

Germany

Italy

Netherlands

Norway

Spain

Sweden

UK

Global

US

35%31%20%15%

6% 9%

19% 28%

20%33%

10% 40%

47%20%

8% 32%

39%17%

10% 15%

48%13%

8% 38%

38%

40% 10%

18%19%

35%

25%

33%

40%

20%

18%

23%

20%

25%

38%

18% 18%

40%

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50%

29%

13%

10%

13%

42%

21%

56%

15%

15%

26%

10%

32%

3

3

2

High

Intermediate

Low

Lowest

Cost policies and procedures are continually reviewed and examined to ensure best practices around efficiency and cost management

Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply

There may be written cost policies and procedures documented but not readily available and essentially not followed

Few or no formal cost policies or procedures are employed or documented, or they are significantly fragmented

European countries with the largest proportion of companies reporting a high maturity level are Italy (56%) and France (42%). Companies in Denmark and Sweden reported the lowest maturity levels.

Figure 24. Cost management maturity levels

32 33


Digital technologies are having a major impact on all aspects of business, including cost management. Breakthrough innovations enabled by digital technology are enabling companies to operate and compete more effectively in an increasingly digital world. They also have the potential to enable new levels of cost savings.

Cloud soars above the restAmong the breakthrough technologies in our survey, the technologies most widely implemented by European companies were cloud (50%) and business intelligence (32%) (see figure 25). Cloud was also the most widely implemented technology in the United States (62%) and globally (49%).

Survey findings Of the surveyed technologies, cloud continues to be the most widely implemented in Europe (50%), followed by business

intelligence (32%).

Technology implementation levels exhibit a similar pattern across Europe, with automation and cognitive the least implemented, except in France, Italy, and Spain.

Spain has the highest level of cloud implementation (62%), matching the United States; at the opposite end, the Nordics have the lowest level of cloud implementation (33%).

Technology implementation levels were relatively consistent across all of Europe. The notable exceptions were automation and cognitive, which were the two least implemented technologies in all countries except France, Italy, and Spain.

Global US Europe Germany UK France Italy Nordics Belgium and Netherlands

Spain0

10

20

30

40

50

60

70

% o

f tot

al r

espo

nden

ts

Automation: Robotics Process Automation

Cognitive technologies: Artificial Intelligence and machine learning

Business Intelligence (Not including Cognitive or AI)

Cloud solutions

25%25%

35%

49%

30%

27%

49%

62%

23%

27%

32%

50%

26%

34%

41%

50%

22%

27%

38%

57%

22%22%22%

48%

37%

32%34%

59%

19%17%

25%

33%

13%

18%20%

36%

28%

36%34%

62%

1

2

2 23

3

Digital technologies and solutions applied to cost management in Europe

Figure 25. Technology implementation levels (past 24 months)


35


Top reasons for applying digital technologiesIn Europe, the top reason for respondents using cloud is tightening data security and improving business control (63%). This is consistent with the survey results for the United States (63%) and globally (64%). Reducing costs and increasing productivity is the top

reason for using automation/RPA (83%) and cognitive/AI (75%), not only for Europe as a whole but for each of the surveyed countries individually (see figure 26).

Cloud

Resp

onde

nts

(in %

)

Reduce costs and increase productivity

Increase revenue Enhance product/service capabilities Tighten data security and improve business control

2

2

2

3

3

3

3

0 10 20 30 40 50 60 70 80

Spain


Nordics

Italy

France

UK

Germany

Europe

USA

Global

63%43%

48%64%

57%37%

40%63%

58%43%

48%63%

60%37%

43%54%

53%46%

51%63%

46%33%

38%58%

79%58%

67%75%

44%38%

50%56%

55%

25%40%

50%

71%42%

58%77%

RPA

0

10

20 30 40 50 60 70 80 90 100

80%57%

53%69%

70%51%51%

58%

83%63%

56%71%

89%72%

56%89%

91%68%

77%82%

64%45%

27%55%

93%73%

67%80%

78%33%

44%33%

57%

29%43%

29%

86%71%

57%79%

Cognitive & AI

0

10

20 30 40 50 60 70 80 90

76%56%

59%68%

66%44%

55%71%

75%62%

58%62%

71%58%

50%58%

81%78%

67%70%

64%45%

27%64%

77%62%

77%62%

75%63%

50%63%

70%

30%30%

40%

78%72%

76%67%

1

Survey findings In Europe, tightening data security and improving business control is the top reason for applying cloud solutions; this is

consistent with the United States and global results.

