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Save-to-transform as a catalyst for embracing digital disruptionDeloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Latin America

Global Cost Report 2019-2020 L a t i n A m e r i c a

Contents

Executive summary 4

About the survey 8

Key differences between Latin America and other regions 9

Firmographics 13

Latin America survey results: Detailed insights 17

Digital technologies and solutions applied to cost management in Latin America 32

Save-to-transform as a catalyst for embracing digital disruption 38

2

Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s Second Biennial Global Cost Survey: Cost management practices and trends in Latin America

Cost management remains a strong imperative for the vast majority of Latin American companies, and is likely to be increasingly important in the face of a volatile and uncertain global economy. Today, the prevailing mindset appears to be expanding from save-to-grow to save-to-transform. Companies in Latin America (LATAM) continue to have very positive expectations for revenue growth, and many are using cost reduction as a tool to help fund their required growth investments. However, in today’s technology-driven world, more and more businesses also recognize the need to transform their operations and capabilities with infrastructure investments in key digital innovations such as robotic process automation, cognitive technologies, business intelligence, and cloud-based ERP systems.

These digital technologies and innovations can deliver dramatic improvements in competitiveness, performance, operating efficiency and, increasingly, cost savings. Equally important, they can also strengthen a company’s positioning against economic downturns and other adverse events.

In this dynamic environment where the future is uncertain and digital innovation is a critical enabler for both cost reduction and business transformation, we are delighted to present the results from our latest Latin America cost survey. The study includes responses from 167 executives and senior business leaders in Brazil, Chile, and Mexico, with strong representation from every major industry.

This regional report provides an up-to-date view of the cost management practices and trends shaping the future of business in Latin America and globally. It also takes a detailed look at how the latest digital technologies and cost management strategies can serve as a catalyst for transformation.

We hope you find these insights useful and look forward to hearing your thoughts and feedback.

Foreword

Sam Balaji Global Consulting Leader

Omar Aguilar Strategic Cost Transformation Global Market Offering Leader

3


Executive summaryKey differences between Latin America results and other regions

Cost reduction is less prevalent in Latin America, but many LATAM companies have very aggressive cost targets. In Latin America, 65% of the surveyed companies plan to undertake cost reduction initiatives over the next 24 months—lower than in the United States and globally. However, the percentage of LATAM companies with aggressive cost reduction targets above 20% is higher than both the global and US averages.

LATAM companies are more concerned about currency fluctuations than cybersecurity. Cybersecurity is the top external risk globally (62%) and in the United States (69%) but is the lowest-ranked risk in Latin America (51%). For LATAM companies, currency fluctuation is the top risk (63%).

Cost management maturity in Latin America is lower than the US and global averages. The percentage of LATAM companies that report high levels of cost management maturity is 51% lower than the global average and 66% lower than the US average.

Technology implementation activity in Latin America is expected to exceed global levels. Over the next 24 months, technology implementation activity (in-process or planned) is expected to exceed the global averages for all technologies covered by the survey: automation, cognitive, business intelligence, and cloud.

Cost program failure rates in Latin America are slightly lower than in the United States and globally. According to this year’s survey, 77% of LATAM companies failed to fully achieve their cost reduction targets—a slightly lower failure rate than in the United States (82%) and globally (81%).

Save-to-transform is taking root in Latin America but slightly trails the US and global trends. Many LATAM companies are adopting a save-to-transform mindset characterized by a simultaneous strategic focus on sales growth, cost reduction, technology implementation, and digital enablement. However, this shift is slightly trailing the US and global trends.

Latin America survey results: Detailed insights

Cost reduction remains prevalent but is down in Brazil and Mexico.A large number of LATAM companies

65%plan to undertake cost reduction initiatives over the next 24 months; however, the likelihood of undertaking cost reduction has declined significantly in Brazil and Mexico.

Cost program failure rates are high and rising. The percentage of LATAM cost programs that failed to fully meet their targets is high

77%,

with significant increases in Brazil and Mexico.

Cost reduction targets in Latin America are up significantly. On average,

72%of LATAM respondents have cost targets

above 10%, with 37%targeting cost reductions

above 20%.

The percentage of companies with the most aggressive cost targets (above 20%) has increased significantly in Brazil and Mexico, while companies in Chile tend to have the least aggressive cost targets.

4



Growth expectations remain very positive. LATAM companies have a very positive revenue outlook, with

90%,

reporting growth over the past 24 months and

91%

expecting revenue growth over the next 24 months.

Strategic cost actions maintain a slight edge. Over the next 24 months, strategic cost actions are expected to maintain a slight edge over tactical cost actions.

69% vs. 66%

Currency fluctuation is the top external risk. The top external risks in Latin America are currency fluctuations (63%), macroeconomic concerns (56%), and credit risks (55%). Cybersecurity is the top external risk globally and in the United States but is the lowest-ranked risk in Latin America and is not among the top three risks for any of the LATAM countries surveyed.

Lack of strategic plans is the top internal risk. In Latin America, the top internal risk is

23%lack of strategic plans, followed closely by

22%liquidity and financial position, and

19%lack of controls.

Strategic priorities align with save to transform. The save-to-transform approach uses cost reduction to fund investments in growth and transformational technologies, while using many of those same technologies to boost the efficiency and effectiveness of cost reduction programs. According to this year’s survey, the region’s focus on cost reduction will remain fairly consistent over the next 24 months but will be supplemented with an increased focus on growth, technology, and digital enablement—a multi-faceted approach that is typical of the save-to-transform mindset.

Strategic cost actions have been slightly favored. Among LATAM respondents, one of the two most commonly implemented cost actions in the past 24 months was strategic (increased centralization), while the other was tactical (streamlined business processes). Overall, cost actions in the region were slightly more strategic (32%) than tactical (29%), which is the opposite of the global and US results.

Technology-related capabilities are the primary development focus. In Latin America, the three most commonly developed cost management capabilities over the past 24 months were:

41% automation solutions

35%cognitive technologies

34% ERP.

Competitive pressure is the top driver of cost reduction. The top driver for cost reduction in Latin America over the next 24 months is

63%intensified competition, followed closely by

62%investment in growth areas, and

62%unfavorable cost positions.

Ratings for all three of these drivers are up significantly from the past 24 months, which suggests that cost pressure may be rising across the region.

5



Lessons learned. The three top lessons learned are:

72%adjusting and setting reasonable targets

70%

technology improvements for data transparency and

69%

design of a solid reporting process

Those same lessons top the list in the United States and globally.

Cost management maturity varies widely across the region.Companies across Latin America report significantly lower levels of cost management maturity than their counterparts globally and in the United States. According to the survey, only

17% of companies in Latin America rate their cost management maturity as high—much lower than in the United States (50%) and globally (35%).

Cloud leads the pack. The most widely implemented of the breakthrough technologies in our LATAM survey continues to be

41% cloud 25% business intelligence

They are also the most widely implemented technologies globally and in the United States; however, implementation levels in Latin America are significantly lower across all technologies.

Technology implementation in Latin America is expected to outpace the global average. Overall levels of technology implementation in the region are expected to be somewhat higher than the global averages. Consistent with the US and global results, the surveyed technologies expected to be the most actively implemented over the next 24 months are

73%automation

71%cognitive

Digital technologies and solutions applied to cost management in Latin America

Most technology implementations meet or exceed expectations. When implementing each of the technologies covered by this year’s survey, more than

79% of LATAM respondents say their expectations were met or exceeded—higher than the global average of 76%.

Top reasons for applying digital technologies. For all three surveyed technologies, the top reason for applying each technology is to reduce costs and increase productivity (79% for RPA; 71% for cloud; 71% for cognitive & AI).

Digital leaders make a difference.LATAM companies with a designated digital leader have much higher levels of technology implementation—even higher on average than companies in the United States and globally.

Implementation challenges remain the top barrier. In Latin America, the three top barriers to effective cost reduction are:

65%implementation challenges

64%erosion of savings

62%poorly designed reporting/tracking

These results are fairly consistent with the US and global results.

6


Digital disruption and technology implementation are on the rise. Digital disruption is now recognized as a risk by

51% of LATAM respondents, up from just 1% in 2016. Meanwhile, technology implementation is rising as a strategic priority, with

70% of LATAM respondents citing it as a top priority over the next 24 months.

