Consider these two facts:
- More data has been created in the last 2 years than in the previous 200,000 years of human civilisation
- Less than 0.5% of all data created is ever analysed or used
The potential for data to be turned into value-adding information is almost too enormous to be contemplated. Analysts in the USA have shown that for a typical company listed on the Fortune 1000 index, a 10% increase in the utilisation of data would directly lead to a $65 million increase in revenues – yet most data is ignored and the benefits never materialise.
Management accountants of the future will be the modern day equivalents of the old gold-diggers and prospectors in the Wild West. Management accountants have always been decision makers or at least providers of information for the decision makers. Their role has always been to turn data (raw facts and figures) into information (meaningful patterns which enable decisions to be made) and that role won’t change in 2017 or the years beyond.
The difference for management accountants will be the quantity of data available – by 2020 there will be ten times the amount of data out there than there is right now and the challenge of sifting the valuable nuggets from within it all. To make it even more of a challenge by 2020 over 20% of all data will be in the ‘cloud’.
The buzzword for all this is ‘Big Data’. It is probably the single most important challenge facing management accountants in the history of the profession. Harnessing the patterns in the maelstrom of cloud-based Big Data and finding the relevant information within those patterns will be the major challenge for qualified AAT members who should do everything in their power to familiarise themselves with trends and developments in this area.
Big Data has four main features:
The speed with which new data is created is virtually beyond reason. In every single second of every single day Google records 40,000 searches. That’s 3.5 billion a day. All of them potentially indicating that someone somewhere wants to buy or obtain something of value from them. If organisations can make sense of that information flow then they can identify customer needs and begin to develop products and services to meet those needs. But speed is the key.
With that number of searches every second and 44 trillion gigabytes of data in total by 2020 to sift through, the sheer amount of data presents a monstrous challenge. Management accountants will need frameworks and structures to make sense of it all, to channel the data into formal information and patterns which can be interpreted and made sense of. These patterns, tools and frameworks need to form a ‘dashboard’ for decision-making.
How many different things do people search for on Google or Amazon? How many different ‘interests’ do people refer to in the 37 million Facebook messages which are sent every minute of every day? How could we organise variety such as this into channels, categories, streams or groups?
How reliable is the data in the first place? How honest are people on Facebook? Is anything on Twitter ever made up? What are the controls which prevent people from posting factually incorrect things on Wikipedia? Some analysts believe that over 35% of all information on the internet is fictitious which means that even when a nugget is found within the cloud it could turn out to be fools’ gold after all.
The challenge will be for AAT qualified members working in management accounting functions to ensure they are questioning their current role and moving beyond the traditional costing, budgeting and control functions to embrace the opportunities this new world will present.
Moving from management accounting to strategic management accounting will be a big part of this shift.
There will be less:
- focus on the past
- focus on the numbers
- focus on accounting standards and the rules of accounting practice.
And more focus on generating relevant information for future decision making, using a dashboard of various financial and non-financial feeds to collate a holistic set of information points to drive decisions.
Andy Booth is a trainer for AAT Mastercourses on Financial Performance, Management Reporting, and Budgeting topics.