As management accounting has become more connected to managerial processes, including strategy and risk management, the role of the management account- ant is viewed within the profession across the different countries where it exists as
a distinct occupational expertise: less as a support and more as a ‘ hands-on ’ line management activity. In many organisations, the IT function is likewise no longer viewed purely as a staff function providing technological support, but as a line activity providing business solutions and decisions. Consider the following illustra- tions of changes being put into place in some large enterprises.
The consolidation of back-office functions such as Finance and Human Resources into Global Business Services (GBS) at Procter and Gamble (P & G) brought about huge cost savings, and created a novel way of making such functions more profit- centred and decision-responsible rather than simply serving an information pro- vision role to decision makers. The important difference is that GBS involves IT being regarded not as a provider of technology but as a provider of possible busi- ness decisions and solutions. Consider CAD and CAT systems, which were widely invested in by firms wishing to use IT in producing and testing product prototypes.
The objective was to innovate faster and more cheaply than the traditional method of physically producing and testing real product prototypes. P & G’s Information and Decisions Solutions unit within GBS extended this idea through modelling and simu- lation. Instead of creating consumer products as physical mock-ups which are placed on supermarket shelves to attempt to engage consumer focus groups and retailers in new product developments, virtual reality technology use enables multiple new ben- efits including cost savings, time-to-market speed-up and customer input into both product creation and purchasing experience. Filippo Passerini, the President of GBS and Chief Technology Officer of P & G, explains that:
One technology centers on a room with all walls covered by high resolution screens that create a full, three-dimensional world. By using a pointer you sense that you’re moving through the aisles of a real store even though you are standing still. The renderings of products on shelves look more real than the real thing. Engagement with the customer is much more immediate and profound. More importantly, this technology allows us to quickly implement feedback on a product’s packaging and artwork. Instead of taking five to six weeks to redesign a physical mock-up, we do it in days. This allows us to iter- ate more times and still cut costs while bringing innovation to market much faster and better (quoted in Bloch and Lempres, 2008, p. 15).
Consider too the example of Dell. In 2006, Dell was losing market share to rivals like HP and its profits were down 28% from the previous year. Negative sentiment, according to a Dell-commissioned survey, was 48%. The main problem was that:
‘ On tech blogs and consumer forums, Dell had become almost a by-word for lousy customer service … the company simply became arrogant and set in its ways ’ (Fortt, 2008, p. 19). The company set up a learning team engaging with customers on Twitter, Facebook and other social media sites, and invited customer input via
the Dell site ‘ IdeaStorm ’ . Here individuals could offer suggestions and vote for the ideas of others. This ‘ wisdom of the crowd ’ approach led to Dell’s Latitude laptop line, with its customer-suggested light-up keyboard, faster connection, longer bat- tery life and wide colour choice. Within 2 years, the company’s profit margin rose from 16.6% to 19.1% and its negative customer sentiment had decreased to 23%.
The use of advancing internet technologies, combined with changing attitudes to the internet, have altered the traditional boundaries of organisations towards becoming more fluid by enabling customer input into what might in the past have been limited to the tight confines of the research and development department and focused market research. While the internet initially provided access to virtu- ally unlimited information, the transition is increasingly not simply the provision of information but the enablement of knowledge production and access. As Ford (2008, p. 45) notes: ‘ The most important thing to understand about Web 2.0 is that it refers to the web as a platform rather than a depository ’ . Ultimately, internet users can deploy it to allow them to create content. Content creation becomes the engine of organisational knowledge for enhanced performance in many contexts (this is discussed further in Chapter 4).
Cost management approaches have, in the past two decades, increased the links between producers and consumers in terms of making product specifications align better with customer requirements. To a degree this has affected the extent to which organisations share practices across borders, become more homogeneous and show signs of convergence (Busco et al ., 2007). Target cost management and functional analysis techniques have sought to enable enterprises to align the cost of resources to generate specific product dimensions with the perceived value of those dimensions to the customers. This has led to product re-design on the basis of the identification of variances between, on the one hand, resource consumption providing product benefits and, on the other, the value of these benefits as per- ceived by customers. In terms of pricing, organisational production processes have been re-designed and re-shaped , taking the price as the starting point, allowing for a required profit and structuring production to meet cost limits. Quality functional matrices have also enabled enterprises to prioritise product improvements based on customer perceptions of priority product dimensions. These and other management accounting practices have brought enhanced alignment between enterprise activi- ties and market needs, by creating explicit channels and structures for mediating information flows across organisational boundaries between producers, suppliers and customers.
In broad terms, the past decade has exposed organisations to a wide variety of changes ranging from increasing flexibility and fluidity to the growing impact of digitisation. Enterprises themselves have been the drivers of these changes, impact- ing the activities of firms with which they interface directly as well as indirectly with other firms . A consequence of this for management accountants in practice
and for management accounting professional bodies and commentators has been to lend support to and to instigate and promote a variety of changes.
The ongoing transformation of the management accounting field is inevitable and in many regards desirable. The consequences are many. Research and investi- gations will reveal the extent of the nature and impact of this transformation. It is likely that there will be new approaches and techniques which will surface. These will come from practitioners, educators, researchers and consultants. Prescriptions will be experimented with in practice and novel outcomes will emerge (Ahrens and Chapman, 2007; Chua, 2007; Cooper et al ., 1981; Otley, 2006; Scapens, 2006).
Judgments and analysis of the degree to which novel management accounting ‘ solu- tions ’ are worthwhile will be documented, which will prove to be of potential value to some practitioners.
But beyond this, the field of management accounting is likely to see more changes. In an increasingly globalising, integrated and technologically connected world, organisations will witness an accentuated and accelerated exchange of infor- mation, expertise and knowledge. The lessons will emerge faster and very possibly in a manner that is less cognisant of traditional functional demarcations between what comprises management accounting and what does not. Inevitably this will lead to alterations in what management accounting is deemed to entail. These changes are likely to be both affected by enterprise-specific factors and to be institutionally influenced.
A significant consequence will be the education of future management account- ants. The technical precepts studied in management accountancy programmes will alter. But in addition, the ability of management accountants to understand other areas and to integrate them with the work, tasks and objectives of the changing management accounting function will be key.
Flexibility , fluidity and the advent of digital technologies are core features of the changing nexus of organisational activities. Management accounting as a field will seek to explore the significance of such changes for its future growth.
Cost Co-creation and Globalisation