Save-to-grow. Most LATAM companies have been firmly grounded in save-to-grow mode where cost and growth are the main levers, with talent (including capabilities) as another key component. In this mode, cost reduction is a high priority, with the savings used to fund growth initiatives and strategic investments that support a differentiated business strategy.

Save-to-grow expands into save-to-transform. Many LATAM companies are now shifting into save-to-transform mode, which means that in addition to cost, growth, talent, and liquidity, digital technology is also a high priority. This can help companies capitalize on transformation opportunities, while at the same time positioning themselves for an economic downturn and other adverse events that may be on the horizon—using the power of digital solutions to unlock new levels of cost savings, efficiency, and financial performance.

Save-to-transform as a catalyst for embracing digital disruption

7


Brazil70 responses

Mexico72 responses

Chile25 responses*

Deloitte Consulting LLP (Deloitte or Deloitte Consulting) engaged Dynata to conducta cost-management survey in Latin America and around the world to better understand business leaders’ perspectives on current and future cost-reduction initiatives within large companies, multinationals, and other companies that are representative of the regions surveyed.

Study objectives

Understand factors, approaches, actions, and targets related to cost initiatives

Assess the effectiveness of the cost actions, including lessons learned from previous efforts

Understand the drivers and scope of past and future cost initiatives

Provide context on how digital disruption and advanced digital technologies are affecting cost management

Assess industry results, and provide insights on different behaviors related to cost reduction

MethodologyData was collected through detailed online surveys conducted between November and December 2018.

January February March April May June July August September October November December

About the survey

FirmographicsThe survey included responses from 167 executives directly involved in cost management in their organizations. Respondents were from Brazil, Chile, and Mexico—three countries that account for two-thirds of Latin America’s total economy based on Gross Domestic Product (GDP).

* Regarding statistical validity, the sample for LATAM countries (at a confidence level of 95%) has a margin error of less than 10%. For Chile, the smaller data set results in a higher margin of error (~15%). However, the data set is not highly variable and is thus assumed to be statistically valid.

88



Key differences between Latin America and other regions

99


The results from this year’s global survey are largely consistent across all major geographic regions; however, there are a handful of key differences between the LATAM findings and the US and global findings.

Likely Neutral Unlikely0

10

20

30

40

50

60

70

80

90

100

71%

84%

65%

20%

10%

23%

8%6%

12%

Global US LATAM

Likelihood

% o

f tot

al r

espo

nden

ts

65% of LATAM respondents plan to undertake cost-reduction initiatives

Less than 10% 10% to less than 20% more than 20%0

10

20

30

40

50

60

70

80

90

100

30% 30% 31%

Cost targets

% o

f tot

al r

espo

nden

ts

37% of LATAM respondents have targets above 20%

37%

27%

42%

27%

37%35%

Figure 1. Cost reduction trends

Cost reduction is less prevalent in Latin America, but many LATAM companies have very aggressive cost targets

Did not meet goals Met goals Exceeded goals0

10

20

30

40

50

60

70

80

90

100

81% 82%77%

13%22%

5% 5% 1%

Global US LATAM

% o

f tot

al r

espo

nden

ts

77% of LATAM respondents failed to meet fully their targets

1. Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Latin America, May 2016 (Includes results for Brazil and Mexico only; Chile wasn’t surveyed in 2016).

14%

Figure 2. Cost program success and failure

Comparison to 2016 cost survey results in LATAM1

1. Countries/regions with the most significant increases in failure rates:• Brazil (+10 percentage points)• Mexico (+14 percentage

points)

In Latin America, 65% of the surveyed companies plan to undertake cost reduction initiatives over the next 24 months (see figure 1). That number is somewhat below the global average (71%) and significantly lower than the US average (84%). However, the

percentage of LATAM companies with aggressive cost reduction targets above 20% is higher than both the global and US averages (37% in Latin America versus 31% globally and 27% in the United States).

Cost program failure rates in Latin America are slightly lower than in the United States and globallyAccording to this year’s survey, 77% of LATAM companies failed to fully achieve their cost reduction targets. The failure rate is slightly lower than the results for the United States (82%) and globally

(81%) but has increased in both Brazil (+10 percentage points) and Mexico (+14 percentage points) since 2016 (see figure 2).

10


0

10

20

30

40

50

60

70

80

73% 73%68%

73%78% 76% 76%

70%75%

71%

60%

77%70%

Sales growth Cost reduction Balance sheet management

Product profitability Organization and talent

Technology implementation

Digital enablement

% o

f tot

al r

espo

nden

ts

61%

Next 24 months

Global US LATAM

76%69%

64%69% 69%69%

65%

0

10

20

30

40

50

60

70

59% 59% 59%58% 57%62%

57%61% 59% 59%

55%54% 52%

69%

56% 58%53%

56%53%

63%

55% 51% 51% 51%

Global US LATAM

% o

f tot

al r

espo

nden

ts

Political climate Macroeconomic concerns Currency fluctuations Commodity price fluctuationsCredit risks Cyber security concerns New market entrants Digital disruption

Lowest external risk in LATAM

Figure 3. Top external risks

Figure 4. Strategic priorities and save-to-transform

LATAM companies are more concerned about currency fluctuations than cybersecurity

Save-to-transform is taking root in Latin America but slightly trails the US and global trends

Cybersecurity is the top external risk globally (62%) and in the United States (69%) but is the lowest-ranked risk in Latin America

This year’s survey results for Latin America show a subtle shift toward save-to-transform mode, which is characterized by a simultaneous strategic focus on sales growth, cost reduction,

(51%), along with digital disruption. For LATAM companies, currency fluctuation is the top risk (63%) (see figure 3).

technology implementation, and digital enablement. Many LATAM companies are adopting a save-to-transform mindset; however, the trend is lagging a bit behind the US and global trends (see figure 4).

11


Global US LATAM0

10

20

30

40

50

60

70

80

63%59%

47%

Next 24 months

% o

f tot

al r

espo

nden

ts

62%

38%

24%

39%

24% 20%

39%

14%

33%

0

10

20

30

40

50

60

70

80

57%

50%

33%

59%

43%

15%

36%

21% 15%

35%

9%

24%

0

10

20

30

40

50

60

70

80

71%

64%

54%

73%

38%

35%

45%

26%22%

42%

17%

37%

In process of implementation

Not implemented but planned

Business intelligence (not including cognitive or AI)

Cloud solutionsAutomation: Robotic process automation

Cognitive technologies: AI and machine learning

+9%

+18%+13%

+15%

Figure 5. Cost management maturity

Figure 6. Technology implementation levels

% o

f res

pond

ents

Lowest High

High

Intermediate

Low

Lowest

Cost policies and procedures are continually reviewed and examined to ensure best practices around efficiency and cost management

Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply

There may be written cost policies and procedures documented but not readily available and essentially not followed

Few or no formal cost policies or procedures are employed or documented, or they are significantly fragmented

15% 20% 30% 35%

35%9%6%

23% 4% 56% 17%

50% -51%

-66%

Global

US

LATAM

Cost management maturity in Latin America is lower than the US and global averages

Technology implementation activity in Latin America is expected to exceed global levels

The percentage of LATAM companies that report high levels of cost management maturity is 51% lower than the global average and 66% lower than the US average (see figure 5). A high level of

In Latin America over the next 24 months, technology implementation activity (in-process or planned) is expected to exceed the global averages for all technologies covered by the

cost management maturity is characterized by cost policies and procedures that are continually reviewed and examined to ensure best practices around efficiency and cost management.

survey: automation (+18%), cognitive (+13%), business intelligence (+9%), and cloud (+15%) (see figure 6).

12



Firmographics

66%

(% of respondents based on 2017 global GDP)

Survey respondents

represent 66% of the LATAM

economy

GDP of LATAM countries surveyed

34%

Survey sample coverageMap of LATAM—surveyed countries

GDP of LATAM countries not surveyed

Brazil70 responses

Mexico72 responses

Chile25 responses*

Respondents in this year’s survey accurately represent the overall LATAM economy, both in terms of geographic distribution and combined impact on the region’s GDP (see figure 7). Collectively the three surveyed countries—Brazil, Chile, and Mexico—account for two-thirds (66%) of Latin America’s GDP.

