When corporate budgets for 2019 were being set in the final quarter of last year, the forecasts were still quite optimistic. Since then the economic prospects have darkened considerably and half of all finance directors polled for the latest Operations Efficiency Radar by Roland Berger expect the economy to cool off this year. Companies would therefore be well advised to adjust their budgets and their priorities to the new economic circumstances fast. Each industry will necessarily have a different focus.
Whereas the 2018 edition of the Operations Efficiency Radar still had half of all respondents assuming that the boom times would continue, sentiment in the market has since turned. CFOs in the automotive industry are the most pessimistic: a full 93 percent of them anticipate a downturn, while in the engineering sector – the beating heart of the German economy – 56 percent of companies polled hold this view.
Three-quarters of finance directors consider Product Portfolio to be the most important lever when it comes to preparing their company for leaner times ahead. Product Portfolio beat Production to top spot in this year's survey. Also rising up the rankings this year are Controlling & Finance and Sales & Marketing, with 59 and 58 percent of companies, respectively, planning to prioritize these areas in 2019.
"Many companies have not yet adjusted their 2019 budgets for the downturn. Now is the time to question priorities and set the course for the future."
Different functions are applying different levers. In terms of Product Portfolio, for example, CFOs are looking for cross-functional product/service cost reduction, as well as more customer-focused optimization of product/service features. Activities in Controlling & Finance focus mainly on optimization/efficiency improvement of back-office services, especially through digitalization. Working Capital Management is also gaining in importance once again, interpreted by the study authors as another sign of clouds on the horizon.
Priorities, too, differ between industry sectors. The main focus in the automotive industry is on efficiency improvements in Production and on Working Capital Management. Engineering firms, on the other hand, prioritize Product Portfolio, Production and Procurement. Managers from the consumer goods industry place Product Portfolio as well as Supply Chain and Logistics at the top of their agenda.
For this edition of the Operations Efficiency Radar, participants were asked whether they viewed the digital transformation as more of an opportunity or a threat for their function. Their responses vary here, too. Half of all respondents see a single-minded focus on automation as a threat to corporate functions. The most optimistic were respondents working in Controlling & Finance functions: while 70 percent of them anticipate that functions will need to reposition themselves in terms of the value they add to the company, 80 percent do view digitalization as an opportunity.
The Operations Efficiency Radar 2019 marks the 10th successive annual publication of this study by Roland Berger and the International Association of Controllers (ICV). The results provide CFOs with an additional perspective to use for challenging priorities, setting budgets and adjusting investment plans. More than 300 companies from key industry sectors took part in the latest edition of the Operations Efficiency Radar.
What are the most important success factors for CFOs and controlling managers this year? Where do they start to make their budgets crisis-proof and realize further efficiency gains? Answers from more than 300 companies from the most important German industrial sectors provide current insights.
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