Zoom out, zoom in

Brazilian organizations have historically had a swinging movement – if the economy is doing well, they expand and free up resources for new projects; and when the economy goes into a downturn, they stop looking at the market and start looking more at home to reduce costs. It is an approach that addresses more immediate contextual issues but has vulnerabilities and limits long-term opportunities. A more sustainable way out is to adopt a perennial, flexible and dynamic strategic management that maintains or adapts to the organizations’ ability to develop regardless of the economic scenario.

Based on the results of the “Optimize or expand – How to innovate in the new economic moment” survey, produced by Deloitte, Heloisa Montes, lead partner for Strategy, Marketing & Analytics at the Deloitte Business Consulting area, explains: “The executives and entrepreneurs indicated in the survey that their main objectives are increasing revenue (with 65% of mentions), optimizing costs and expenses (59%) and increasing productivity (49%). The first is an expansion objective, looking at the market and looking at opportunities. The other two mean the following: ‘How do I finance and create the ability to make this transformation, this expansion?’

The big challenge involves the ongoing exercise of shifting the gaze from long-term to a more immediate view – allowing for reflections on the future, while identifying initiatives that will make a difference to present outcomes – and having the flexibility to tailor strategic planning in light of the changes encountered along the way. All this without losing sight of the constant and increasingly mandatory need to innovate to ensure an adequate products and services offering to customers, who are today so empowered and eager for solutions that meet their needs in a time of technological revolution.

Saving to transform

Crucial to any strategic planning is setting priorities, establishing realistic goals that do not make the organization’s operations unfeasible. It is at this stage that cost reductions usually gain prominence within companies. According to Deloitte’s “Global Cost Survey 2019”, 71% of the 1,200 executives surveyed worldwide plan to implement cost reduction initiatives at their companies over the next 24 months. This percentage rises to 81% among the Brazilian organizations interviewed. For most organizations, it’s not just about spending less – strategic cost reduction is a way of financing indispensable investments in an increasingly digital world, with the adoption of tools such as cognitive technologies, business intelligence and cloud-based ERP systems, for example. Digital enablement ranks third in the companies’ listed priorities, with 71%.

These technologies are also allied with cost reduction in a virtuous circle of business management. “While traditional cost-saving methods are still important, companies are already investing heavily in transforming technologies to improve operational efficiency and cost savings while boosting their performance and competitiveness” explains Caroline Yokomizo, partner at Deloitte’s Business Consulting area.

Looking for answers

Despite being an immediate goal of most organizations, technological advancement is still manageable. Disruptive as new technologies are, incorporating automation into everyday operations is slower. Some, at least in the short run, can still decide how and if they will participate in this transformation – many leave technology leadership to others. “In some cases this may even be a smart strategic choice” says Florian Klein, director of Deloitte’s Center for the Long View in Frankfurt, Germany. “At the same time, other organizations will use this space to develop their technology or process leadership. The strategy is that this technology leadership will give them a sustainable competitive advantage in the future” Klein continues.

In this sense, some terms become part of the vocabulary of organizations – such as big data, analytics, robotics, artificial intelligence, cognitive computing, blockchain, Internet of Things (IoT), virtual and augmented reality, among others. However, there is still a need to understand them in order to generate or acquire solutions aimed at improving efficiency-focused management, generating results, and delivering the best consumer experience to people.

The deepest and most complex challenge is understanding how corporate structure and culture need to be redesigned to keep up with these developments. Few organizations truly prepare for these imminent changes. The degree of success will depend on one’s planning and transformational capacity.

If the technologies are truly disruptive, they could eventually kill competitors who don't follow suit Florian Klein, Director of Deloitte Germany's Center for the Long View

Innovation on the spotlight

Innovation is the key word for completing business transformation, especially in a context where customer demands evolve at the same pace as new technologies emerge. Among the most advanced sectors in adopting innovation are banking, telecommunications, e-retail and healthcare.

Vivo’s Digital Experience director Fernando Moulin explains that “there is a latent concern about the need to continually innovate, whether in products and services or in developing new consumer solutions.” The phone operator, for example, has invested in Aura, an artificial intelligence-based service platform, which already accounts for about 7 million customer support operations per month.

new technologies focusing on customer experience Fernando Moulin, from Vivo

Banco Santander is betting on the blockchain revolution, which allows the certification of online financial transactions. This is the basis of the One Pay Câmbio platform, an application that enables international transfers by mobile. Marino Aguiar, Santander’s chief technology officer, says “a modern bank is a technology and data company”.

a modern bank is a technology and data company Marino Aguiar, from Santander

Optimism to face big challenges

For Florian Klein, “all these efforts may still fall short of the real challenge we face. Upgrading technology will be a necessary condition for successful businesses, but it will not be enough. Today, more than ever, truly successful companies need to think holistically about the social, technological, economic, environmental and political changes ahead. This is a dramatic break from our traditional, narrow, short-term understanding of how to run a business. It will take courage and honesty from business leaders to accept this new challenge.”

Overall, these two Deloitte surveys and market examples show that despite major challenges and the need for resources – financial, human or infrastructure – there is an important evolution underway. Brazilian executives look for a more strategic look at their business as a way to keep the company well, from the point of view of efficiency and optimization of their assets, so that it can invest in expansion and transformation, including digital ones. Business leaders must resist the temptation to create a business plan that takes into account only the most immediate period. Companies that crave success must be mindful of today and tomorrow.

Also read about the “Agenda 2020” survey, which presents the strategic vision of Brazilian business executives, based on responses from organizations that together make up the equivalent of 50% of national GDP. This time, the study also works with the concept of possible scenarios for the coming year (of improvement, stabilization or worsening of the economy and the business environment) to capture the intentions of corporate leaders in each situation.