Interchangeable Parts: Information Lego Blocks

In 1798 a significant shift occurred when the concept of “interchangeable parts” was perfected when Ely Whitney applied that idea to the manufacture of rifles.  Before interchangeable parts, all goods created around the globe where individually created by a skilled craftsmen.

An interchangeable part is a part or component that is created to a specific specification and is identical to other parts and will fit into an assembly that requires that part/component.  No customization was required to make the part/component fit into the assembly. This enables easy assembly, a reduction in the skills required to assemble, easier repair, which minimizes time and cost.

XBRL International's Open Information Model (OIM) and OMG's Standard Business Report Model (SBRM) going to be an enabler of “interchangeable parts” for business reporting in the Fourth Industrial Revolution, the Information Age.

While in the 1790s the concept of interchangeable parts enabled to creation of machining tools that could create the precision parts necessary to enable the feature of interchangeability; SBRM will enable to create tools, such as software tools, than enable this information component interchangeability.

Further, automation cannot be achieved without interchangeable parts. Automation is like the assembly line. Assembly lines and interchangeable parts are connected ideas; but they solve two different problems.  Interchangeable parts standardized what is being assembled, that is a design and production innovation which assures uniform specifications.  Assembly lines optimize how things are assembled, a process and workflow innovation.

Assembly lines amplify the value of interchangeability.  Once parts are uniform, tasks can be broken down into simpler, repeatable steps and processes become scalable.  Without the precise, uniform, standardized interchangeable parts; pieces have to be custom fit by more highly skilled craftsmen. With interchangeable parts, assembly and repair becomes much easier and less skill is needed.

Continuous flow (i.e. automation, semi-automation) is impossible without interchangeable parts.

To industrialize something means to turn it into a routinized, repeatable, scalable, reliable process that can be done the same way every time. That includes:

• Standardization: You define the steps clearly so the work is done the same way each time.
• Repeatability: Anyone (or any machine) can follow the steps and get the same result.
• Scale: You can do it not just once, but hundreds or thousands of times.
• Efficiency: You remove unnecessary variation, waste, or improvisation.
• Transfer from “craft” to “system”: Before industrialization: Work depends on individual skill, judgment, or memory. After industrialization: Work depends on a documented, controlled process.

A simple metaphor. If you cook a meal from memory, that’s craft. If you write a recipe that anyone can follow, that’s standardization. If you build a kitchen that can produce 500 identical meals a day, that’s industrialization.

Why this matters conceptually; Industrialization is essentially the move from:

• tacit knowledge understood by an individual to explicit procedure “baked” into a process
• individual variation into a controlled process
• one off performance by a person to routinized, systematized production

Excel-based accounting schedules, audit working papers, financial statements, and analysis models cannot really be industrialized effectively. Why?  Excel-based spreadsheets are extremely hard, if not impossible, to scale.

But interchangeable parts and assembly lines can be created using global open industry standard information blocks. Accounting is a deterministic system. Massive productivity improvements are possible for accounting and audit.

Today; accounting, reporting, audit, and analysis artifacts are a craft. Per Gartner, it is estimated that the average Fortune 1000 company uses 800 electronic spreadsheets to prepare the financial statement for regulatory reporting (page 2).  Sarbanes Oxley addresses the symptoms, not the conditions that cause this situation.

Now it is possible to better industrialize accounting, reporting, audit, and analysis.

SBRM can enable the creation and exchange of INFORMATION at both the semantic (meaning, logic) level and the syntax (physical format, technical specification) level.  XBRL is one global standard technical syntax that is broadly used.

Today; financial accounting, reporting, auditing, and analysis artifacts are created by costly highly skilled craftsmen.  In the near future, because of SBRM and the interchangeable information parts/components that it enables to be created will revolutionize financial accounting, reporting, auditing, and analysis.  This is but one example of what SBRM could do for general business reporting globally.

Think of it like this.  Think “Lego Blocks”.  Mark Cossey, in a LinkedIn post, provided the graphic shown below.  Data that is sorted, classified, structured, arranged, and represented to be consumable by both humans and machines results in actionable information.

The Lego Blocks will be modern spreadsheets, hooked together with logic rather than layout oriented artifacts like rows, columns, and cells. Modern approaches to building accounting and auditing workpapers will be used.

Additional Information:

• Theory of Information Blocks
• Core Pattern
• Lego Analogy