Tuesday, 16 January 2018

End-of-year reviews: Pass me my crystal ball


Image result for end of year review
End-of-year reviews used to make sense. They are a bit of a chore, but ultimately useful, and, if things have gone well during the year, can be very encouraging. They’re a great way to take stock, see where your organisation has under- or overspent, as well as consider your wins (hopefully many) and losses (hopefully few and attached to valuable lessons). And finally, an end-of-year review forms a useful template for plotting your way forward into the next year.
Not any more unfortunately.
The year that was 2017 gave us just a taste of the seismic shifts that are coming our way. And has taught us that the fundamental assumptions we used to be able to take for granted can vanish overnight.
For instance, Brexit. What is that deal going to look like, and how is it going to play out for our businesses? And will Trump provoke a thermonuclear war with North Korea? The very fact that the man is president of the US is enough to tell us to expect the unthinkable. For me, closer to home, we saw the swift and peaceful end to Robert Mugabe’s 37-year rule of Zimbabwe arrive almost out of the blue. One week he was in power, the next week, he wasn’t. But is this really a fundamental change or just a change of face, and what is the impact going to be on business if any? And South Africa is poised to find out what happens when Jacob Zuma’s leadership comes to an end during the current succession planning in the run up to the 2019 elections. 
Even without politics, the world we live in is an interesting place. Technological changes, which have been slow, tectonic plate shifts for the last few decades, have suddenly sped up. How soon will it be before we are working alongside robots? And, in a way we already are, thanks to software automation bots. And blockchain and cryptocurrencies have gained hold on people’s imagination and wallets faster than many could have expected — a major supermarket in South Africa trialled bitcoin payments this year. These are just some of the changes coming our way.
So what to do? Abandon the end-of-year review and wing it? Absolutely not. But realise while you will still need to plan, using the best information available to you at the time, you will also need to bake extreme flexibility into your outlook. Hold the course, but also be prepared to shift, dramatically, if needed. If you don’t, you could find yourself being a Kodak in a world of digital cameras.
Things to do:
  • Still do a budget review and forecast, obviously. You need to continue to function in the world, motivate staff, negotiate bank financing and so on.
  • Stay flexible. Prepare for the fundamentals to change at a moment’s notice. Nothing is cast in concrete. Do your best with what you have at the time, and keep a beady eye on what is happening in the world, and especially with your customers.
  • Do factor in the cost of doing nothing projects. These are the maintenance, upgrade and incremental innovation projects that don’t deliver an immediate ROI, but are essential for saving you money and ensuring your survival in the longer term. A cloud computing migration strategy is one example.
  • Do consult with the coal face of your organisation. While you are being overwhelmed by macro-level issues, they hold the key to essential information on the ground. What marketing activities are most effective with their customers? What are competitors doing in their specific market? Looping in the coal face also ensures a more accurate budget, with ownership by the non-financial managers who actually spend the money.
​​Things not to do:
  • Don’t panic!
  • Don’t not plan!
  • But don’t think you can plan for every possible variable — both known and unknown. It’s impossible. Embrace the fact that major change is the new normal.
Good luck! Flexibility is the watchword going forward, and the key to unlocking the opportunities that will undoubtably still exist in our new normal.

Monday, 18 December 2017

A Heavy Price Tag on Doing Nothing



The business world is a bewildering, fast-moving place right now. But don’t fall into the trap of bunkering down and doing nothing, because this will cost you in the long run, says Kevin Phillips

The largest enemy of change and leadership isn’t a “no”, it’s a “not yet”. “Not yet” is the safest, easiest way to forestall change.’ –  Seth Godin

On a recent trip I took to New Zealand, the Auckland airport was closed down and its operations curtailed when the pipeline delivering jet fuel was dug up by accident. It seems impossible that there was such a massive single point of failure for the airport, which is a pretty significant regional hub. One stakeholder said in a radio interview that the cost of laying an additional pipeline wasn’t able to be justified as it would only be used infrequently, if ever.

Surely that is the very definition of back-up?