Figure 7. Geographic representation and GDP impact

* Regarding statistical validity, the sample for LATAM countries (at a confidence level of 95%) has a margin error of less than 10%. For Chile, the smaller data set results in a higher margin of error (~15%). However, the data set is not highly variable and is thus assumed to be statistically valid.

1313

Management-level breakdown(% of respondents by level)

Management-level breakdown(% of respondents by level and country)

0

20

40

60

80

100

MexicoChileBrazil

11%

20%

47%

21%

18%

60%

70% of responses were from executive

management positions, followed

by 18% from President or

CEO roles, and the rest from CFO and

COO roles10%

12%

President, CEOExecutive Management (business units)Executive Management (enabling functions) CFO, COO

84%

4%4%8%

15%

65%

19%

Only executives with direct involvement in cost-management decisions were included in the survey (see figure 8).

Figure 8. Respondent breakdown by management level and country

14



Industry breakdown:Total respondents (%)

Industry breakdown:number of responses by industry and country

37%12%

5%4%

4%

16%

22%

Public Sector Other

Financial services Technology, Media and Telecommunications

Life Science and Health care

Consumer and industrial products

Energy and Resources

0 20 40 60 80 100

Brazil

Total

70

25

72

25 15 10 7 5 5 3

Chile 12 4 3 3 1 2

Mexico 24 18 14 10 2 2 2

Industry-related information was collected to provide meaningful insights for six major industries. Industry representation ranged from 12% to 37%, except for energy & resources (4%) and public sector (5%). Consumer & industrial products had the highest representation at 37% (see figure 9).

Figure 9. Industry breakdown

15

$200M to less than $500M

Brazil Chile Mexico

0

10

20

30

40

50

60

$500M to less than $1B

$1B to less than $5B



Over $60B

28%

21%

17%

9% 8%

27%

20%20%

1%

6%4%

0%1%

32%

56%

24%

12%14%

52% of LATAM respondents reported revenues above US$5B, with almost 19% reporting revenues above US$20B

Note: The survey was conducted in local currencies – for analysis purposes figures have been converted to US dollars

Less than 1,0000

10

20

30

40

50

1,000 to 2,499 2,500 to 4,999 5,000 to 9,999 10,000 to 24,999 More than 100,000

48%

8% 8%

24%

16%

24%

11%14%

17%

13%

6%

11%

6%4%

7% 7%

44%

0% 0% 0%

7%4%

16%

4%

25,000 to 49,999 50,000 to 99,999

Brazil Chile Mexico

In LATAM overall, 54% of respondents had more than 5K employees

Survey respondents are an accurate representation of major companies in Latin America based on revenue (see figure 10).

Survey respondents are also an accurate representation of major companies in Latin America based on headcount (see figure 11).

Figure 10. Revenue breakdown

Figure 11. Headcount breakdown

16




17

A large number of LATAM companies (65%) plan to undertake cost reduction initiatives over the next 24 months (see figure 12). However, the likelihood of undertaking cost reduction has declined significantly in Brazil (down 38 percentage points to 57%) and Mexico (down 31 percentage points to 65%).2 Companies in Chile have the highest likelihood of undertaking cost reduction initiatives (88%), higher than respondents in the United States (84%) and globally (71%).

Likely Neutral Unlikely

Global US LATAM Brazil Mexico Chile

65% of LATAM respondents plan to undertake cost reduction initiatives

71%

84%

65%

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

80

90

57%

65%

88%

20%

10%

23% 25%

6%

12%

19%

10%

0%

24%

12%

8%

1

1

1

2

2

2

3

Figure 12. Likelihood of cost reduction over the next 24 months

Survey findings On average, 65% of LATAM respondents plan to undertake cost reduction initiatives over the next 24 months, a relatively low number

compared to the US (84%) and global (71%) results.

Neutral and unlikely positions in Latin America are higher than in the United States and globally; Brazil is the country most unlikely to undertake cost improvement initiatives (19%).

Chile has the highest likelihood of undertaking cost reduction initiatives (88%), higher than the US and global results.

Comparison to 2016 cost survey results in Latin America3

• Likelihood of cost reduction initiatives

– Brazil decreased significantly from 95% in 2016 to 57% this year (-38 percentage points)

– Mexico decreased significantly from 96% in 2016 to 65% this year (-31 percentage points)

Cost reduction remains prevalent but is down in Brazil and Mexico

2. The 2016 report did not include results for Chile.3. Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Latin America, May 2016.

18


Cost reduction targets in Latin America are up significantlyOn average, 37% of LATAM respondents have cost targets above 10%, with 27% targeting cost reductions above 20%. Companies in Chile tend to have the least aggressive cost targets, with 40% pursuing overall cost savings of less than 10% (see figure 13).

Survey findings On average, 72% of LATAM respondents hope to achieve cost reduction targets above 10%, a similar number to the US (69%)

and global (68%) results.

Brazil (36%) and Mexico (42%) have a higher proportion of respondents with targets above 20%, compared to the US and global results at 27% and 31% respectively.

Chile has the highest proportion of respondents setting targets less than 10% (40%), much higher than the global, US, and LATAM averages (30%, 30%, and 27% respectively).

Since 2016, the percentage of companies with the most aggressive cost targets (above 20%) has increased significantly in Brazil (+9 percentage points) and Mexico (+6 percentage points).

10% to less than 20% More than 20%

30% 30%

% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

27%

Less than 10%

21%

29%

37%

42%

35%33%

38%36%

27%

37%

42%

36%

24%

Most LATAM respondents (72%) reported targets above 10%

1

1

1

11

1

2

2

3 33

3

31%

40%


Figure 13. Cost targets across LATAM5


• The percentage of LATAM companies with cost targets above 20% has increased significantly since 2016:

– Brazil (+9 percentage points)

– Mexico (+6 percentage points)

4. Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Latin America, May 2016. 5. Respondents that selected “no specific targets were established” were not plotted in the graph.

19


Survey findings Failure rate in Mexico (83%) is higher than the LATAM average (77%) but similar to the results globally (81%) and in the US (82%);

Chile has the lowest failure rate (72%).

In LATAM, a lower proportion of companies exceeded their goals (1%), compared to the results for the US (5%) and globally (5%).

LATAM has a higher proportion of respondents that were successful in meeting their goals (22%), compared to 14% globally and 13% in the United States.

Cost program failure rates are high and risingThe percentage of LATAM cost programs that failed to fully meet their targets is high (77%), with significant increases in Brazil (+10 percentage points) and Mexico (+14 percentage points) since 2016. The failure rate ranges from 72% in Chile to 83% in Mexico. The

percentage of LATAM respondents that met their goals (22%) is higher than in the United States (13%) and globally (14%). However, a much lower percentage of LATAM respondents exceeded their goals (only 1% in Latin America versus 5% in the US and globally)(see figure 14).

Met goals Exceeded goals

0

10

20

30

40

50

60

70

80

90

100

Did not meet goals

81% 82%

14% 13%

22%

5% 5%1% 1% 1% 0%

15%

28%26%

83%

77%

72%73%

1 1

1

3

2

% o

f tot

al r

espo

nden

ts


Figure 14. Cost program success and failure analysis


• Failure rate increases since 2016:

– Brazil (+10 percentage points)

– Mexico (+14 percentage points)

6. Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Latin America, May 2016.

20


Survey findings Over the past 24 months, Mexico had a higher percentage of respondents with positive revenue growth (97%) than the LATAM

average (90%), the global average (86%), and the United States (86%).

Over the next 24 months, Chile has the most positive revenue outlook, with 100% of respondents expecting growth; Brazil is at the opposite end of the spectrum with 84% of respondents expecting growth.

Compared to the past 24 months, Chile shows a significant increase in the percentage of companies with a positive revenue outlook for the next 24 months (+8 percentage points).

