A recent report from Accenture Strategy said 24% of CFOs fear their business will be eliminated by disruption and 58% believe their industry is in danger, but most are doing nothing to stop it.
According to a new Accenture Strategy report released on Tuesday, 24% of Chief Financial Officers (CFOs) believe that disruption will destroy their company, but most aren't doing anything to stop it.
The report, titled CFO Reality Check: Good Intentions in Cost Management are Not Good Enough, showed that despite this fear of disruption, only 6% plan to prioritize strategic cost management in 2016. Strategic cost management is a way of analyzing cost drivers in order to lower costs and maximize the value of a business's assets, which can help a business stave off disruption by staying efficient in spending.
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The CFOs in the following industries were the most concerned about their businesses being disrupted:
- Insurance - 40%
- Energy - 31%
- Consumer Goods - 23%
- Automotive and Industrial - 23%
In terms of industry-wide disruption, 58% of CFOs believe that their industry will be disrupted and 41% believe that disruption will eventually take out their competitors. Additionally, almost 60% of CFOs feel that strategic cost management must play a role in how they respond to disruption, but they don't seem to be ready to put it into action.
In the report, Accenture Strategy senior managing director Christian Campagna said that the role of the CFOs has been shifting over the past decade. CFOs now have more say in the overall direction of the business (not just its finances), and that shift has led many CFOs to begin focusing on digitally-driven strategic cost management to help their company grow and stay agile.
"More than half of CFOs already have performance objectives in place that make them responsible for strategic cost management on a daily basis," Campagna said. "The challenge will be to consistently perform against those set objectives."
Aneel Delawalla, managing director for Accenture Strategy, described the shift as CFOs evolving from "corporate bean counter to enterprise value architect."
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Accenture's argument in the report is that strategic cost management, using digital technologies, is one of the main strategies that will help organizations fight off competitive disruption. That is opposed to ad hoc cost cutting, where cuts are made as needed to stay in budget with less regard for an overall strategy.
The report found that more than half of the surveyed CFOs who are using strategic cost management are primarily moving to mobility (54%) and cloud (52%) as part of their strategy. Over the next three years, the report said, robotics and big data analytics will also play a key role.
For businesses looking to engage with strategic cost management, Accenture recommends three steps to take:
- Pass a digital stress test - Plan for digital disruption and take into account what aspects of the business and cost structure must be changed in order to survive.
- Create a 'digital-first' plan of action - Reorient your cost base and cost structure to focus on each business area being digital at its core.
- Obsess over customers - Strategic cost management helps the business, but the customer experience shouldn't suffer for it.
The results of this report were compiled from a survey conducted with 216 CFOs of organizations that have global annual revenues greater than $1 billion.
The 3 big takeaways for TechRepublic readers
- One quarter of CFOs fear disruption will eliminate their business, but only 6% are engaging strategic costs management to prevent it. CFOs should voice their concerns about potential disruption, and devise a plan to help keep their organization competitive in the market.
- Of those surveyed, 58% believed their industry would be disrupted, and 60% said that strategic cost management should be part of a response plan. The C suite should take a close look at its cost structure to determine if it makes room for growth and agility.
- The role of the CFO is shifting to include more responsibility for the overall direction of the business. CFOs should take this into account as they continue to plan their company's finances for 2016.
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