So instead, hundreds of planes were grounded and delayed, fuel needed to be trucked in, inefficiently and at great expense, and only ten days later was the pipeline repaired and put back into action. This management philosophy, based on the assumption that nothing can go wrong, may have been acceptable a few decades ago, but is way, way out of place in today’s world of rapidly changing requirements and expectations.

Three horsemen of the inertia apocalypse

Warren Buffett once said at his annual investors’ meeting: ‘Inactivity strikes us as intelligent behaviour.’ And it’s hard to argue with this if it’s conscious, mindful inactivity and a result of a careful evaluation of the situation and a decision that the status quo is the least risky course and the best use of available resources. However, mindless, knee-jerk inactivity, resistance to innovation and improvement, and even a lack of maintenance and monitoring are a different kettle of fish altogether.

‘I’ll think about it.’ In my experience, this response to innovation, a new process or product seldom delivers a decision in a positive way that can drive a business forward. Whether it’s to avoid change, a fear of failure when undertaking something new, the perceived (or real) risk of upsetting the boss, laziness, or the dreaded ‘If it ain’t broke, don’t fix it’ thinking, the usual outcome is no decision at all!

Most start-ups or other companies setting out to change and improve the way things have always been done for their clients will empathise. Your competition in closing a sale is often not another company offering a similar product or service, instead, it’s the ‘not yet’ or ‘we’re thinking about it’ response.

Or, what I like to think of as the three horsemen of the inertia apocalypse: resistance to getting moving, moving faster, or changing direction. And this unholy trinity coagulates to form a dangerous situation where cost of doing nothing jobs are neglected for another day.

Cost of doing nothing jobs

Cost of doing nothing jobs? A strange choice of words perhaps, but I like to think of these as the jobs that cost money but are not directly revenue generating, at least initially. These are the maintenance, optimisation and improvement tasks that will divert time and resources away from elsewhere, but because they are preventive or future-proofing your organisation, it is hard to quantify the cost of not doing them as this is largely opportunistic. Until the situation becomes critical, that is, and they end up costing you big time.

These are also the projects that can shift the paradigm for your organisation, building a foundation for future innovation, growth and success. Hence the danger of not doing them. An example is moving your operations onto the cloud. Neglect to spend the time and money today, and you may find yourself behind tomorrow when your competitors are offering cloud-enabled services and innovations that you simply can’t.

Take my hometown, Cape Town. Like other cities and regions around the world, we are currently at the start of what looks to be a long-term drought situation. All of a sudden, the leaking taps that could have been fixed months and years ago are critical – but people were busy, or would have had to adjust their household budget, or just didn’t know where to find a good plumber. Months and years ago the cost of doing nothing would have been hard to estimate. Today, as water levels drop and water costs rise in the city, the cost of doing nothing is all too apparent.

Step it up a level, and you’ll see the cost of doing nothing has also resulted in the status quo being preserved. While summers get hotter and the winter rainfall season gets shorter, ‘management’ (in other words city officialdom) has continued to rely on large dams in specific catchment areas for our water.

Now, with shifting weather patterns and a growing population, they’ve realised, all too late, that there is a need to change the approach to water management. What worked last year, won’t work next year. The crisis management that is upon us now will come at a price which with more innovative forward planning or attending to some of those cost of doing nothing jobs in a more timely fashion could have been managed more effectively and at a fraction of the future cost. The old adage ‘a stitch in time saves nine’ springs to mind.

Innovate to survive

In the business world, cost of doing nothing jobs are often also the small steps needed to innovate. Innovation is too often painted as a wide-ranging, paradigm-shifting, big bang event. But it includes the incremental improvements to products, services and processes and asks the question, what is next?

It’s not surprising that an unhealthy attachment to the status quo, and resistance to change, is part of the fabric of most organisations. Companies are often still built to Industrial Revolution specifications. When assembly lines were the heart of an operation, things needed to be repeatable, predictable and risk-free. Similarly, the Waterfall Method worked for hardware design but should never have been transplanted lock, stock and barrel into a software world. Now that the Industrial Revolution era is heading to a close, this type of thinking is becoming increasingly egregious.

