Fifty years ago, Peter A. Pyhrr created the zero-based budgeting (ZBB) method, in which a company’s budgets are determined with an understanding of future needs, instead of being carried over from the previous budgeting period.

The premise is good, but sometimes budgeting on a blank canvas isn’t enough. Especially when the macroeconomic environment is uncertain, and gains from digital and operational excellence initiatives have not yet shown up on the bottom line.

Roland Berger’s Accelerated Zero Based Budgeting (AZBB) approach helps companies speed up ZBB and create financial leeway to adapt their operations and business models for changing economic circumstances. As knowledge and innovation cycles accelerate, companies need this more and more.

How does AZBB work?

AZBB is designed as a tailored cost management solution for companies that need to quickly identify and realize concrete savings potential, in addition to lean and efficient processes.

Differences between AZBB and ZBB

Compared to ZBB, AZBB shifts cost responsibility to line managers, those people who know what can be reduced based on their experiences on the front lines of the business, for instance in sales/distribution. It is not a method that originated from within production and then has to be adapted to other areas of the company.

AZBB also differs from ZBB because it takes a broad organizational consensus to implement. All employees who hold operational responsibility for cost efficiency need to be on board.

The potential of AZBB

Roland Berger project analyses show that AZBB can help save an average of 15 to 25 percent of addressed costs.

Typically, it takes three months in an AZBB project to enable companies to adapt their cost structures comprehensively by analyzing if they are doing the right things (renunciation levers), if they are doing things right (productivity levers), and if they are using the right resources (resource levers).

Given the challenges of digitalization, faster business cycles and economic uncertainty, AZBB is an important method for addressing cost structures -- so that resources can be quickly funneled into promising growth initiatives.