0

10

20

30

40

50

60

70

80

90

100

86% 86%90%

83%

92%97%

7% 7% 7%3% 0% 0%

7% 7% 7% 8%10%3%

1 1 11

79%

100%

2

0

10

20

30

40

50

60

70

80

90

100

Past 24 months

% o

f tot

al r

espo

nden

ts%

of t

otal

res

pond

ents

Next 24 months

Increased Remained the same Decreased

Increase Anticipate flat top line Decrease

86% 86%

5% 4%0%

6% 4% 4%9%

1% 0%

84%91%

8% 7%

3


94%

9%

Figure 15. Revenue performance and expectations for growth

Growth expectations remain very positiveLATAM companies have a very positive revenue outlook, with 90% reporting growth over the past 24 months and 91% expecting growth over the next 24 months. Those percentages are higher than the averages for companies in the United States (86%) and globally (86%). Chile has the most positive revenue outlook, with 100% of respondents expecting growth, followed by Mexico at 94%, and Brazil at 84% (see figure 15).

21


Survey findings Currency fluctuations (63%), macroeconomic concerns (56%), and credit risks (55%) are the top external risks in Latin America.

Cybersecurity is the top external risk globally and in the United States.

Cybersecurity is the lowest-rated risk in Latin America, and is not among the three top risks in any of the LATAM countries.

Country-specific findings Brazil—Currency fluctuation is the top risk (66%, highest among all countries); new market entrants is the lowest (46%).

Mexico—The three top risks are: political climate (61%), currency fluctuations (61%), and commodity price fluctuations (61%); the lowest is macroeconomic concerns (50%).

Chile—Currency fluctuation is the top risk (60%); political climate is the lowest (32%, lowest among all countries).

Currency fluctuation is the top external riskThe top external risks in Latin America are currency fluctuations (63%), macroeconomic concerns (56%), and credit risks (55%). Cybersecurity is the top external risk globally and in the United States, but is the lowest-ranked risk in Latin America and is not among the top three risks for any of the LATAM countries surveyed. Political climate risk ranks relatively low in Brazil (53%) and very low in Chile (32%) but is in a three-way tie as the top risk in Mexico (61%) (see figure 16).

Political climate Macroeconomic concerns Currency fluctuations Commodity price fluctuationsCredit risks Cyber security concerns New market entrants Digital disruption

0

10

20

30

40

50

60

70

80


21

1

1 3

A

A

62% 61%

53% 52% 52%53% 53%

32%36%

40% 40%

54%

% o

f tot

al r

espo

nden

ts

B

B

B

C

C59%59% 59%59% 59%

69%

59%58% 58%53% 53%

64%61% 61%61% 60%

50%

66%

56% 56% 56%

63%

53%55%51% 51% 51%

46%51%51%

57% 57% 56%54% 55%52%

2

Figure 16. Top external risks


• In Brazil, the highest rated external risk in the previous survey was “macroeconomic concerns”; in Mexico, it was “currency fluctuations”

• In 2016, digital disruption was not recognized as a major risk in Brazil (0%) nor Mexico (1%)


22


In Latin America, the top internal risk is lack of strategic plans (23%), followed closely by liquidity and financial position (22%), and lack of controls (19%) (see figure 17).

Figure 17. Top internal risks

Lack of strategic plans or execution to provide clear direction to the business Liquidity and financial position to support business plans

Recruitment, development and retention of required talent to support business initiatives

Reliability and functionality of information systems to support business processes and decisions

Lack of controls, processes and systems to ensure business continuity Lack of regulatory, legal and/or management controls

0

10

20

30

40

50

34%

27%

23%

19% 19%

31%

21% 21%20%

12%

32%

12%

24%

16%

20%

1 1

3

2

2A

AB

B C

C

C


% o

f tot

al r

espo

nden

ts

23%23%25% 24% 23% 23%22%

16% 16%16% 16%A

16%13%14% 15%

18%18%

26%

22%19%

29%

Lack of strategic plans is the top internal risk

Survey findings Lack of strategic plans is the top internal risk in Latin America (23%), followed by liquidity and financial position (22%).

Globally and in the United States, reliability/functionality of information systems and talent are the two top risks.

Reliability and functionality of information systems—the top internal risk globally (26%) and in US (34%)—is the lowest-ranked risk in Latin America (16%).

Country-specific findings Brazil—The top internal risk is lack of strategic plans (31%); the lowest are reliability/functionality of information systems (16%)

and lack of regulatory controls (16%).

Mexico—Liquidity and financial position is the top internal risk (19%); talent ranks the lowest (13%).

Chile—The top risk is liquidity and financial position (32%, highest among all three countries); the lowest are lack of strategic plans (12%) and talent (12%), both the lowest among all three countries.

23


% of total respondents

Sales growth Cost reduction Balance sheet management Product profitability

Organization and talent Technology implementation Digital enablement

US

LATAM

Global

0 10 20 30 40 50 60 70 800 10 20 30 40 50 60 70 80 90

70%56%

56%

68%60%

77%

76%

A

A

1

1

69%73%

73%

61%73%

69%

69%

64%

78%76%

76%

75%

71%

70%


Next 24 monthsPast 24 months Next 24 monthsPast 24 months

0 10 20 30 40 50 60 70 80 90 0 10 20 30 40 50 60 70 80

73%69%

59%74%

56%72%

68%

65%

73%

78%76%

79%

77%65%

65%

62%

69%+22%

Next 24 monthsNext 24 monthsPast 24 months

74%

54%70%

63%54%

56%66%

69%61%

71%73%

2

2

81%

70%59%

68%72%

63%

76%58%58%

67%

67%71%

64%79%

72%64%64%

III

BB

I

2

2

2

2

+24%

+28%

84%64%

40%84%

56%80%

64%

88%56%

52%92%

52%80%80%

CC

+30%

+43%

-19% C

Brazil

Mexico

Chile

73%

72%

65%70%

B

I

I

III

Survey findings Over the past 24 months, sales growth and product profitability were the two top

priorities in Latin America, the United States, and globally.

Similar to the US and global results, product profitability, sales growth, and technology implementation are all among the four top priorities in LATAM over the next 24 months.

In LATAM, “organization and talent” sees the largest increase from the past 24 months to the next 24 months (+22%).

Figure 18. Strategic priorities

Comparison to past 24 months

I. The two top strategic priorities remain the same in Latin America

II. Organization and talent has increased by an average of 22% across the region, with even larger increases in Chile (+43%) and Mexico (+24%)

III. Digital enablement has increased in Brazil (+28%) but has decreased in Chile (-19%)

Country-specific findings Brazil—Sales growth is the top priority (81%); the lowest is balance sheet

management (59%).

Mexico—Similar to Latin America overall, the top priority for Mexico is product profitability (79%); the lowest priorities are balance sheet management (64%), technology implementation (64%), and digital enablement (64%).

Chile—The top priority is product profitability (92%, highest among all countries); the lowest are balance sheet management (52%) and digital enablement (52%), lowest among all countries.

Strategic priorities align with save-to-transformThe save-to-transform cost management approach uses cost reduction to fund investments in growth and transformational digital technologies, while in turn using many of those same digital technologies to boost the efficiency and effectiveness of cost reduction programs. Looking at the shift in strategic priorities from the past 24 months to the next 24 months, the survey results for Latin America show an increased focus on technology implementation (from 65% to 70%) and on digital enablement (from

62% to 65%)—both indicative of a save-to-transform mindset. Balance sheet management will remain the lowest priority.

The save-to-transform shift is most evident in Brazil, where the survey results predict a strong increase in digital enablement (from 56% to 71%) and technology implementation (from 66% to 73%) (see figure 18).

24


Competitive pressure is the top driver of cost reductionThe top driver for cost reduction in Latin America over the next 24 months is intensified competition (63%), followed closely by investment in growth areas (62%), and unfavorable cost positions (62%). Ratings for all three of these drivers are up significantly from the past 24 months: competition (+23%); investment in growth areas (+22%); and unfavorable cost position (+27%), which suggests that cost pressure may be rising across the region.