The culture of risk-aversion and a steady as she goes approach is exacerbated by tough economic times, cost cutting and management protecting their pensions instead of rocking the boat and challenging the status quo. And this means that cost of doing nothing jobs fall by the wayside until it’s too late as they are the easy targets when looking for costs to cut.

Start-ups don’t have this inability to change, nor an attachment to the way things have always been done. This gives them a window of opportunity to innovate and delight your customers that you simply don’t have.

And while the inertia of its members might be baked into the business model of every gym contract, organisational inertia has reached its sell-by date and may leave you grounded, like it did the planes passing through Auckland.


As published in Accountancy SA Magazine - November 2017 https://www.accountancysa.org.za/regulars-a-heavy-price-tag-on-doing-nothing/ 


Thursday, 7 December 2017

Give Inertia the Boot

Image result for inertia business

Have you noticed that problems are solved and decisions are made differently today, especially by millennials? What’s the first thing that they do – and you probably do too, even if you are definitely pre-millennial? They Google it, of course.

Back in my day, pre-Google, we’d probably think about what we’d done before in similar circumstances, perhaps consult whichever was the prevailing canonical guide on the topic – updated at least once a year – and maybe phone a friend. Or, if we were really entering new territory, we’d call in the management consultants, who’d probably do much the same thing, just at a heftier price tag.

The upside of doing business today is that we have research, case studies, discussions, opinions, thought leadership and news related to our decision at our finger tips. The downside, however, is exactly the same. We have so much information, so many takes on a matter, and so many rabbit holes to explore that reaching a decision can be more difficult and time consuming than ever before.
Welcome to analysis paralysis. But supercharged for the digital age.

Today we can’t afford to be hamstrung by inertia. A wait-and-see, ‘nobody ever got fired for choosing IBM’ approach is no longer tenable. We’ll be sidelined by start-ups who have no interest in preserving the status quo, as well as our nimbler traditional competitors, who took the opportunity to act. Meanwhile we’ll still be commissioning one last piece of research and running one more cost-benefit analysis.

Right now, we should all be considering the opportunity cost of doing nothing when figuring out what to do next. Which, I know, is a tough sell in a business world driven by short-term ROI objectives. In the past, cost of doing nothing projects typically related to maintenance type tasks. The equivalent of ensuring you service your car every year, even though it’s running perfectly well today, to avoid costly repairs in a few years’ time when a tiny niggle becomes a catastrophic breakdown. Or, to save every month on fuel, because you’ve kept your car running efficiently.

Today, in business, these projects are more significant. Such as deciding to spend time and money on the automation of manual, repetitive (and probably boring) work, to free up your time to be more strategic. And even reviewing systems that currently work but that could be improved would not be wasted energy to keep you and your business ahead of the curve.

This month and next, I discuss these cost of doing nothing projects elsewhere in this magazine. Happy reading and let me know what you think.

Three ways to zap inertia
  • Curtail your short-term ROI mindset. Next quarter’s figures are going to be irrelevant if your business isn’t around next year.
  • Quantify the cost of doing nothing as a matter of course. It won’t be perfect, but it will be on the agenda.
  • Decide! Choose a lighthouse project that gives you a toe in the water, then learn and improve.
As published Accountancy SA - 1st November 2017
http://www.accountancysa.org.za/viewpoint-give-inertia-the-boot/ 

Wednesday, 8 November 2017

Spreadsheets: a victim of their own success?



There is so much talk of digital disruption today, that it is easy to forget that one of the most significant disruptors of them all has been sitting quietly on our desktops for the past three decades. Yes, the humble spreadsheet software, most likely Microsoft Excel.

And even though my accounting days go back to the comptometer, I can barely remember a time when spreadsheets were literally that, sheets of paper spread across my desk!

And thank goodness too. I shudder to think what life would be like for accountants and companies without the multiple capabilities that spreadsheets give us. Especially in today’s data-centric world. From rapidly carrying out arithmetic involving multiple rows, columns and tabs of figures, to compiling information from various sources, to running scenarios using different figures, to analysing data thanks to pivot tables and macros, and even running small pieces of software. Spreadsheets really are our data workhorses.