Reducing costs and increasing productivity is the top reason for applying RPA for Europe as a whole, and in each of the surveyed countries. This is followed by tightening data security and improving business control (except in the Nordics and Belgium and Netherlands).

For Cognitive & AI, reducing costs and increasing productivity is the top reason across Europe and in all countries; followed by tightening data security and improving business control, and then by increasing revenue (except in the United Kingdom, Italy, and Spain).

When implementing each of the technologies covered by this year’s survey, at least 70% of the respondents across Europe say their expectations were met or exceeded (see figure 27). For cloud, the

Survey findings In Europe, 56% of the companies that implemented cloud had their expectations met, and 27% had their expectations

exceeded; Belgium & Netherlands had the highest proportion of companies that had their cloud expectations met (85%).

When implementing RPA, 40% of European companies had their expectations met, and 30% had their expectations exceeded; the United Kingdom had the largest proportion of companies with RPA implementations that fell short of expectations (68%).

When implementing Cognitive & AI, 48% of European companies had their expectations met, and 30% had their expectations exceeded; Spain had the best results, with 39% of companies having their RPA expectations met and 49% having their expectations exceeded.

number is 83% (56% met + 27% exceeded); for Cognitive and AI, the number is 78% (48% met + 30% exceeded); and for RPA, the number is 70% (40% met + 30% exceeded).

13% 29%

56%

2%

Global USA Europe

Germany UK

Unable to assess results at this pointResults according to expectations Results below expectationsResults above expectations

Cloud

12% 27%

57%

16% 27%

56%

4%1%

France Italy NordicsBelgium

andN’lands

Spain

11% 31%

58%

0%

30% 23%

45%

2%

13% 17%

70%

0%8%

42%50%

0%

19% 25%

56%

0%

10% 5%

85%

0%10%

39%

45%

6%

2

2

3

3

3

1

1

RPA

Global USA Europe

Germany UK France Italy NordicsBelgium

andNetherlands

Spain

Global USA Europe

Germany UK France Italy NordicsBelgium

andNetherlands

Spain

23% 35%

41%

1%

22% 33%

45%

0%

30% 40%

46%

1%

29% 30%

40%

1%

68%

27%

5%

0%9% 18%

73%

0%

20% 47%

33%

0%

22% 22%

56%

0%

29%14%

57%

0%

7% 36%

50%

7%

16% 36%

47%

1%

17% 25%

58%

0%

11%34%

53%

2%

22%

30%

47%

1%

44% 26%

30%

0%

64%

9% 27%

0%

54%

8%38%

0%

49%

13%

38%

0%

10% 20%

70%

0%6% 49%

39%

6%

Cognitive & AI

Figure 26. Reasons for applying technologies Figure 27. Implementation results

Most technology implementations meet or exceed expectations

36 37


Europe is expected to set the pace for technology implementationOver the next 24 months, implementation levels (in-process or planned) for all the surveyed technologies are expected to be slightly higher in Europe than in the United States and globally. Automation and cognitive are expected to be the most actively implemented technologies (see figure 28).

Designating digital leaders makes a differenceEuropean companies with a designated digital leader have much higher levels of technology implementation—even higher on average than companies in the United States and globally. The impact of designating a digital leader varies across technologies, but on average the level of technology implementation is 187% higher (see figure 29).

Survey findings The impact of designating a digital leader varies across technologies, but on average the level of technology implementation is

187% higher.

Cloud is the technology with the highest implementation levels, whether or not a digital leader is designated; it is also least affected by having a designated leader, although the impact is still very positive (+59%).

RPA is the technology most affected by designating a digital leader (+367%).

