thingamy

transactions, accounting, bah humbug

In these tax return days, please raise your hands all who love accounting. Anybody?

Accounting - double-entry bookkeeping - transactions. Basically unchanged since 1494.

Did they have computers in 1494?

So why do we keep doing it the same way the Venetians did it?

The double-entry bookkeeping has one requirement: Register transactions.

When your product changes owner it's deemed to be a transaction. No, hang on, not always, you have differing rules there, from country to country, from year to year. So what you register as a transaction one year may not be a transaction the next. A moving target indeed.

In practice we try our best to reflect the transaction by a an invoice, a contract, a bill of transport or a receipt of delivery. Then that travels to the accounting department who's main purpose is to make educated guesses as to what bill, receipt or invoice best reflects what the tax authorities rules as that particular transaction in section 93, part 3, clause 34.

Next year clause 34 is amended and comparing last year's results with this year is like comparing apples and bananas.

In reality most of "how we do things" in business is a direct result of the 514 year old accounting method. It created the invoice, the bill-of-whatever, the report - no other need for such massive resource wasting documents and reporting requirements.

Then you have Enterprise Software, the stuff that has made the world's best and brightest production and retail companies amazingly efficient. Guess what principles these are built on. Yep, transactions. 514 year old methods nicely translated into efficient code. Not to mention the invoices, bills-ofs, documents and forms, yech.

Is that fair to the code? Is that really smart at all?

The thing is - I do not disagree with the concept, I merely disagree with how it's done, i.e. accounting as in methodology:

Today: You make up your mind as to what report or activity that best matches the current and local rules, then register that as a "transaction". Then you make best use of that piece of manipulated data, raw data with somebody's logic stuck to it. Any changes at a later date requires unsticking the transaction, reapply a different logic (rule) and stick it back into the system.

As a result you end up comparing apples with bananas, reconciliation bloating your OH and days, weeks or even months gaps between reality and reporting of that reality. (Nice way to architect a management control system eh? Drive a car by proxy.)

Tomorrow: Register what really happens when it happens, not the transaction but what really, really happens: Widget is created, widget is painted red, widget changes owner, widget leaves our warehouse. These activities are direct results of tasks, again results of work orders and all such can be captured. If your Enterprise Software is meant for that first and foremost (and not to exist in order to register transactions), well then you have the raw data onto which you can apply some logic in the form of templates at the back end: One for UK GAAP, one for German GAAP, one for last year's rules, one for this year's rules.

As a result you have only apples or only bananas, no reconciliation and real reports in real time. Drive with direct steering.

First step to better business, better use or resources, a greener world, better profits and more time for the family is - well, rather simple: Disentangle us from the 514 year old methods!

Good riddance to accounting as we know it. It will happen.

Knowledge handling - the neglected opportunity

I believe we are making a huge and unconscious mistake in how we handle knowledge; how we capture, organise and distribute facts and information for assimilation. It might have a wide-ranging negative impact on all what we do, and I think we should do something about it.

Knowledge is the source of our wealth, well-being, and hope for the future.

Knowledge is facts, information and skills acquired by experience or education.

Thus the most important aspect of knowledge is how and in what form it is captured and distributed for the most efficient assimilation.

As we cannot have all knowledge in our personal RAM at all times we need systems and ways to have the right information and facts delivered at the right time, and in a form that we immediately understand - preferably without any previous and specific training.

That is what makes organisations work better, that increases global wealth and well-being, in short, that yields more efficient resource use.

And in practice it's about the single most important aspect for education, knowledge management, politics, global warming, enterprise software and almost anything else. Do not underestimate the importance of how knowledge is handled.

Let me keep it simple and divide the handling methods into two distinct ways:

1. Categories

When asked "what word is the odd one out among these three - cow, chicken, grass" and your answer is "grass" - then you lean towards organising life by Categories.

Also known as taxonomies, hierarchies, tags, classes, branches and similar.