So it’s not surprising that spreadsheets have escaped the finance department and are very often how finance and the rest of the company communicate with each other. It’s quite strange how everyone, whether in actual fact they do or not, is expected to have some level of Excel know-how. Designers don’t expect anyone else to be able to use Photoshop, for instance.

Yet any job title is expected to complete spreadsheet-based expense claim forms, or update a forecast with figures for next year, or apply a new budget, adjusted for a tough economy.

But sadly the spreadsheet has also become a victim of its own success. Several things typically happen when spreadsheets reach critical mass in terms of users, data or both. Spreadsheets get bigger and bigger, more and more complex, and increasingly prone to breaking, and certainly less likely to be trusted for accuracy. Only the initial author understands the logic of how it was set up, and if they leave the company, this insight goes with them.

Meanwhile as more non-financial people contribute to the spreadsheet, version control is abandoned, people do things that only make sense to them, including adding up their figures with a calculator and typing final amounts directly into the spreadsheet as plain text. (It happens!) Things happen manually, slowly and errors creep in: the domino effect of a single misplaced comma can be catastrophic, and like a needle in a haystack to track down.


Suddenly your spreadsheet is no longer saving you time or money, or giving you an accurate, up-to-date view on critical business information. But instead is a millstone that is weighing you down and putting you at risk.

A 2015 study gained unprecedented insight into the extent of this problem. Using more than 15,000 of Enron Corporation’s spreadsheets as the dataset, the study showed that:

      24% of the spreadsheets with at least one formula contained an error, and of these, six out of ten had dependent cells;
     76% of the spreadsheets used the same 15 functions -- barely scratching the surface of Excel’s capabilities.
     One in ten emails sent either included or referred to spreadsheets, and often errors in and updates to the spreadsheets were the discussion point.

Don’t you think it’s time we stop overburdening the hard-working spreadsheet? And stop demanding, or expecting, non-financial managers to get up to speed with financial thinking: after all, spreadsheets digitise existing finance functions, they don’t necessarily de-mystify them for the rest of the organisation.

The answer isn’t in closing ranks, however. I have long argued that the best way to get the right information as well as buy-in from the company, especially at budget and forecast time, is to decentralise this function to the coalface. And the only way this can happen, is by giving non-financial managers tools that are intuitive and easy to use, and don’t require them to understand what is going on under the hood. It is far more important that they are able to set, and manage their own budgets, with the room to be nimble and responsive to changing market conditions, than it is for them to navigate and understand cumbersome spreadsheets.

The good news is that this frees up the accounts department too. So instead of hunting needles in haystacks, or reverse engineering bizarre ways people have used Excel, we can turn our minds to more strategic, impactful activities.

Perhaps it’s time to give the overworked spreadsheet a helping hand?

As published Accountingweb 25th October 2017 https://www.accountingweb.co.uk/community/blogs/kevin-philips/spreadsheets-victims-of-their-own-success

Tuesday, 17 October 2017

Expense management: Honing the double-edged sword



Ironically, growth and success can be a double-edged sword for small and medium-sized businesses. On the one hand, you're growing and hitting the milestones, which is a massive achievement, especially in today’s tough economy. On the other, quite quickly things that used to be simple and straightforward acquire added levels of complexity. All of a sudden, as the business owner or FD, you simply can’t be as hands-on and omniscient as you used to be.


It’s pretty daunting giving up some of this control, especially when it comes to something such as expenditure. Expense management, especially in the SME world, is really about procurement and “signing off” on expenditure before the money is spent. As your company grows, this becomes impractical. You as the business owner or manager need to focus on new business and growth strategies, rather than being tied to paperwork.


The only way to proceed is to start empowering the rest of the organisation to take ownership of some of these tasks. And to do this, you need to put the tools and processes in place — such as reporting, which, while reactive, will allow you to spot issues in a timely manner. And most importantly, you need to ensure everyone understands and buys into the big picture, and is able to align their goals with this overall strategy.


