“If I have seen further, it is by standing on the shoulders of giants.” Isaac Newton
It’s rare to find someone who possesses the right blend of skill, experience, education, talent, demeanor, and grit; not only to become deeply curious about a problem, but to also pursue that problem with sustained effort and ultimately succeed in solving that problem.
The Wright brothers did not just get up one day and then decide to fly. It took Orville and Wilbur Wright four years of experimentation and testing to successfully achieve controllable sustained flight. Their breakthrough was the invention of the notion of "wing warping" and putting that together with a three-axis control mechanism which allowed an aircraft pilot to achieve full aerodynamic control over aircraft roll, yaw, and pitch to effectively steer the aircraft and maintain equilibrium.
That basic breakthrough enabled aviation to take off. And that breakthrough, discovered by the Wright brothers and their Wright Flyer, is fundamental to even the most advanced aircraft such as the SR 71 Blackbird.
Grit is the passion, perseverance, and stamina for setting and then achieving very long-term goals. That sort of person understands that failure is not a permanent condition. They are willing to fail. They are willing to take the best ideas, experiment, test them, measure whether they have been successful, and repeat that process over and over until they succeed.
And that is how I have approached XBRL-based digital financial reporting from the very beginning. I did not go down the well-warn cow path taken by the crowd. I intentionally, deliberately, rigorously tried to get XBRL to work the way accountants needed it to work. Why? Because I could. For some reason, I seemed to have the right set of skills, experience, education, talent, demeanor, and grit.
Advancing the profession, the universal technology of accountability, forward is part of the duty of a certified public accountant. It is part of the code of ethics of a certified public accountant to move their profession forward, to advance their profession, to improve their profession.
My personal superpower is accounting information systems and sensemaking.
Sensemaking is the process of determining the deeper meaning or significance or essence of the collective experience for those within an area of knowledge. Sensemaking is a tool. You can use sensemaking to construct a map you can then share with others. Sensemaking is the art of analyzing, understanding, clarifying, untangling, organizing, categorizing, and synthesizing. The process of sensemaking involves:
- Looking for patterns
- Making connections
- Synthesizing and categorizing
- Think about the big picture
- Think about the "why" of a situation
- Organizing and untangling things
- Generating theories about how things work
Accountancy is an area of knowledge, a community of practice, a domain of understanding, an area of interest. To be clear, my definition of "accountancy" includes accounting, reporting, audit, and analysis; it includes compliance reporting, management/cost reporting, tax reporting, and special or OCBOA (Other Comprehensive Basis of Accounting).
The opportunity is this. Using the
IPO Model and
The Kuhn Cycle to explain; normal practice in accountancy today is to work with information
in the form of documents using this pattern: (i.e. document centric)
Those input documents are structured; but the problem with the structure is that the structure relates to the presentation of the information to humans such that humans can read the information. So structure includes the "workbooks", "sheets", "columns", "rows" and "cells" of a spreadsheet or the "paragraphs", "tables", "columns", "rows" of a word processing document or PDF. A byproduct of that document oriented approach is that there are many different words used to describe exactly the same thing in the document. Remember,
computers are dumb beasts. Also,
Excel is NOT a knowledge graph.
And so input documents like "sales invoices" or "sales orders" or "purchase invoices" or "purchase orders" or all those other documents that drive business events and end up as financial transactions (i.e.
this sort of stuff) that serve as input documents which are then turned into output documents like "reports" and "trial balances" and "financial statements" and "financial analysis models" are, well, documents that are readable only by humans.
Now, people try and overcome this by using things like OCR and
RPA and AI to try and over come this problem of information structured for presentation to humans such that they can read the information. But that only works so well. Those attempts address the symptoms of a problem; they do not address the conditions that cause the problem.
This bucket brigade approach works, but it is expensive, a
kludge, and the processes are being stressed by the sheer volume, complexity, and pace of information. Many accountants are little more than "data janitors" as they try and perform their "
transaction chasing". The result?
Audit is broken. Fewer people are entering the accounting profession. Information systems are
hairballs. The typical organization is not ready for artificial intelligence because their information is pretty much a mess, they are overwhelmed with
semantic fragmentation.
Is there a better approach?
Yes. The better approach is a
model-driven approach to information. You don't have to imagine this idea, the blueprint when through this process in the 1980s via computer aided design and computer aided manufacturing (CAD/CAM). CAD/CAM has further evolved into that is called BIM.
You can read all about this here.
Using a model-driven approach, and more precisely a global open standards based semantic oriented model-driven approach, the IPO Model looks like this:
An information block is effectively a
semantic spreadsheet; a global open standards based semantic spreadsheet. (See XBRL International
Open Information Model and OMG's
Standard Business Report Model and my
Seattle Method which is based on the OIM and is the basis for the SBRM). Because that information block is a global open standard, you can
process information blocks using a reliable machine. Efficiency can increase, friction is reduced, and accountants can do the higher value added work the machine cannot handle effectively.
If you try and understand this using your old mental map; this might make no sense at all. Why? Because this is an entirely new paradigm. As a result, you need a new mental map to understand this new territory.
Digital works differently. Here are the
details of the vision. But this is more than a vision; it works today to a degree, but no one has put all the pieces together properly yet.
Quality control is not about eliminating mistakes, it is about building quality into every aspect of your work processes. A model-driven approach enables building quality into processes significantly better than document-oriented approaches.
What all this is fundamentally about, this
model-driven approach, is the reduction of unnecessary friction from the system and making things better, faster, and cheaper. Today, some task or process currently performed by humans that, if measured, would achieve a
sigma level of 3 which is a defect rate of 6.7% (about 67,000 defects per million opportunities) could be improved and could achieve a
sigma level of 6 which is a defect rate of 0.00034% (about 4 defects per million opportunities). You are hearing me right, defects go from a whopping 67,000 down to 4. That value proposition alone is a compelling argument for this idea of model-driven.
But this is only the beginning. If your information minimizes semantic fragmentation, is available to what amounts to a "mindful machine" which can effectively communicate with your entire information set; massively valuable new approaches are possible.
Completely new business models are possible.
This is not something you throw over the wall to your IT department. This is not about technology, it is about talent.
Stakeholders of a community, such as accountancy, working within a system need to be in agreement as to an undisputed core knowledge of an area of knowledge. That essence is what goes into a
conceptualization and ultimately a conceptual model. Subject matter experts do this very important work.
Subject matter experts (SMEs) have a lot to gain, or lose, when it comes to these important social artifacts which will certainly be part of the architecture of our new digital world.
Sure, model-driven digital reporting you see today looks a lot more like a Wright Flyer than an SR 71 Blackbird. But the
breakthrough has occurred. A new world of possibilities is before us accountants.
How are you approaching this opportunity? Me, I am going for the SR 71 Blackbird.
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