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Dickeson--Making Relevant Data Decisions

October 1998
Something has has been troubling some accountants and printing software suppliers whom I speak to from time to time: They note that printers often produce reports—information—from their computers at dazzling speeds, but then they don't use the data to make decisions and take action.

"Why do companies pay big bucks for these data systems and then seem to ignore results that mandate remedial action?" is a question many ask. "We're giving them what they asked for, aren't we? So why don't they use it?"

Yes, these systems are providing financial reports, balance sheets, income statements and cash flow analysis—all based on a system developed by the merchants of Florence and Genoa shortly before Columbus sailed for America. It provides for double entries into journals translated into general ledger books.

Debits are assets and credits are for ownership of the assets. It's worked for more than 500 years. Don't people understand this?

And now we even give 'em the Florentine reports at high speed from computers, don't we? Well…maybe not so high speed. Say two to three weeks after the close of the month or quarter.

Corrective Action
Is that really any faster than we did it when Bob Cratchit, in Dickens' time, was standing at a high table with quill and sandbox? Are the figures any more accurate? The numbers on the reports are lined up in a column alongside the budgets with variances of actual from planned, aren't they? We can see where we've gone astray.

So why don't we take action to correct?

When World War I ended, Alfred Sloan realized that the system that worked for tracing assets and ownership didn't help make decisions for mass-produced automobiles. "Cost accounting" was developed by Will Durant and others. It wasn't a double-entry system. There was no general ledger or trial balance to provide validation for the numbers, but it satisfied the need for some idea of how much an automobile cost.

Well, friends, that cost accounting idea has worked for printing and other businesses for 70 years now hasn't it? But now we use our high-speed adding machines, called microprocessors, to produce and track our "costs" at high speed, don't we? Well, maybe speed really isn't a factor since we only jigger those "standard costs" and "production standards" once a year...if we get around to it.

Trouble is that those microprocessors that we believed were improving our decisions, but didn't, were beginning to have a profound impact on our printing process. Computers are for the estimating system, aren't they?

At first, computers took over typesetting starting in the '70s. Then one after another, color separating, page composition, platemaking, programmable logic control of our machines, computerized mail labels, and on and on. Our basis for daily decisions was obsolesced by the very black boxes we thought were just fancy adding machines.

General ledger bookkeeping and cost accounting are no longer the real world where problems are solved and decisions made. We're coming to realize that a printing business doesn't succeed by controlling internal costs. It must focus on the external world by adding value that fulfills market needs.

Cutting costs may save a faltering company for a time by making it more efficient. But efficiencies of reduced internal costs don't supply external customer value. Adding value to blank paper makes the printer effective. All the ledgers and sophisticated cost systems a computer can produce are but internal yardsticks that have not a thing to do with the outside world where the customers live.

History tells us the first Information Revolution was the development of written alphabet characters and the second was the use of the characters written down in books. Let's take a lesson from the third Information Revolution where 10,000 monks illuminating manuscripts lost their jobs because of Gutenberg's press and movable type.

You could downsize the number of monks, increase monk efficiency training, have monk teams for motivation in your monastery business, but the monk transcription business was obsolete. The process did not add the value demanded by the market.

Back to our original question: Why won't managers take action based on our computerized accounting reports? It may be because even though they may be very accurate, and a tad faster, they're not relevant to adding external values for consumers. They no longer play in prime time.

Beating a Dead Horse
There's an old saying: "When your horse dies, the first thing to do is dismount."

It's time to dismount the ledger and cost system horses for problem solving and decision making. They're dead. That's why they're unused. Now the question: What do we use to guide us?

We must think about how computers can reach out onto the Internet and bring us external world data that helps us make relevant data decisions. What is the meaning of "information" we need for economic guidance?

Think about William L. Davis, CEO of R.R. Donnelley & Sons, who noted in a recent speech that printing is a "decade behind in manufacturing best practices."

Reflect on this nugget: In printing we add value for customers by converting raw sheets of paper to information pieces. Yet, to this day, we buy paper from our suppliers by the pound (basis weight of a 500 sheet ream) and sell it after conversion by the copy. Do we even yet realize who we are or what the value we add is?

WHOA! Stop the world. We want to get on.

—Roger V. Dickeson

About the Author
Roger Dickeson is a printing productivity consultant based in The Woodlands, TX. He can be reached via fax at (281) 419-8213 or e-mail at roger@prem-associates.com.
 

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