For instance, you need to make clear the difference between cutting expenses and managing expenses and tie this to overall company strategy.


A mid-level manager tasked with controlling spending might be wildly successful at that specific metric, when taken in isolation. And this might be wildly unsuccessful for your company as a whole when you consider things holistically.


For instance, collectively your mobile phone bill might be right down, which is great. But it’s not that great that customers are disgruntled because they are not being contacted in a timely manner, and so have taken their business elsewhere. On balance, that mobile phone bill saving suddenly doesn't look so rosy anymore, not when compared to the business you have lost.  And your middle manager? Well, they did what you asked them to do, especially if you didn’t provide them with any context.


I’ll admit, this is a pretty simplistic example — although unfortunately still a common enough occurrence. How often, as a customer, have you been inconvenienced to the point of defection through an obvious cost-cutting exercise? But now consider this in the context of the digital disruption the world is going through. Where doing more of the same is no longer going to cut it, and very soon you’ll find you are running to stand still.


It’s a world where, in order to save money and make money in the future, you need to spend money today. Moving to the cloud is the perennial example: without an investment in cloud infrastructure and capabilities today, you won't be able to offer the services and functionality demanded by your customers tomorrow.


In this scenario, being over budget is not necessarily a negative, provided you can explain it in terms of a bigger picture. So expenditure management is not always about minimising costs. Today, more than ever, it is critical to communicate your company strategy, tie it closely to individual goals and targets, and then give your people the tools to enable them to achieve their, and your collective, goals.


As published Accountingweb - 20 September 2017
https://www.accountingweb.co.uk/community/blogs/kevin-philips/expense-management-honing-the-double-edged-sword

Tuesday, 26 September 2017

What is the new normal?


There’s no doubt that the last 12 months have got most people muttering, ‘Well, truth is stranger than fiction, after all.’ It’s easy to get caught up in the mass, global Chicken Little, ‘the sky is falling in’ reaction to events such as the Trump election and the Brexit referendum.

We’re used to keeping an eye on the world to spot the trends, shifts, and Netflix series coming our way. But this can sometimes blind us to our unique experience living and doing business in Africa. Operating in change and uncertainty is our status quo. And, without wanting to glamourise the very real challenges Africa faces, the unintended consequence is that we’ve become extraordinarily resilient and adaptable – comfortable with not only riding out tectonic disruptions but also turning them into opportunities.

Here in South Africa we’ve been through a few pretty bumpy few years, to put it mildly. From musical chairs in our finance minister’s office, which wiped out around R500 billion in value from the economy and saw the rand go into free fall at the end of 2015; a yo-yoing petrol price; a 6,6% official inflation rate (many would argue the true inflation rate is double that!); and last but not least, a highly uncertain political landscape. Not to mention that, like the rest of the world, we are facing a massive period of digital disruption as we enter the fourth industrial economy. Change is quite literally our constant.

Today we need to tap into our inherent entrepreneurial savvy more than ever before. At all levels.

For instance, typically when you plan you set parameters and make some fairly significant assumptions: ‘Robots won’t be replacing my people in the next five years’; ‘The UK will still be part of the European Union’; ‘Smartphones aren’t going to become the biggest supplier of my product.’

Today, these assumptions are pointless! You can’t plan for the amount of disruption that is coming your way. And if you try, you risk baking a panicky, knee-jerk reaction into your numbers. At best, this would be inappropriate and regrettable when the dust settles. At worst, this approach becomes a self-fulfilling prophecy.

Instead, ensure your planning and business strategy is responsive to change by looping in the view from the grass roots of your organisation. Head office might be running around like Chicken Little, but the people on the ground can often see the opportunities, and know where to hustle. That is why you employed them, after all.

Look for the opportunities. We are resilient and uniquely adapted to make things happen, so we should be relishing the potential presented by the turbulence in the world today!

