In a recent survey conducted by Deloitte, it was revealed that over 70% of companies are falling short of their margin improvement targets. This alarming trend highlights the challenges businesses face in navigating a landscape marked by inflation, talent shortages, and supply chain disruptions.
Key Takeaways
Margin Improvement Goals: More than 70% of executives report failing to meet their margin targets.
Top Barriers: Inflation, talent shortages, and supply chain constraints are the primary external challenges.
Focus on Growth: Nearly two-thirds prioritize sales growth over cost reduction.
Talent Shortages: 42% of companies struggle to attract and retain key talent, impacting operations.
Technology Investment: Organizations are shifting towards technology-based solutions to enhance efficiency and drive transformation.
The Current Business Landscape
Businesses today are grappling with unprecedented levels of disruption, including technological advancements, geopolitical tensions, and regulatory changes. These factors, combined with persistent inflation and rising interest rates, create a complex environment for Chief Financial Officers (CFOs) who must balance margin pressures with the need for investment in new technologies.
Deloitte's 2023 MarginPlus survey, which included over 300 senior business executives worldwide, sheds light on how organizations are attempting to navigate these challenges. The survey indicates that while companies recognize the need for transformation, many are struggling to achieve their margin improvement goals.
Challenges to Margin Improvement
The survey identified several key barriers that executives face in their efforts to improve margins:
Inflation: Rising costs continue to erode profit margins.
Talent Shortages: A significant number of companies report difficulties in attracting and retaining skilled workers.
Supply Chain Constraints: Ongoing disruptions in supply chains hinder operational efficiency.
Despite these challenges, executives acknowledge that they cannot simply cut costs to achieve profitable growth. Instead, they must implement significant operational changes.
Prioritizing Growth and Transformation
Interestingly, the survey found that nearly two-thirds of organizations prioritize sales growth over cost reduction. This shift in focus reflects a broader trend where companies are investing in new capabilities, such as:
Customer Experience: Enhancing interactions with customers to drive loyalty.
Digital Enablement: Leveraging technology to streamline operations.
Technology Implementation: Adopting advanced technologies to improve efficiency.
The Role of Technology in Margin Resilience
To combat the challenges posed by talent shortages and operational inefficiencies, companies are increasingly turning to technology. The survey revealed that:
90% of organizations are investing in permanent transformation capabilities.
Companies are exploring automation and cognitive solutions, such as artificial intelligence and machine learning, to reduce labor needs and enhance flexibility.
Key Success Factors for Margin Improvement
Deloitte's survey also highlighted several success factors for companies that have successfully achieved their margin improvement targets:
Solid Tracking and Reporting Processes: Establishing clear metrics to monitor progress.
Clear Business Case Development: Articulating the rationale for margin improvement initiatives.
Effective Change Management: Ensuring that employees understand and accept new initiatives.
Technology Investments: Enhancing data availability and decision-making processes.
Dedicated Leadership: Appointing leaders to drive efficiency and cost-improvement initiatives.
Conclusion
As companies continue to face ongoing disruptions and uncertainties, the need for margin improvement and technology-enabled transformation becomes increasingly urgent. Achieving sustainable growth and margin resilience requires a balanced approach that combines traditional margin improvement methods with innovative technology solutions. By focusing on these areas, organizations can better position themselves for success in a challenging business environment.