Next 24 monthsPast 24 months


Significant reduction in consumer demand

Decrease in liquidity and tighter credit

Unfavorable cost position relative to peer group

Changed regulatory structure

Required investment in growth areas

Intensified competition among peer group

Increased international growth opportunities

Next 24 monthsPast 24 months

Global

52%52%

56%59%

65%63%

66%

55%53%

57%61%

67%66%65%

US

54%

70%

46%50%

57%

66%67%

54%

62%63%

51%55%

60%67%

LATAM

48%47%49%

54%51%51%

57%

51%62%61%62%63%61%

54%

A

A

+27%

+22%+23%

Brazil

49%49%51%

57%44%

59%59%

54%

63%67%

67%

69%74%

59%+21%+22%

+22%

+67%

+50%

+27%+55%

Mexico

50%46%50%

56%53%

56%49%

57%46%

61%

54%

2

2

2

61%63%

54%

Chile

40%44%

36%40%

40%64%

56%

44%

60%44%

44%44%

60%64%

B

CC

CIII

II

B


3

33

1

I

I

I

I

1

In Brazil, competition is the top driver of cost reduction (74%); however, the driver with the biggest expected rise over the next 24 months is investment in growth areas (+55%). Unfavorable cost position shows the biggest rise in Mexico (+22%) and Chile (+67%) (see figure 19).

Figure 19. Past and future cost-reduction drivers

Survey findings The two top drivers in Latin America over the past 24 months were international growth

opportunities (57%) and changed regulatory structure (54%).

The top drivers over the next 24 months are competition (63%), investment in growth areas (62%), and unfavorable cost position.

Unfavorable cost position sees the largest increase (62%) over the next 24 months (+27%), followed by competition (+23%), and required investment in growth areas (+22%).

Comparison to past 24 months

I. Reduction in consumer demand and decrease in liquidity continue to be the least important drivers

II. Drivers across Brazil see the largest increase from the past 24 months (+24%), especially “investment in growth areas” (+55%)

III. Across all drivers, unfavorable cost position sees the highest increase from the past 24 months in Chile (+67%)

Country-specific findings Brazil—Competition is the top driver (74%, highest among all countries); reduction in

consumer demand is the lowest (54%).

Mexico—The top driver is investment in growth areas (63%); the lowest is decrease in liquidity (46%).

Chile—The top driver is international growth opportunities (64%), followed by unfavorable cost position (60%), and competition (60%); the other four drivers are all at 44%, lowest among all countries.

25


In Latin America, the three most commonly developed cost management capabilities over the past 24 months were automation solutions (41%), cognitive technologies (35%), and ERP (34%). In Brazil, cognitive topped the list at 53%, while in Mexico the most commonly developed capability was improved ERP (50%). In Chile, the most commonly developed capability was new policies and procedures (44%).

% o

f tot

al r

espo

nden

ts

Created a new executive position and/or full time positions to drive cost management

Set-up or improved ERP infrastructure

Developed or implemented Automation technologies

Developed or implemented Cognitive and Artificial Intelligence technologies

Implemented new policies and procedures, and strengthened the compliance mechanisms

Improved processes for forecasting, budgeting and reporting to enable effective cost management

Implemented zero-based budgeting system or process

0

10

20

30

40

50

60

70

US LATAMGlobal Brazil Mexico Chile

31%

44%

48%

53% 53%50%

26%25%

24%

21%

18%

8%

49% 49%

35% 36% 36%

40% 40%

44%

28%

20%

12%

38%

32%

23%20%

29%

34%

42%

34%

12%

31% 31%

42%40%

11%

1

1

1

2

2

41% 41%40%

16% 16%

3 3

3 A

A B

B

C

C

Zero-based budgeting (ZBB) was the least developed of the surveyed capabilities (16% across the LATAM region); however, that number is higher than the results globally (12%) and in the United States (11%) (see figure 20).

Figure 20. Development of cost management capabilities

Survey findings The most commonly developed capabilities in LATAM over the past 24 months were

automation solutions (41%), cognitive (35%), and ERP (34%).

Automation solutions was the most commonly developed capability globally (48%) and in the US (53%).

ZBB development was higher in Latin America (16%) than in the United States (11%) and globally (12%).

Country-specific findings Brazil—The most commonly developed capability was cognitive technologies (53%,

highest among all countries); the least was new executive position (16%).

Mexico—The most commonly developed capability was improved ERP infrastructure (50%); the least was ZBB (8%, lowest among all countries).

Chile—The most commonly developed capability was new policies and procedures (44%); the least was ZBB (12%).


• ZBB development increased by 16 percentage points in Brazil and by 3 percentage points in Mexico

• “Set up or improved ERP infrastructure” decreased by 4 percentage points


Technology-related capabilities are the primary development focus

26


Action 1 Increased centralization – Integrated business units and functions into the corporate center

StrategicAction 2 Changed business configuration – Divested underperforming assets, adjusted number of products/services, geographies, customers, etc.

Action 3 Outsourced/Off-shored business processes to low cost service providers

Action 4 Streamlined organization structure – Increased spans of control, and modified reporting relationships

Tactical

Action 5 Streamlined business processes

Action 6 Improved policy compliance

Action 7 Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials and services

Action 8 Implementation of specific automation or cognitive technologies

Action 9 Aligned incentives of executives or employees to cost reduction objectives

Strategic cost actions have been slightly favoredIn Latin America, the most commonly implemented cost actions over the past 24 months were slightly more strategic (32%) than tactical (29%), which was the opposite of the global and US results. Tactical actions tend to produce incremental improvements and relatively small cost savings, whereas strategic actions have a much broader and deeper impact. Examples of strategic actions include centralizing business activities (Act. 1 in the chart); structurally reconfiguring the business (Act. 2); and outsourcing/offshoring (Act. 3) (see figure 21).

Among LATAM respondents, one of the two most commonly implemented cost actions was strategic (increased centralization, at 37%) and the other was tactical (streamlined business processes, also at 37%). In Brazil and Chile, streamlined business processes was the top cost action (51% in Brazil, highest among all three LATAM countries). In Mexico, increased centralization topped the list at 31%, but was closely followed by changed business configuration (28%) and streamlined organization structure (26%).

Figure 21. Cost reduction actions over the past 24 months

Averages

Global LATAMUS Brazil Mexico Chile0

10

20

30

40

50

60

35%

31%

31% 36

%

37%

37%

32%

32%

30%

43%

41%

31%

46%

45%

39%

41%

34%

29%

3 3

37%

25% 30

%26

%22

%

51%

41%

41%

30% 33

%

31%

13%

22% 24

%24

%16

%16

%40

%

28%

24%

24%

20%

34%

31% 37

%

26%

29%33%34% 38% 21% 25%32%32% 31% 43% 25% 21%

2A

A B

BC

C

22%

21%

21%

31%

26%28

%17

%

1

49%

43%

37%

11

3

2

% o

f tot

al r

espo

nden

ts

Survey findings The most commonly implemented strategic cost actions over the past 24 months were streamlined business processes (37%)

and increased centralization (37%).

Similar to Latin America, streamlined business processes was among the two top actions implemented in the United States and globally.

Unlike in the United States and globally, Latin America leaned slightly toward strategic actions (32%) versus tactical actions (29%).

Country-specific findings Brazil—The most commonly implemented cost action was streamlined business processes (51%, highest among all countries);

the least implemented was automation/cognitive technologies (30%).

Mexico—Increased centralization was the most implemented cost action (31%); the least implemented was automation/cognitive technologies (13%, lowest among all countries).

Chile—The most implemented cost action was streamlined business processes (40%); the least implemented were outsourced business processes (16%) and streamlined organization structure (16%).

27


Strategic cost actions maintain a slight edgeOver the next 24 months, strategic cost actions are expected to maintain a slight edge over tactical cost actions in Latin America (69% versus 66%). Top actions for the region (in-process and/or planned) are: increase centralization (72%), reduce external spend

0

10

20

30

40

50

60

70

80

61% 55% 66% 54% 72% 74%56%62% 62% 70% 77%69%

Strategic In process of implementationNot implemented but planned

Averages

42% 44

%43

%42

% 46%

40% 43

%41

%

19% 21

%16

%18

%16

%19

%18

% 22% 3

3

48%

35% 42

% 48%

35%

35%

33%

19%

15% 13

% 11%

15% 19

%20

%

48%

36%

56%

44%

52%

48%

76%

28%

32%

40%

20%

24%

16%

24%

12%

44%

44%

42%

39%

60%

44%

43% 53

%42

%

31%

29%

25%

18%

25% 26

%21

%29

%


49%

41%

33%

46%

41%

31% 36

% 39%

16%

19%

27%

13% 20

%16

% 13% 17

%

47%

40% 41%

50%

45%

40%

52%

37%

25%

28%

25%

17%

21%

22% 16

%28

%

221

1 1 A

A

B

B

C

C

40%

10%

% o

f tot

al r

espo

nden

ts

(68%), and streamline organization structure (67%). In Brazil, the top focus is centralization (65%); in Mexico the top focus is streamline organization structure (78%) and in Chile, it is reducing external spend (88%) (see figure 22).