That's when you want to acquire some knowledge about the honey bee and find that it has a latin name - Apis mellifera - mellifera for "honey" of the family "apis" for bee, with no less than 10 more super-categories and you really need to be a highly trained zoologist to assimilate the official knowledge.

Tag this post with "education", and someone looking for tuition fees might read it, not precisely what you meant.

Categories are nouns, they are boxed, limited and requires training and acceptance and belief that the definitions are "right".

Categories are dogmatic as in "accept it" and quite theoretical as in taxonomies based on the male reproductive organs.

Categories requires distribution of common rules and understanding of what each category entails, without that knowledge categories are rendered useless. Or worse, it becomes a source of discord and destruction. This requirement was perhaps always one of the driving forces for the educational system, second only after the historic need for dogmatic religious training.

2. Relationships

When asked "what word is the odd one out among these three - cow, chicken, grass" and your answer is "chicken" - then you lean towards organising life by Relationships.

When we observe that "honey bees" fly, "honey bees" gather nectar, flowers produce nectar, nectar attracts bees, bees get covered by pollen, pollen is brought to other flowers by bees, nectar is converted to honey by the bee... we establish Relationships.

Relationships are endless collections, a web where relationships can easily be followed without training nor much education, and that still could diffuse more precise knowledge about the bee and all that it touches directly or indirectly than any strictly logical taxonomy could do.

That's when you may do a (IT based of course) multilevel query of the full population of all IBM'ers (if you work there) for: "Everyone that know C++, speak Italian, have friends that live in Rome and where those friends ride bikes and have a bike my size to lend out".

Relationships describe how a cup needs liquids and a mouth, thus makes it a cup.

That's how children learn, they observe and "get" the relationship between the objects in their vicinity. That's how our mind works, empirical, learn from observation.

Relationships are verb phrases, based on real activities. It's pragmatic and not theoretical and have no boundaries as the relationships links everything in one way or the other.

Relationships are human in form while still useful for all other things, after all, all relates to the observer, the human being.

In your daily life you would say "Chanterelles are yellow, look like beakers and are really good when sautéed" instead of "Cantharellus cibarius of cantharellaceae family of the Basidiomycetes class". Relationships instead of Categories is what comes natural, and the listener does not have to be a highly trained mycologist.

Not so at work with it's category-based forms and questionnaires and hierarchical positions. Heck, even archiving, the high priesthood of categorising is a proper profession!

So why do we still bother with the Category method if the Relationship method is better in all aspects?

Because of technological limits. Organised life required organised facts and information, and for that technology had to be employed.

Categories worked well in the two-dimensional reality of pen and paper where the multidimensional Relationships could not easily be represented. So frameworks suitable for paper were devised - taxonomy, organisational hierarchies, narrative reporting, accounting and even the last kid to the block, tagging.

But now, yep, Relationships are "made for" modern information technology with its ability to represent multiple dimensions and query links for any number of steps with great speed.

Time to refocus on the single most important issue in all what we do: How we capture, distribute and assimilate facts and information - in short how we handle knowledge.

Make that better, then the rest follows - economic efficiency, better resource use and simplified and better educational methods.

Relationships, not Categories, will save the planet.

categorising or relationships

Thanks to Johnnie Moore and his links to Stuart Henshall referring to a keynote by Dave Snowdon I was yet again reminded about the importance of ditching the tags.

Yep, the tags, a popular categorising tool still spreading, as an alternative to the age old taxonomy tree structures which I find no better. (But as I supported until doubt set in!)

My favourite take away was Dave's request to the audience:

"What's the odd one out from chicken, cow and grass?"

What's your answer? Pretty standard IQ test stuff such...

"Here in the West most of us would say grass but in much of the world they'd say chicken. That's because we're trained to filter by categories; elsewhere they filter for relationships."

says Dave, and I admit to the same fault. So much for western dominated IQ tests... heh.

