A solution for delivering truly strategic management accounting ?

Part 2 about Strategic Management Accounting, linked to longer articles.

These two posts summarise longer papers on “Strategic Management Accounting and Dynamic Business Models

Get the part-1 paper here. (Problems? .. copy http://sdl.re/SMApaper1 to your browser)

Get the part-2 paper here. (Problems? .. copy http://sdl.re/SMApaper2 to your browser)

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The Part 1 paper explains:

  • – the full range of support that leaders need for their strategic management tasks,
  • – the demanding requirements this places on accountants for the SMA analysis they offer, notably the wide range of non-financial factors and topics, and the fast time-clock on which they manage strategic issues (weeks, not quarters)
  • – an example of a digital-twin, dynamic business model for a simple business that can fulfil those needs

“Digital-twin” dynamic business models can meet ALL of these needs.

In case you don’t know about just what digital-twin dynamic business models can do, here’s a few success cases. (Share this with your accountant friends – GIFs may take a second to load.) 

  •  All these are cases that truly “strategic” management accounting should be helping with, 

  • … but all need accountants to have mastery over the non-financial business system:

GIFs showing a range of success cases for dynamic business models. 
- turning round a failing investment company
- fighting off a competitive threat in pharmaceuticals
- cutting staff turnover in aerospace
- rebuilding sales in bulk chemicals
- growing an equipment dealership business in a falling market

… and in case you don’t know what such a model looks like, here’s an animation of a dynamic business model actually working (It’s for a big initiative for a consumer-tech firm to launch a new product, and shows about 20% of the full model).

GIF of a working dynamic business model for a consumer-tech product launch over 60 months [shows about 20% of the full model]. 2 scenarios [a] limited marketing spend and normal price -v- higher marketing spend and lower price

How do we get there?

Part 2 goes on to show:

  • – why standard strategy methods and frameworks cannot achieve what SMA needs
  • – how the rigorous theory behind dynamic business models offers a reliable, practical process for building them – easily within reach of accounting professionals
  • – why those models are so powerful for meeting leaders’ strategic management needs

… and also gives free access to the working model, and free access to the short course on how to build  that model.

Here is that 4-step process, matching exactly the underlying theory of how business systems work. The paper explains exactly what we mean by “resource-stocks”, how we quantify them (and all other items!), and how we formulate the relationships in the model:

shows the 4-step process for building a dynamic business model
1.Time-chart the desired outcomes (including their history)
2. Find, specify, quantify the resource-stocks, decisions, and external factors driving those outcomes
3. Quantify the rate of gains and losses causing those resource-stocks to grow or decline
4. Find, specify, quantify the resource-stocks, decisions, and external factors causing those gains and losses
... and repeat steps 3 and 4 for any new resource-stocks found

I think this cracks the challenge of how to provide truly strategic management accounting.

I think, too, that it is a solution that any accounting professional would be able to adopt – it is not technically complicated and is easier, faster and more transparent than anything possible with spreadsheets.

The solution should enable accountants to push back behind the financials, right into the guts of the business system that generates those results. And they can do that with principles they already know well, but applied to business factors in their own terms (customers, staff, service quality …).

simple image of a 'cloud' of the previously unknown working business system, with arrow pointing to the financial results that management accountants otherwise focus on.

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