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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...