Thing about categorising is that it creates relationships between objects in a indirect way, and thus leaves precision out.

Chicken and Cow are not directly related other than both being members of same groups: "Domesticated animals" or both "farm dwellers" or both being "staple food in many countries", when dead and parted of course.

Hardly precise those relationships, and thus not very valuable as knowledge enhancers.

Adding knowledge to the objects is what it's all about.

If precise and fulfilling you and a system can find the right object at the right time - enhancing productivity, learning, speed, precision and minimising errors and waste of time.

Whatever we're doing to software systems or ways of running anything - using the best possible knowledge enhancers is of utmost importance. Without the best the rest is kind of moot.

Back to the cow.

Cows eats grass. That's useful and pretty simple or what?

Cows lives on farms.

Chicken lives on farms.

All relationships. Semantic N-triples - readable by you and me, and a proper system as well.

Allowing queries like "what eats grass?", "what animals lives in same locations as cows?" or even "what is the most popular car brand among owners of locations with grass eating animals and egg laying animals?".

Nifty eh? And not easy to do with categorising...

complexity and complication

Michael, a fellow Enterprise Irregular, reminded me of one of my pet peeves in his posts here and here. Thanks Michael ;)

We all too often equal complexity with complication:

Complex is when something consists of many different and connected parts.

Complicate is to make things more difficult or confusing by making it more complex.

And boy do we complicate things. And boy do I hate it. And boy do we often use it as an excuse for not rocking the boat!

I think the sentence "but it is much more complex than you think!" may be my most disfavoured sentence, a message I hear much too often. Actually I think only once would have been once too much.
It is the first step to complicate things. Worst, it's almost always used as an argument to stop all further discussion. Intellectual laziness I call such.

I once studied chemistry, mathematics and physics because I liked it. No I loved it.

I'm sure there are readers out there that have felt the same when the "aha!" hit them after struggling with a particular concept for hours or days.

Have you ever wondered why?

Not that I want to challenge Greek philosophers or any other fine thinking around this theme - but for me it was the following:

Everything is complex. Every day we meet hard-to-understand issues, complex as they are, above all for natural phenomena.

With 6.022 X 10ˆ23 molecules in 18 grams of water, add a few gazillion more and different molecules into the pot and how could it not be complex?

But then a student got his head around the atoms, then how they react with each other and build molecules and suddenly the complexity was possible to handle. A finite number of atoms, some rather not complex set of rules and much of the stage was set for an understanding of what happened in my beaker.

That is when I got the "aha!" and complexity was no more a threat. Actually I started to love complexity.

Note that I did not reduce the complexity, nor did I simplify - I could now "see" and accept all the parts and their relationships, the whole complex molecular world - a much more gratifying and useful situation than the simplify-all approach of the alchemists!

As with the chemistry I once studied, the only way to handle complexity and diffuse complication is to be radical and go to the roots, find the basic building blocks and their relationships then rebuild an understandable complexity that can be used in every day life.

The sentence should be "it is very complex, so let's roll up the sleeves and see what parts it consists of and how they relate to each other!".

Complexity is nothing to be afraid of, on the contrary it should spur us to go and explore and understand. Beware of the complicators, they're just lazy!

Enterprise Software, running enterprises, a most complex area that increasingly is complicated by many - a most ripe area for radical exploration me thinks. What fun it'll be!

adblocker... heh

Added Adblocker Plus to my Firefox yesterday.

Then I hit the bookmarks for several sites I often visit; sites that I would expect to have plenty of glossy and annoying banner ads and the like.

But, I could not see any difference!

Ah, yes, no ads there, but I noticed something, a sense of less "noise", then I saw the white spaces in the layouts. Puzzling.

Had to use another browser, now without the Adblocker, and compare side-by-side - and lo and behold, yes the sites were littered with ads.

Thing is, I never noticed! My brain seems to block such already.