Figure 22. Expected cost reduction actions over the next 24 months9

Action 1 Increased centralization – Integrated business units and functions into the corporate center

StrategicAction 2 Changed business configuration – Divested underperforming assets, adjusted number of products/services, geographies, customers, etc.

Action 3 Outsourced/Off-shored business processes to low cost service providers

Action 4 Streamlined organization structure – Increased spans of control, and modified reporting relationships

Tactical

Action 5 Streamlined business processes

Action 6 Improved policy compliance

Action 7 Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials and services

Action 8 Implementation of specific automation or cognitive technologies

Survey findings Top actions for Latin America (in-process and/or planned) are: increase centralization (72%), reduce external spend (68%), and

streamline organization structure (67%).

Globally and in the United States, change business configuration is the top cost reduction action.

In Latin America, strategic cost actions are expected to be implemented slightly more than tactical cost actions (69% versus 66%) over the next 24 months.

Country-specific findings Brazil—Increase centralization (65%) is the most expected cost action; improve policy compliance is the least expected (47%,

lowest among all countries).

Mexico—Streamline organization is the top cost action (78%); outsource business processes is the lowest (64%).

Chile—The top cost action is reduce external spend (88%, highest among all countries); the lowest are streamline organization structure (68%), and streamline business processes (68%).

9. Respondents who planned to implement those actions or were in process of implementation are represented in this tabulation.

28


Implementation challenges remain the top barrierAmong LATAM respondents, the three top barriers to effective cost reduction are implementation challenges (65%), erosion of savings (64%), and poorly designed reporting/tracking (62%). In the United States and globally, implementation challenges and erosion of savings are also two of the three top barriers. However, the number two barrier globally and in the United States is lack of an effective ERP system, which places fourth in Latin America.

Lack of understanding is now the fifth-ranked barrier in Latin America, down from second place in 2016.


% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

80

Lack of understanding/ acceptance of the solution by the audience

Erosion of savings due to infeasible target setting

Weak/ unclear business case for cost improvement

Poorly designed reporting and tracking

Lack of an effective ERP system

Management challenges in implementing initiatives

57% 57% 58% 61%62%65%

51%55%56% 58%60%

64%

53%55%62%

64%59%

65%59%

63%69% 69%

61%

71%

49%44%

56%61%58% 61%

48%

64%60% 60%

52%56%

11 1

2

3

2

3

3

A

A

B

B B

C

C

Figure 23. Barriers to successful cost reduction


Survey findings The top barriers in Latin America are implementation challenges (65%), erosion of savings (64%), and poorly designed

reporting/tracking (62%).

The top barriers in the United States (64%) and globally (65%) are implementation challenges, lack of an ERP system, and erosion of savings.

Lack of an effective ERP system is the second most common barrier in the United States (60%) and globally (62%), but is only the fourth most common in Latin America (59%).


• Implementation challenges remain the top barrier

• Lack of understanding is now the fifth-ranked barrier, down from number two

Country-specific findings Brazil—The top barrier is implementation challenges (71%, highest among all countries); the lowest is weak/unclear

business case (59%).

Mexico—The top barriers are erosion of savings (61%) and implementation challenges (61%); the lowest is lack of understanding of solution (44%, lowest among all countries).

Chile—Lack of understanding of solution (64%) is the top barrier; weak/unclear business case is the lowest (48%).

29


Lessons learnedRegarding cost management in Latin America, the three top lessons learned are: adjusting targets reasonably (72%), technology improvements for data transparency (70%), and design of a solid reporting process (69%). Those are also the top lessons learned in the United States and globally. Designating a full-time position


% o

f tot

al r

espo

nden

ts

0

10

20

30

40

50

60

70

80

90

100

Designate a full time position to drive efficiency and cost improvement initiatives

Develop, validate and sponsor a clear business case for cost improvement

Deploy change management activities to raise awareness, acceptance and benefits of initiatives

Design a solid tracking and reporting process

Assess, validate and adjust targets reasonably according to the reality throughout the implementation phase

Invest in technology improvements to enable data availability, reliability and decision-making process

61%66%

70% 69%72%

65%

57%

69%75% 73%

76%

69%

11 1

2

55%59%

69% 72%70%

62% 59%

71%80%77% 77%

47%53%

57%

65%63%

51% 52%52%

60%

76%80%

72%

3

2

3 3A

A

B

B

C

C

to drive efficiency is the lowest-ranked lesson (55%), similar to the global and US results. Brazilian respondents generally cited more lessons learned than did respondents from other countries (see figure 24).

Figure 24. Lessons learned for effective cost management

Survey findings The three top lessons learned in Latin America are adjusting targets (72%), technology improvements for

data transparency (70%), and design of a solid reporting process (69%).

Globally and in the United States, the three top lessons learned are the same as in Latin America.

Designating a full-time position to drive efficiency is the lowest-ranked lesson in Latin America (55%), similar to the global and US results.

Country-specific findings Brazil—The top lesson learned is design of a solid reporting process (80%); the lowest is designating a full-time

position to drive efficiency (59%).

Mexico—The top lesson learned is adjusting targets (65%); the lowest is deploying change management activities (47%, lowest among all three countries).

Chile—The top lesson learned is adjusting targets (80%); the lowest are designating a full-time position (52%) and developing a clear business case (52%).

30


Cost management maturity varies widely across the region Companies across Latin America report significantly lower levels of cost management maturity than their counterparts globally and in the United States. According to the survey, 17% of companies in Latin America rate their cost management maturity as high—much lower than in the United States (50%) and globally (35%)—while

% o

f res

pond

ents

Lowest High

-100 -85 -70 -55 -40 -25 -10

5

20 35 50

LATAM

Brazil

Chile

Mexico

Global

US

35%31%20%15%

6% 9%

23% 4%

34%

12% 12%

6%17%

35%

56%

47%

48%

67%

50%

17%

19%

28%

11%

High

Intermediate

Low

Lowest

Cost policies and procedures are continually reviewed and examined to ensure best practices around efficiency and cost management

Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply

There may be written cost policies and procedures documented but not readily available and essentially not followed

Few or no formal cost policies or procedures are employed or documented, or they are significantly fragmented

2 3

3

1

A A

B B

C C

56% of LATAM companies report their maturity as intermediate. Among the three LATAM countries surveyed, respondents in Chile report the largest percentage of high maturity companies (28%), while Brazil and Mexico come in at 19% and 11% respectively (see figure 25).

Figure 25. Cost management maturity levels

Survey findings 17% of LATAM companies rate their cost management maturity as high; 56% rate their maturity as intermediate.

High maturity in cost management is much less common in Latin America (17%) than the global average (35%).

The percentage of high-maturity companies in Latin America is 18 percentage points lower than the global average and 33 percentage points lower than in the United States.

Country-specific findings Brazil—19% of Brazilian companies rate themselves high maturity; 34% rate themselves lowest maturity

(a larger proportion than in Chile and Mexico).

Chile—Chile has the largest proportion of high-maturity companies (28%) and the smallest proportion of lowest-maturity companies (12%).

Mexico—Mexico has the largest proportion of intermediate-maturity companies (67%), but the smallest proportion of high-maturity companies (11%).

31


Digital technologies are having a major impact on all aspects of business—including cost management. Breakthrough innovations enabled by digital technology allow companies to operate and compete more effectively in an increasingly digital world. They also have the potential to enable new levels of cost savings.

Digital technologies and solutions applied to cost management in Latin America


Cloud leads the packIn Latin America, the most widely implemented of the breakthrough technologies in our survey continues to be cloud (41%), followed by business intelligence (25%). Those two technologies are also the most widely implemented globally (49% for cloud; 35% for business intelligence) and in the United States (62% for cloud; 49% for business intelligence). However, implementation levels in Latin America are significantly lower across all technologies (see figure 26).

