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Delivering strategic business value: business intelligence can help management accounting reclaim its relevance and rightful role.

By Williams, Steve
Publication: Strategic Finance
Date: Sunday, August 1 2004

The term "business intelligence" was spawned in the 1990s to convey the concept that businesses can harness the blizzard of transactional information generated by their IT systems to gain substantial insights into emerging profit opportunities. By integrating transactional data in appropriate

databases, companies can use a common set of business facts for analyzing revenue and cost drivers, launching profit improvement initiatives, measuring and managing business performance, and deploying decision support applications such as activity-based costing (ABC), supply chain analytics, customer analytics, scorecards, dashboards, optimization models, and simulations. Well-known companies in a wide range of industries have already realized some of the promise of business intelligence (BI), and the underlying methods and technologies for delivering business value are well established. For example, Avnet, Barclays, BellSouth, Ford, HP, Nationwide, and Sears have established BI programs that have been used to drive revenues, reduce costs, or both.

During roughly the same period when BI was emerging, management accountants were embarking on the mission to reclaim their relevance. With the publication of Relevance Lost--The Rise and Fall of Management Accounting in 1987, Thomas Johnson and Robert Kaplan initiated discussion of how and why management accounting had become irrelevant for planning, control, productivity management, pricing, and other fundamental management tasks. More importantly, they challenged management accountants--practitioners and academics--to reclaim the original focus of management accounting on resource management and to capitalize on modern information technology to deliver information that is more relevant and timely.

Since then, the challenge has begun to be answered. Kaplan, Robin Cooper, David Norton, Peter Drucker, Gary Cokins, and others have refined our thinking about the types of information managers need. Innovations such as ABC and scorecards have been adopted to good effect in a number of industries. The role of management accounting and management accountants is being expanded. Even so, many practitioners believe that the potential of business intelligence technology for delivering dramatically expanded management accounting information has just begun to be realized. BI offers affordable tools for delivering a wide variety of relevant management accounting information for planning, control, productivity management, pricing, and other fundamental management tasks. And BI can help management accounting reclaim its relevance and assume the key strategic role it needs to play if companies are to succeed in today's fast-paced global economy.

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