0

10

20

30

40

50

60

70

80

Global US Europe Belgium

No designated leader



Business intelligence (not including Cognitive or AI)

Cloud solutions

9%21

%

0% 0% 0%6% 6%

14%

0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

20%

33%

5% 10% 16

%9% 6%

12%

14%

20%

33%

10% 17

% 21%

16%

11%

29%

14%

40%

33%

15%

30%

39%

39%

34%

35%

43%

20%

20%

67%

40%

0

10

20

30

40

50

60

70

80

29% 31

%28

%15

% 20%

21%

31% 34

% 41%

17%

25% 28

%13

%26

% 29%

30%

31%

15%

0%14

%31

%42

%35

%27

%38

%36

%25

% 31%

39%

54%

36%

31% 30

%21

%

0% 0% 0% 0%

28%

45%

38%

23% 25%

34%

25%

44%

53%

67%

54%

46%

40%

21%

53% 55

%62

%40

%63

%62

%38

%61

%

222%

47%

190%

88%

198%

77%

129% 125%

Designated leader187%

157%

59%72%

1

3

2

Finland France Germany Italy Netherlands Norway Spain Sweden UK

367%

RPA is the technology most affected by having a designated digital leader (+367%). Cloud is less affected, but still positive (+59%), and has the highest implementation levels overall—regardless of whether or not a digital leader has been designated.

Survey findings Automation and cognitive are expected to be the most actively implemented technologies in Europe over the next 24 months; the

lowest expected implementation level for any technology is 47%.

Technology implementation patterns across Europe are expected to vary by country over the next 24 months; however, the top priority in all countries is either cognitive or RPA, except in the United Kingdom where business intelligence is the top priority.

Over the next 24 months, 76% of respondents from France plan to implement cognitive, and 75% of respondents from Belgium and Netherlands plan to implement RPA—significantly more than in other European countries.

Figure 28. Technology implementation levels (next 24 months)

Figure 29. Impact of a designated digital leader on technology implementation

Top

pref

eren

ces

of r

espo

nden

ts (i

n %

)

1 2

In process of implementationNot implemented but planned

0

10

20

30

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50

60

70

80

SpainBelgium & NetherlandsNordicsItalyFranceUKGermanyEuropeUSGlobal

38% 39

%39

%33

%

43%

36%

35%

24%

24%

24%

62%63%

47%

59%60% 60%

58%

47%

59%61%

47%

39%

57%

50%

33%

20%

14%

15%

21%

15%

9%

34% 36

%35

%31

%

26%

24%

23%

16%

40%

40%

30%

30%

19% 21

%17

%9%

32% 38

%38

%27

%

25%

16%

22%

16%

28% 44

%44

%44

%

28%

32%

26%

14%

41%

32%

32%

27%

24%

7% 20%

20%

29% 31

% 33%

35%

31% 38

%27

%19

%

40%

31%

36%

27%

35%

36%

29%

22%

30%

36%

32%

28%

22% 20

%22

%10

%

59%57% 56%

76%

70%

58%

65%

54%

60%

43%

52%

47%

60%

69%

75%

67%65%

49%52%

56%54%

38%

60%

54%

39%

33



Business intelligence (not including Cognitive or AI)

Cloud solutions

38 39


Cost management practices and approaches have grown increasingly sophisticated over time, with digital solutions—although still maturing—now representing the most advanced level of cost management. Companies that relied on more traditional cost management methods in the past are now finding that digital solutions can open the door to a whole new level of savings—as well as enable new and more innovative business models.

The rise of digital technologies and innovations is also contributing to a shift in how European companies approach cost management, with the save-to-grow mindset from 2016 steadily evolving into a save-to-transform mindset where investments in digital enablement and transformational technologies play a prominent role.

16 Thriving in uncertainty in the age of digital disruption, Deloitte’s first biennial global cost survey report, December 2017. 17 Save-to-transform as a catalyst for embracing digital disruption, Deloitte’s second biennial global cost survey report, April 2019.18 Cybersecurity was included for the first time in the 2019 report.

% o

f tot

al r

espo

nden

ts

Digital disruption’s evolution as an external risk Cybersecurity18 perceived as an external risk in 201917

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

58%

15%

61%62%

6%

58%

62%

69%

Digital disruption 201716 Digital disruption 201917

Digital disruption is now recognized as a risk by 62% of

European companies, compared to only 6% in 2017

B 1A

Cybersecurity is now recognized as a top external

risk, particularly in the US

Global USEurope

+933%

Global USEurope

6%

Save-to-transform as a catalyst for embracing digital disruption Figure 30. Digital-related business risks

Digital rises to the top of the agendaDigital disruption and cybersecurity are now both recognized as top external risks in Europe. In 2016, digital disruption was seen as an emerging and significant external risk by survey respondents in the United States but was barely on the radar in Europe (6%) and globally (6%). In this year’s survey, however, 62% of European companies now cite digital disruption as a key external risk, which represents a 933% increase in awareness (see figure 30).