Global US LATAM Brazil Mexico Chile0

10

20

30

40

50

60

70

% o

f tot

al r

espo

nden

ts

Automation: Robotics Process Automation

Cognitive technologies: Artificial intelligence and machine learning

Business Intelligence (Not including Cognitive or AI)

Cloud Solutions

25% 25%

35%

30%

27%

62%

17% 17%

25%

41%

20%

31%

26%

50%

14% 14%

24%

28% 28%

16%

12%

52%

1

1

2

2 23

3

23

49% 49%

A

A

B

B

C

C

Figure 26. Technology implementation levels (past 24 months)

Survey findings In Latin America, the most widely implemented of the surveyed technologies continues to be cloud (41%), followed by business

intelligence (25%).

Globally and in the United States, cloud and business intelligence were the two most implemented technologies.

For cloud solutions, implementation levels are lower in Latin America (41%) than in the United States (62%) and globally (49%).

Country-specific findings Brazil—Cloud is the most commonly implemented technology (50%); automation is the least implemented (20%).

Mexico—The most commonly implemented technology is cloud (28%); the least are automation (14%) and cognitive (14%).

Chile—Cloud is the most commonly implemented technology (52%, highest among all countries); cognitive is the least implemented (12%, lowest among all countries).

33


Top reasons for applying digital technologiesFor all three surveyed technologies, the top reason in Latin America for using each technology is to reduce costs and increase productivity (79% for RPA; 71% for cloud; 71% for cognitive & AI). This top reason applies to the region as a whole, and for each of the surveyed LATAM countries. However, respondents from Chile also cite data security and business control as key reasons for using cognitive technologies. Respondents from Mexico cite data security as a key reason for using cognitive, while citing data security and business control as key reasons for using cloud and RPA.

Cloud

Resp

onde

nts

(in %

)

Reduce Costs and tIncrease Productivity

Increase revenue Enhance product/service capabilities Tighten data security and Improve business control

0

10

20 30 40 50 60 70 80 90 100

Chile

Mexico

Brazil

LATAM

USA

Global

63%

43%

48%

64%

57%

37%

40%

63%

71%

40%

47%

60%

71%

54%

40%40%

45%

70%

80%

80%

54%

31%

31%

46%

RPA

0

10

20 30 40 50 60 70 80 90 100

80%

57%53%

69%

70%

51%

51%

58%

79%

36%

46%

79%

43%

50%

71%

71%

20%

40%

70%

70%

25%

100%

75%

75%

Cognitive & AI

0

10

76%

56%

59%

68%

66%

44%

55%

71%

71%

43%

46%

68%

60%

53%

53%

60%

80%

80%

40%

30%

0%

67%

67%

67%

1 2 3

A A A

B

B

B

CCC

Figure 27. Reasons for applying technologies

Survey findings In Latin America, the top reason for using cloud is to reduce costs and increase productivity (71%).

The top reason for using automation/RPA is to reduce costs and increase productivity (79%).

The top reason for using cognitive & AI technologies is to reduce costs and increase productivity (71%).

Country-specific findings Brazil—Cost reduction and productivity is the main reason for applying cloud (71%), RPA (79%), and cognitive (80%).

Mexico—For cloud and RPA, Mexican respondents give equal importance to “cost reduction and productivity” and “tightening data security and improving business control” (both reasons rated at 80% for cloud and 70% for RPA); for cognitive, the top reason is “tightening data security and improving business control” (80%).

Chile—For cognitive, Chilean respondents give equal importance to “cost reduction and productivity” and “tightening data security and improving business control” (both at 67%); for cloud and RPA, the key reason is “cost reduction and productivity” (54%).

34


When implementing each of the technologies covered by this year’s survey, more than 79% of LATAM respondents say their expectations were met or exceeded, which is higher than the global average of 76%. For cloud, the LATAM number is 92% (60%

met + 32% exceeded); for RPA, the number is 79% (47% met + 32% exceeded); and for cognitive & AI, the number is 86% (57% met + 29% exceeded).

13%

2%

Global USA LATAM Brazil Mexico

Unable to assess results at this pointResults according to expectations Results below expectationsResults above expectations

Cloud

12%4%1%

Chile

7% 9%31%

0%10%

0%8%

0%

23%

1%


RPA

13%35%

41% 46% 47%

60% 60% 45%

45%

77%

15%

57%

27%29% 32%

32%21% 29%

42%

29% 20%

30%100%

56%

40%

1% 1%

Chile

0% 0%

16%

1%


Cognitive & AI

11%36%

47% 53% 57%

29%14% 20%

47%

33% 10%30%

50%

60% 100%

34%

2% 0%

Chile

0% 0%

1

2

3

A

A

B

B

B

C

C

C

Figure 28. Implementation results

Most technology implementations meet or exceed expectations

Survey findings For cloud, 60% of LATAM respondents achieved results that met expectations and 32% achieved results that exceeded

expectations.

For RPA, 47% achieved results that met expectations and 32% that exceeded expectations.

For cognitive & AI, 57% achieved results that met expectations and 29% that exceeded expectations.

Country-specific findings Brazil—29% of respondents had results below expectations when implementing RPA and 20% when implementing cognitive.

Mexico—When implementing cloud and cognitive, 90% of respondents had results that either met or exceeded expectations, whereas for RPA only 80% had results that met or exceeded expectations.

Chile—When implementing RPA and cognitive, 100% of respondents had results that met expectations; for cloud, 77% achieved results that met expectations and 15% that exceeded expectations.

35


Figure 29. Technology implementation levels (next 24 months)

Top

Pref

eren

ces

of R

espo

nden

ts (i

n %

)

1

2

2

In process of implementationNot implemented but planned

0

10

20

30

40

50

60

70

80

ChileMexicoBrazilLATAMUSGlobal

38% 39

%

39%

33%

43%

36%

35%

24%

24%

24%

62% 63%

47%

59% 57%

50%

33%

20%

14%

15%

21%

15%

9%

56%

48%

16%

16%

40%

32%

24%

16%

59%

64%64%

72%

48%31

%

33%

40%

29%

46%

27%

24%

17%

70%73%

60%

44%

47%

40%

36%

18%

46%

47%

29% 18

%

75%76%

65% 65%

42%

38%

35%

22%

45%

37%

26%

17%

71%73%

64%

54%

A

A

B

B

C

C


Cognitive technologies: Artificial intelligence and machine learning

Business Intelligence (Not including Cognitive or AI)

Cloud Solutions

In Latin America, overall levels of technology implementation are expected to be somewhat higher than the global and US averages. The surveyed technologies expected to be the most actively implemented across the LATAM region over the next 24 months are automation (73%) and cognitive (71%). Those same two technologies

are also expected to be the most actively implemented globally and in the United States. However, Chilean respondents break from the pattern, predicting the most implementation activity around business intelligence (72%) (see figure 29).

Technology implementation in Latin America is expected to outpace the global average

Survey findings In Latin America, the most actively implemented technologies over the next 24 months are expected to be

automation (73%) and cognitive (71%).

Automation and cognitive are also expected to be the most actively implemented technologies in the United States and globally.

Overall levels of technology implementation are higher in Latin America than in the United States and globally.

Country-specific findings Brazil—Automation is expected to be the most actively implemented technology (73%); cloud is the least

(44%, lowest among all countries).

Mexico—Implementation expectations for automation were highest in Mexico (76%, higher than in Chile and Brazil); technologies with the lowest expected implementation levels are business intelligence (65%) and cloud (65%).

Chile—Business intelligence has the highest expected implementation level (72%); cloud has the lowest (48%).

36


Digital leaders make a differenceLATAM companies with a designated digital leader have much higher levels of technology implementation—even higher on average than companies in the United States and globally. The impact of designating a digital leader varies across technologies, but on average the level of technology implementation in Latin America is 190% higher when a digital leader is designated. Globally, the impact of a digital leader is smaller but still highly positive (+155%) (see figure 30).

