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Fueling growth through zero-based budgeting: How winners know where to place big bets

Many business executives say they are adept at reducing costs to reinvest in growth—but are they?

Overview

Accenture Strategy research indicates that 82 percent of executives agree that their business is focused on cost reduction to free up funds to reinvest into growth initiatives. Yet more than half (54 percent) struggle with where to “place their bets.”

Challenges, such as lack of alignment between senior and junior management and competing priorities, impede progress. What are the winners doing to get ahead?

DOWNLOAD: FUELING GROWTH THROUGH ZERO-BASED BUDGETING: HOW WINNERS KNOW WHERE TO PLACE BIG BETS [PDF]

Key Findings

Leading companies are precisely cutting costs and purposefully reinvesting, they are aligning cost reduction efforts with growth strategy and they are implementing techniques, such as zero-based budgeting, to accelerate the path to growth.

Businesses struggle with strategic cost reduction:

  • Only 23 percent say they have optimized their process for identifying and removing business activities and investments that do not add value.

  • Only 36 percent strongly agree their business sustains the benefit of cost reduction programs.

Zero-based budgeting can help:

  • Accenture compared those using zero-based budgeting techniques to industry peers. Revenues increased by 28 percent for the zero-based budgeting group, compared to 22 percent in the peer group. EBITDA also increased by 50 percent, compared to 39 percent among the peer group.

Recommendations

To reinvest in growth and competitiveness, companies should:
Double-down on growth
Double-down on growth
Before a business can successfully implement strategic cost reduction techniques, such as zero-based budgeting, it must first understand today’s — and tomorrow’s — growth strategy.
Cut wisely to promote growth
Cut wisely to promote growth
Businesses should proactively identify low-value activities and focus on those strategic activities driving the next dollar.
Rally around growth
Rally around growth
Help employees gain a clear picture of growth and non-growth activities. Communicate cost management and growth objectives so that people understand the business is not just pumping dollars back to shareholders — it’s reinvesting them in the company’s future.

Authors

Kelly Askew

Kelly Askew

Managing Director – Accenture Strategy, Retail

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Patrick Daoust

Patrick Daoust

Managing Director – Accenture Strategy

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