Meanwhile, cybersecurity continues to be recognized as one of the top three external risks in Europe, although at levels somewhat lower than in the United States (69%) and globally (62%).

A Digital disruption is cited as an external risk by a greater percentage of companies in Europe than globally and in the United States.

B In 2017, digital disruption was mostly recognized in the United States.

Survey findings The impact of designating a digital leader varies across technologies, but on average the level of technology implementation is

187% higher.

Cloud is the technology with the highest implementation levels, whether or not a digital leader is designated; it is also least affected by having a designated leader, although the impact is still very positive (+59%).

RPA is the technology most affected by designating a digital leader (+367%).

Cybersecurity is now perceived as a top external risk in Europe, although at lower levels than globally and in the United States.

• Cybersecurity is ranked as a top three external risk in Europe, but is the top external risk globally and in the United States .

41

Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in EuropeSave-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Europe

Save-to-growIn the recent past, most companies were firmly grounded in save-to-grow mode where cost and growth are the main levers, with talent (including capabilities) as another key component (see figure 31). Cost reduction is a high priority, with the savings used to fund growth initiatives and strategic investments to support a differentiated business strategy.

19 Source: Deloitte Consulting LLP

Figure 31. The continuum of cost management approaches19

TurnaroundSave-to-turnaround. Focus on immediate actions to reduce costs, maximize liquidity, achieve stability, and capture savings to avoid further deterioration of the business.

FundSave-to-fund. Focus on actions that help improve cost and competitive position; avoid cuts that might inhibit future growth; rebalance costs to fund investment in business strategy enablers.

GrowSave-to-grow. Enable or develop a scalable cost/business platform to fuel growth and investment in core capabilities while supporting a differentiated business strategy.

TransformSave-to-transform. Invest in digital technologies and technology infrastructure to make operations more efficient and effective, enabling new and more agile business models to prosper in a digitally disrupted market.

Turnaround Fund Grow Transform

Cost levers

Liquidity Cost Growth Growth

Cost Growth Cost Cost

Talent Talent Talent Talent

Growth Liquidity Liquidity Liquidity

Prio

rity

+

-

Save-to-transformNow, many companies are moving into save-to-transform mode, with the save-to-grow approach expanding to include a strong focus on digital enablement and technologies that can transform the business and help it capitalize on the vast opportunities of an increasingly digital world (see figure 32).

Figure 32. Save-to-grow expands into save-to-transform

1. Save-to-turnaround 2. Save-to-fund 3. Save-to-grow 4. Save-to-transform

Scope Narrow Broad

Competitive situation

• Losing market share • Structural operating flaws • Liquidity concerns • Flat profit growth

• Adjusting to demand levels • Growth concerns • Healthy balance sheet • Excess cash flow/reserves • High growth potential

Playbook

Defense-oriented playbook

• Short-term tactics to improve balance sheet • Cash flows • Stabilize business through any cost and/or liquidity

improvements • Compensate sales decline

Growth-oriented playbook

• Achieving profitable and sustainable growth through structural cost efficiencies and improvements

• IT investments • Innovation • Actions to strengthen performance and competitive position

Cost levers priority

Save-to-turnaround Save-to-fund Save-to-transform levers

Growth Talent Cost Liquidity Growth Talent Liquidity Cost Growth

Technology

Talent CostLiquidity

New

Low Low HighHigh Low High

42 43


Survey findings On average, Brexit action levels in Europe are expected to remain similar to the past.

• In the United Kingdom, action levels are expected to remain consistent; however, there is great variability in other countries, with the Nordics, France, and Spain planning to take more actions, and Germany and Belgium and Netherlands planning to take less.

Beyond the United Kingdom, Spain and Germany are the two countries expecting to undertake more action than average over the next 24 months, with Spain focusing on risk and talent initiatives and Germany on cost reduction.

Belgium and Netherlands have the lowest percentage of respondents expecting to undertake Brexit-related actions over the next 24 months (on average, 40% less than the other countries in Europe).