Navigating the new normal
  • Realise you can’t begin to plan for the amount of disruption you are about to face.
  • Embrace the hustle like you’ve never done before.
  • Don’t codify a Chicken Little response – it may just come true.
  • Look for opportunities and don’t only focus on the threats.
  • Leverage our adaptability and resilience, the unintended consequence of ‘our normal’.
As published Accountancy SA - 1st September 2017
http://www.accountancysa.org.za/wordpress/viewpoint-what-is-the-new-normal/ 

Thursday, 7 September 2017

When your normal is change then change is opportunity


It's easy to get disruption fatigue when literally every article you read reminds you that digital disruption is here, and that if you are not doing something about it, you’ve already missed the bus

Well, I hate to say it, but you’ve not only missed the bus, but you’re missing the taxi-on-demand-service and are imminently going to miss the self-driving vehicle. Take Uber — the poster child for the disruption of traditional business, shaking up the centuries-old taxi industry. But, while Uber sorts out its internal culture issues, and figures out its relationship with its drivers, it is already getting a taste of its own medicine. Dubai is about to disrupt the disruptor with the announcement that it is launching driverless drone taxis this year.


So I think we can all agree that change is coming, it is coming fast and it is exponential. I could say: “like nothing we have seen before” but we have, consistently over the last generation. It is just getting faster!


However, operating in this amount of change and uncertainty is par for the course in Africa. And the consequence of our exposure to unrelenting and erratic change is a deep-seated entrepreneurial optimism, which I think is going to stand us in good stead. I’m writing this in the week that my country, South Africa, saw its president survive an eighth vote of no confidence in parliament. This is a reasonable reflection of the lack of confidence the country as a whole is suffering from, compounded by musical chairs in our finance minister’s office; a yo-yo-ing petrol price; and an official 6.6% inflation rate (which many would argue is far from realistic) and constant revelations of mismanagement, corruption and graft. Change is quite literally our constant.


We’ve become extraordinarily resilient and adaptable. Comfortable with not only riding out tectonic shifts, but also turning them into opportunities. With the uncertainty created by Brexit and Trump, the western world is learning the hard way how to challenge existing thought processes and adapt to an environment of continual change and uncertainty. It is not all bad and the pot of gold at the end of the rainbow is a more versatile and adaptable management team, with a good dose of entrepreneurial spirit thrown in.


If your normal is change, then you should be well-prepared for making the most of digital disruption by looking for the gaps and the opportunities it presents. Because there are going to be opportunities. Take the arrival of the car at the start of the last century. For sure, businesses died as fewer horses were used: the grain industry faced ruin; and stables, farriers, trainers and other support services that had built up around horse-drawn vehicles saw a massive decline.


But other businesses emerged. Cars needed to be built and these cars needed tyres, fuel stations, etc. Proper roads had to be designed and built, as did road signs, pedestrian crossings and other infrastructure we take for granted.


How is this playing out in our finance world? Consider the automation of accountancy functions. Robots are simply better at doing tasks that are repetitive and rule-based. They are faster and more accurate than we are, and don't get bored or distracted. They are taking over some of the more repetitive functions in our firms, and at our clients, as accountancy software becomes more accessible.


So, as accountants, do we go the same way as the farriers and grain suppliers? Or are we agile enough to adapt to this new normal and look for the opportunities? For instance, with the flood of repetitive work taken care of, can we hone our critical thinking and problem-solving skills on behalf of our clients? Can we use our time analysing and assessing the real-time data we now have at our finger tips to give strategic input to our clients and support their planning and decision-making process? Can we develop our inter-personal skills now that we can leave the back office and interact with the rest of the firm as well as our clients? And can we review a few holy cows, for instance, what impact will blockchain technology have for us and our clients?


We have the opportunity to lead, not follow, the digital disruption. But we need to learn to be adaptive and hone those skills that were not perhaps at the top of the list: interpersonal skills, analysis, and a healthy and open minded view of what the future holds for us and our clients. We can lead or we can follow, but in tomorrow’s world there is little value to be added by being a follower.


As published Economia 17th August 2017
http://economia.icaew.com/en/tech-hub/when-your-normal-is-change-then-change-is-opportunity