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

Wednesday, 30 August 2017

Holy cow, the robots are coming!


Back in the day, when I set out on some of my first auditing jobs, I was accompanied by a formidable team of comptometrists. Their fingers were a blur as they entered lines of numbers into their comptometers — for the younger generation who have likely never seen one, this was a huge, key-driven calculator — and added up the trial balances. In those days, the human was the final word in accuracy.

But by the 1990s comptometrists were a thing of the past. We had started trusting computers enough to run the numbers, and what needed double-checking were the systems that governed the computers, not the calculations themselves. And the comptometrists? Well, their role was made obsolete, not in a generation but virtually overnight. They needed to find a new space to apply their existing skills, or, retrain and stay relevant in a changed world. 

Thinking about succession planning today, this story keeps playing through my mind. Except today the changes we are experiencing are far more profound and fundamental, not to mention coming at us at an almost exponential rate. Take automation. Repetitive tasks don’t bore robots, they are faster and more accurate, they don't make mistakes and they don't take breaks; put simply they are just better than we are… at the routine tasks. It also means our clients, including small and medium-sized companies, through the use of technology, have the ability to do a lot more self-service accountancy work. 

In the same way the internal combustion engine drove (pun intended) the horse and cart off the road, robots, in this case software robots, are going to replace humans in your organisation sooner rather than later — on the factory floor as well as in the office. According to a PwC report, 30% of jobs in the UK are at risk of being replaced by robots and artificial intelligence in the next 15 years.

What does this mean for how we think about succession in our organisations? In the past, this meant ensuring the leadership had understudies waiting in the wings for their time to take the reins.  

But today — and I do mean today — succession planning needs to consider what happens to our people when part of their function is taken over by robots. We need to be putting a plan in place for our existing employees, and also hiring people that have the skills to adapt: not only to working with robots, but also to thriving at the functions that robots can’t do. Recruitment policies need to focus on ensuring organisations attract and retain the correct people, not necessarily for the skills they have today but for the ability and potential they have to adapt to the skills they will need tomorrow. 

Take strategic client relations. In an ideal world, with the repetitive work items picked up by robots, accountants will have more time to analyse the data, problem solve creatively and engage with your clients to help them grow their businesses. Suddenly an ability to establish trusted inter-personal relationships becomes essential. So that hard-as-nails accountant, the “human calculator”, who previously did incredible work in from the back office, but never ventured out to client meetings, may well become a square peg in a round hole. 

This is succession planning today. It’s about considering the functions that software will do for you, and then figuring out how to redeploy staff whose functions have fundamentally changed and they no longer fit. And hiring for the skills and talent-sets that you will need humans for.  

It’s in appreciating that some of our holy cows, the things we are the “experts” at, the production of accounts or even, potentially, the double-entry bookkeeping system, might be slain, and choosing to act like Darwin’s finches, adapting to new circumstances and thriving, rather than putting our head in the sand and hoping.

As published in Accountingweb – 22 August 2017



Tuesday, 1 August 2017

Digital Darwinism: it’s still adapt or die


Charles Darwin was right about survival depending on our ability to adapt. And never has this been more true than in the face of the digital revolution we are living through in the twenty-first century. While Darwin might have been speaking about adapting from generation to generation, today it feels like you need to adapt from month to month and day to day.  

Look at the taxi industry and Uber. Retail and Amazon. Publishing and Facebook. Hotels and Airbnb. 

Frighteningly, even these examples are dating. Amazon has already gone full circle and is expanding its bricks and mortar presence, armed with everything it has learnt about consumer behaviour in the digital world. Uber and its drivers are still figuring out their working relationship, but Dubai has announced it is launching driverless drone taxis this year. 

So where does that leave us, the accountants? We’re typically the conservative bastions of caution and risk-aversion in any company. Wielding the double-entry bookkeeping system for the last several centuries, we have, for the most part, kept businesses honest and solvent. But now even the double-entry system is being questioned in the world of blockchain and other decentralised, shared digital ledger systems.

The same thing applies to us, I’m afraid. Adapt or die. But bear in mind that adapting doesn't mean throwing out the baby with the bathwater. Adapting means understanding what needs to change in order to continue delivering value to your clients and your organisation. Look at Darwin’s finches on the Galapagos Islands, which, within one generation evolved larger and stronger beaks to find food during a prolonged drought. The birds adapted fast to their current reality, by optimising a function rather than replacing it all together. 

Likewise accountants need to look down the line and start shifting their position today — we are already seeing the impact of some of the changes brought about by digitalisation. Just like with the introduction of the internal combustion engine at the start of the previous century, there will be winners and losers. The “horseless cart” put an ecosystem built up around horse-drawn vehicles out of business, but enabled the growth of entirely new industries to support the automobile.  

The same is happening today. 

My advice? Step away from the spreadsheets, literally and figuratively. Step out of the shadows and reconnect with your colleagues at the coal face — they are the ones who know where the changes are coming from, can see the impact of these changes, especially the opportunities.  Open up the accounting process and empower your colleagues to collaborate with you. By doing so you’ll ensure that they have access to the numbers that impact their view of reality and in turn provide real input and value to your analysis of the numbers. This gives you an accurate picture, and creates buy-in and mutual benefit whether in the planning process or understanding the variances, when looking at actuals. You’ll stay connected and relevant, and by decentralising some of the accounting functions, you’ll free up your own time to be more strategic and adaptable. 

With the world changing so fast, the old rules no longer work but the new rules haven’t yet been developed!  This makes finance’s custodial role more difficult but even more important than ever before. Stay adaptable and you’ll be able to guide your clients and organisation ethically and prosperously through these opaque days; don’t and you will be one of Darwin’s casualties.

As published in Accountingweb – 27th July 2017