Top

Pref

eren

ces

of R

espo

nden

ts (i

n %

)

Actions undertaken/planned to be undertaken as a result of the UK referendum to leave the EU

Cost reduction initiatives Growth initiatives Talent initiatives Liquidity initiatives Risk prevention initiatives

0

10

20

30

40

50

60

70

80

0

10

20

30

40

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60

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Europe Germany France

+5%+28% +19%

+8%+9%

+7% +10%

+10%

+36%

+18%

+4%

B

B

AA

1

1

353%

54% 55% 55% 55%60%

63% 64%61%

64% 66% 66%64%

50%

58%54%

59% 61%

69%

59%

70%

50%48%

58%

44%

56%

41%

54%

49%

41%

61%

42% 44% 44%

52% 54%

42% 40%44%

51%49%

54% 53%

59%63%

66% 64% 64% 65%

58%54%

64%60%

64%61%

53% 54% 54%57%

50%52%

60%

48%

60%

39%

49%

54%49%

56%

46%

60%

52% 50%

56%

36% 35%

42%

35%

49%

+4%2 2

2

UK Spain Belgium & Netherlands

NordicsItaly

57%

Figure 33. Brexit-related actions

A. United Kingdom and Germany reported the highest levels of actions over the past 24 months

B. Nordics are the countries in which actions to be undertaken are expected to grow the most (on average, +6%); Germany expects the greatest decrease (on average, –7%)

Appendix A: Cost management practices as a result of BrexitOn average, the level of Brexit-related actions across Europe is expected to remain similar to past levels. Not surprisingly, the United Kingdom has the highest percentage of respondents taking (or planning to take) Brexit-related cost actions over the next 24 months (63%). In the United Kingdom, future activity is generally at the same high level as prior activity (see figure 33). A high level of Brexit-related cost reduction activity is also expected in Germany (61%) and Spain (58%).

Respondents in Spain also expect to significantly increase their talent initiatives (+28%), while respondents in the Nordics predict an even larger increase in their growth initiatives (+36%), perhaps as a means to capitalize on economic opportunities enabled by Brexit.

44 45


Save-to-transform can not only help a company capitalize on digital opportunities, it can also position the company to withstand potential adversity that may be on the horizon by using the power of digital solutions as the key to unlock new levels of cost savings.

Looking ahead

46 47


Authors Contacts

Global

Omar Aguilar Principal Deloitte Consulting LLP +1 267 226 8956 [email protected]

Europe

Alexander Kainer (Austria) Partner Deloitte Services Wirtschaftsprüfungs GmbH +43 664 805 372 800 [email protected]

Catherine Hannosset (Belgium) Partner Deloitte Belgium + 32 494 56 68 55 [email protected]

Zlatko Bazianec (Croatia) Partner Deloitte Croatia +385 1 2351 906 [email protected]

Ulrik Bro Muller (Denmark) Partner Deloitte Denmark +45 30 93 40 13 [email protected]

Anne Gronberg (Finland) Partner Deloitte Finland +35 8207555607 [email protected]

Olivier Perrin (France) Partner Deloitte France +33 6 87 14 17 38 [email protected]

Alexander Mogg (Germany) Partner Deloitte Consulting GmbH +49 151 5800 1290 [email protected]

Alan Flanagan (Ireland) Partner Deloitte +35 314 172 873 [email protected]

Umberto Mazzucco (Italy) Equity Partner Deloitte Consulting SRL +39 0283323053 [email protected]

Willem Christiaan van Manen (Netherlands) Partner Deloitte Consulting B.V. +31 882883118 [email protected]

Bjorn Grenman Partner Deloitte AS +47 911 61 726 [email protected]

Irina Biryukova (Russia) Partner Deloitte Russia +74 957870600 [email protected]

Gorka Briones (Spain) Partner Deloitte Consulting, S.L. +34 914432520 [email protected]

Jonas Malmlund (Sweden) Partner Deloitte Sweden +46 75 246 33 03 [email protected]

Hugh Macquarrie Partner Deloitte Consulting AG +41 795 298 228 [email protected]

Lorraine Barnes (UK) Partner Deloitte MCS Limited +44 7765 897434 [email protected]

Omar Aguilar Principal Deloitte Consulting LLP Strategic Cost Transformation Global Market Offering Leader [email protected] USA +1 215 870 0464 International +1 267 226 8956

Contributors

David Izquierdo Sánchez Senior Consultant | Monitor Deloitte Deloitte Consulting, SLU [email protected]

Sakshi Kastiya Consultant | Strategy & Operations Deloitte Consulting India Private Limited [email protected]

48 4949


As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively, the “Deloitte Network”), is, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances, or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

Copyright © 2019 Deloitte Development LLC. All rights reserved.

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