LONDON; 16th May 2018 – Leading companies are realising savings of millions of pounds from the adoption of zero-based initiatives, according to the largest ever study on zero-based budgeting (ZBB), conducted by Accenture (NYSE: ACN). The research, which surveyed 85 of the largest organisations around the world, found that many companies are moving beyond traditional cost reduction techniques and instead adopting a more holistic zero-based mindset (ZBx) to fund new growth.
The ‘Beyond the ZBB Buzz’ study by Accenture Strategy analysed the practices and results of zero-based initiatives implemented by leading global companies across different industries, including consumer goods, banking, industrial and retail. The study highlighted the exponential growth in ZBB adoption—a 57 percent increase per year from 2011 to today—and found that the majority of companies surveyed (91 percent) have met or exceeded their financial targets.
"Adopting a zero-based mindset (ZBx) can help UK organisations unlock significant savings which can be reinvested to accelerate growth and pivot to new digital business models. But many UK companies are still stuck using short-term ‘cut the fat’ cost-cutting programs which can do more harm than good to growth, reputation and employee satisfaction,” said Jan Mueller, Managing Director at Accenture Strategy. “ZBx is a smarter approach which gives companies forensic visibility into both spending and savings opportunities across all cost segments, so that savings can quickly be reinvested into high growth areas."
Zero-based initiatives accelerating growth
Companies are adopting zero-based initiatives to improve profitability (96 percent), respond to competition (48 percent) and drive growth (40 percent). Surprisingly, the research did not point to the common perception in the UK that companies turn to zero-based initiatives in crisis mode, M&A scenarios or as the result of pressure from private equity funds and activist investors.
While the majority (92 percent) of companies surveyed implemented ZBB strategies to reduce general and administrative costs, the research highlights that leaders are also applying a zero-based mindset to other spend areas, such as sales and marketing (52 percent), labour (43 percent), and transportation and logistics (42 percent).
Challenges to applying ZBx
Among the hardest obstacles to adopting a zero-based mindset are: cultural buy-in (67 percent), change management (41 percent) and data visibility (33 percent). However, once the initiatives are in place, there is a common desire among the companies surveyed to ensure they are durable, with 77 percent investing in control and monitoring to make the results of their zero-based initiatives part of continuous improvement.
"With only a quarter of UK business leaders very confident that they will achieve their 2020 growth targets, ZBx can help free-up inefficient money that doesn’t support business strategy, and funds can be redirected to fuel priority investments,” said Naomi Hudson, managing director, Accenture Strategy. “A zero-based mindset requires a cultural transformation that results in a change of behaviour. It must become engrained in how people think and work so that it begins to happen naturally."
To find out more about the report, visit: accenture.com/beyondzbbbuzz. Join the conversation at @AccentureStrat.
About the research
Accenture identified 136 major companies that use a zero-based mindset (ZBx) to reduce costs and reinvest for growth. Sixty-percent of the companies are in the top 2000 globally. From this distinct set of companies, Accenture analysed the scope, results and practices of ZBx programs based on 85 in-depth examinations and executive interviews carried out between November 2017 and January 2018.
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