0

10

20

30

40

50

60

70

80

Global US LATAM Brazil


Cognitive technologies: AI and machine learning

Business intelligence (not including Cognitive or AI)

Cloud solutions

9%

21%

5% 5%

7% 0% 0% 0%10% 16

%

9% 8%12

%

14% 17

% 21%

16%

14%

18%

30%

18%

39%

29%

11%

40%

0

10

20

30

40

50

60

70

80

29%

31%

23%

23%

24%

20%

29%

30%

23%

21%

21%

15%

39%

54%

30%

29%

29% 35

%

53%

67%

53%

55%

47%

55%

222%

48%

190%

88%

77%

129%

Designated leader190%

157%

201%72%

1

33

Mexico Chile

332% 90%138%

A AB

A AB B

B BC

C

C B C

No designated leader

In Latin America, automation is the technology most affected by having a designated digital leader (+332%), followed by cloud (+201%). The effect is smaller but still very positive for cognitive (+138%) and business intelligence (+90%). Cloud has the highest implementation levels overall—regardless of whether or not a digital leader has been designated.

Figure 30. Impact of a designated digital leader on technology implementation

Survey findings Designating a digital leader has a highly positive impact on technology implementation in Latin America (+190%).

Globally, the average implementation impact of a digital leader is +155%.

For automation and cloud solutions, the impact of designating a digital leader is higher in Latin America than in the United States and globally.

Country-specific findings Brazil—A designated digital leader has the most impact on automation (+229%) and the least impact on cognitive (+64%).

Mexico—Designating a digital leader has the most impact on automation (+380%) and cloud (+327%), and the least impact on business intelligence (+61%).

Chile—A designated digital leader has the most impact on business intelligence (from 0% to 35%) and the least impact on cloud (+38%).

37


Cost management practices and approaches have grown increasingly sophisticated over time, with digital solutions—although still maturing—now representing the most advanced level of cost management. Companies that relied on more traditional cost management methods in the past are now finding that digital solutions can open the door to a whole new level of savings—as well as enable new and more innovative business models.

The rise of digital technologies and innovations is also contributing to a shift in how LATAM companies approach cost management, with the save-to-grow mindset from 2016 steadily evolving into a save-to-transform mindset where investments in digital enablement and transformational technologies play a more prominent role.

Save-to-transform as a catalyst for embracing digital disruption


11. Thriving in uncertainty, Deloitte’s first biennial cost survey: Cost improvement practices and trends in Latin America, May 2016. 12. Save-to-transform as a catalyst for embracing digital disruption. Deloitte’s second biennial global cost survey report, April 2019.

% o

f tot

al r

espo

nden

ts

Digital disruption’s evolution as an external risk Technology implementation as a strategic priority in 201912

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

58%

15%

61%

51%

6%

65%

70%73%72%

Digital disruption 201611 Digital disruption 201612 Past 24 months Next 24 months

Digital disruption is now recognized as a risk by 51% of LATAM companies, compared

to only 1% in 2016

11

Technology implementationis the strategic proirity for LATAM (70%)

over the next 24 months

GlobalLATAM

+5000%

+8%

Global USLATAM

1% BA

Figure 31. Digital-related business risks

Digital disruption is recognized as a significant external risk in LATAM, but is cited by a lower percentage of LATAM companies than globally and in the United States.

In 2016, digital disruption was widely recognized only in the United States.

In our previous survey, digital disruption was only cited as a significant risk by respondents in the United States. However, digital disruption is now recognized as a risk by 51% of LATAM respondents, up from just 1% in 2016, and is quickly approaching the level of recognition that currently exists in the United States (58%) and globally (61%) (see figure 31).

Meanwhile, technology implementation is rising as a strategic priority, with 70% of LATAM respondents citing it as a top priority over the next 24 months—up 8% since 2016, and now nearly on par with the global average of 73%.

Digital disruption and technology implementation are on the rise

Over the next 24 months, technology implementation is a top strategic priority both in LATAM (70%) and globally (73%).

In LATAM, the focus on technology implementation is expected to increase by 8% relative to the past 24 months.

39


Save-to-growIn the recent past, most LATAM companies were firmly grounded in save-to-grow mode where cost and growth are the main levers, with talent (including capabilities) as another key component. In this mode, cost reduction is a high priority, with the savings used to fund growth initiatives and strategic investments that support a differentiated business strategy (see figure 32).

Figure 32. The continuum of cost-management approaches13

13. Source: Deloitte Consulting LLP

TurnaroundSave-to-turnaround. Focus on immediate actions to reduce costs, maximize liquidity, achieve stability, and capture savings to avoid further deterioration of the business.

FundSave-to-fund. Focus on actions that help improve cost and competitive position; avoid cuts that might inhibit future growth rebalance costs to fund investment in business strategy enablers.

GrowSave-to-grow. Enable or develop a scalable cost/business platform to fuel growth and investment in core capabilities while supporting a differentiated business strategy.

TransformSave-to-transform. Invest in digital technologies and technology infrastructure to make operations more efficient and effective, enabling new and more agile business models to prosper in a digitally disrupted market.

Turnaround Fund Grow Transform

Cost levers

Liquidity Cost Growth Growth

Cost Growth Cost Cost

Talent Talent Talent Talent

Growth Liquidity Liquidity Liquidity

Prio

rity

+

-

40


Save-to-transformMany LATAM companies are now moving into save-to-transform mode, with the save-to-grow mindset expanding to include a strong focus on digital enablement and technologies that can transform the business and help it capitalize on the vast opportunities in an increasingly digital world. Shifting into save-to-transform mode means that in addition to cost, growth, talent, and liquidity, digital technology is also a high priority (see figure 33).

Figure 33. Save-to-grow expands into save-to-transform14

1. Save-to-turnaround 2. Save-to-fund 3. Save-to-grow 4. Save-to-transform

Scope Narrow Broad

Competitive situation

• Losing market share • Structural operating flaws • Liquidity concerns • Flat profit growth

• Adjusting to demand levels • Growth concerns • Healthy balance sheet • Excess cash flow/reserves • High growth potential

Playbook

Defense-oriented playbook

• Short-term tactics to improve balance sheet • Cash flows • Stabilize business through any cost and/or liquidity

improvements • Compensate sales decline

Growth-oriented playbook

• Achieving profitable and sustainable growth through structural cost efficiencies and improvements

• IT investments • Innovation • Actions to strengthen performance and competitive position

Cost levers priority

Save-to-turnaround Save-to-fund Save-to-transform levers

Growth Talent Cost Liquidity Growth Talent Liquidity Cost Growth

Technology

Talent CostLiquidity

New

Low Low HighHigh Low High

14 Source: Deloitte Consulting LLP

41


Save-to-transform can not only help a company capitalize on digital opportunities, it can also position the company to withstand potential adversity that may be on the horizon by using the power of digital solutions as the key to unlock new levels of cost savings.

Looking ahead

42


Authors

Omar Aguilar Principal Deloitte Consulting LLP Strategic Cost Transformation Global Market Offering Leader [email protected] USA +1 215 870 0464 International +1 267 226 8956

Contributors

David Izquierdo Sánchez Senior Consultant | Monitor Deloitte Deloitte Consulting, SLU [email protected]

Sakshi Kastiya Consultant | Strategy & Operations Deloitte Consulting India Private Limited [email protected]

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Contacts

Global

Omar Aguilar Principal Deloitte Consulting LLP +1 267 226 8956 [email protected]

LATAM

Heloisa Montes (Brazil) Partner Deloitte Consultores +55 11 5186 6910 [email protected]

Caroline Yokomizo (Brazil) Partner Core Business Operations Deloitte Consultores +55 11 99258 4030 [email protected]

Pablo Tipic (Chile) Partner Deloitte Advisory SPA +569 6844 4636 [email protected]

Daniel Ortega (Chile) Director Deloitte Advisory SPA +56 996 496 205 [email protected]

Eduardo Pacheco (Mexico) Partner Deloitte Consulting Mexico +52 55 5080 6321 [email protected]

Monica Guisa (Mexico) Senior Manager Deloitte Consulting Mexico +52 55 5080 7537 [email protected]

4444


As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms or their related entities (collectively, the “Deloitte Network”), is, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances, or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

Copyright © 2019 Deloitte Development LLC. All rights reserved.

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