New King for the Information Age -- Dickeson
Now we have information that provides knowledge. Fictitious is vulnerable to a few accounts that are subsidizing a large number of deficient margin accounts. Is the enterprise dangerously out of marketing balance? What would you do, knowing this condition? You'd want more facts, more information, wouldn't you?
First question you'd ask might be, "Is the Job Cost Accounting System based on full-absorption cost rates?" That's a cockamamie model replete with assumptions and arbitrary allocations that invariably misleads analysis. The managers of Fictitious must realize the deceptive nature of the job cost system and just ignore it. Which sales reps are selling the high and low margin accounts? What products are producing the best margins? And on and on.
Why didn't that Digital Fancies printout provide all that marketing analysis as report information initially? The format of the report was a legacy from BC (before computers.) It originated long before we could sort, group, filter and compute the raw data into analytic structures. We all became so entranced by the "functionality" of computers and systems that we forgot the management information objective.
One of my friends is a software system designer for another industry. I asked him if he was designing systems that presented data listings rather than knowledge. "Yes," he responded. "The management of a company is willing to spend what it takes to get the data, but not willing to spend the additional amount needed to convert it to information—a form of knowledge that evokes corrective action."
Charles Wang, president of Computer Associates, believes that we are wasting a trillion dollars each year to provide computer information we don't or cannot use. My account summary example is a case in point. But it is just one small example.
Our primary hang-up has always been pricing. For pricing and managerial systems we had developed the Job Cost Accounting System in the 1920s. When computers came along in the '70s, we simply imported the job cost model into microprocessors.