Do you ever hear what those in-store speaker borne blurbs are about? Can you recollect any of the ads you saw on the telly yesterday?

Have you ever tried to really read all the little ads when on the London Tube escalators, then trying to remember any of them one minute later (a little hobby of mine)? I never recollect anything anytime.

Is it only me or do you also snicker at that slight uproar against the adblocking among ad-based web site owners? If I'm not alone they've lost already, or rather the marketing departments that still believe in ads have lost.

The meek will inherit the markets

Yesterday International Herald Tribune ran an article called "Consumer voices speak loudly online" about how Cadbury Schweppes brought back a discontinued candy bar thanks to about 17,000 fans gathered at Facebook.

Excellent, my thoughts went - "big business actually listening to their consumers, hooray, welcome to reality, good for them!"

But not so, here's how the situation was portrayed in the same article - "Increasingly, companies are monitoring blogs and online discussion groups to help them decide their brand marketing strategies."

Duh.

The day "monitor" has been replaced with "listen" I will know that a blinding flash of the obvious has hit the top brass (and the journalists)!

Let's hope they survive until then, as the listener will inherit the market...

organisational hierarchies in practice

Last few days have seen me in a practical mode, change of mobile supplier, flipping a three year car lease into a new one and then some more.

Admitting to having the car sales chap go through a few more loops than need be, but hey, he's been to Sales Boot Camp and used "Sir" in every damned sentence so what would you expect?
Long story short, close to closing I came to my senses, did not really want the car and mailed politely a no thank you.

Of course he called within a minute, sounding desperate, to which I said he had done a grand job but we really needed something else, please do not take it personally.

His response? "What shall I say to my boss??" in an increasingly desperate tone. Duh I say.

Then, mobile phones; after 15 support calls and five registered letters last three days, I gave up and walked over to a competing supplier.

[Note: My number is now +33 6 8887 9944]

Keen on new business, my request for five lines and phones was well received. All well until the seller found that he could not supply more than three, the next two had to wait until they've seen me performing payment-wise for a month or two.

I suggested giving him a check for 500 € so they could sleep well, but no, rule's a rule. And of course, all of the local suppliers follow the same rule, aka "Best Practices".

"Centralising decentralisation", another term for "Best Practices".

Of course the bosses in the hierarchies need this, how could they ever justify their positions if underlings actually took decisions all by themselves?

Of course this is inherent in the hierarchies, sometimes very rigid, sometimes not, but always lurking.

With some important results:
1) Inefficiency.
2) I'm left with the idea that the company (read "Brand") is "Stupid".
3) Boss fear is more important than pleasing a customer.

Now I'm just waiting for the first one to start hacking away at their organisational hierarchy, when I'll be their customer faster than they can spell profit.

Ten chaps (and girls) in a room, all knowing what all do, all doing what they're best at, no funny rules needed, no titles needed.
Then extended to thousands of employees...

That's why I tinker with thingamy. To enable the ten chaps-in-a-room modus operandi to be extended to thousands.

Bugger applications and software ROI and efficiency gains, nope, it's about making organisational hierarchies less important and making customers like me happy and car sales men productive and mobile phone services acceptable.

For the millionth time, awast ye scurvy hierarchies!

[UPDATE: Dennis reminded me that my mobile phone supplier actually has a service, that you have to pay for of course, where you have one number who can circumvent the stupid hierarchy and get things done!

Some Credit Card suppliers have something of the same for Gold or Black cards and so forth…

Default service is to punch my nose repeatedly, then have me pay to end the abuse and then calling that a real customer centric service… cheeky or what?]

open document standards

I'm scratching my head over the "standardisation" process for document file formats, in particular the text and form documents. Open Document Format and Office Open XML pitched against each other at Ecma, much time and resources spent.

Why bother at all?

A form or a document consists of two things - content and layout. Nay, many pieces of content and then layout. Information mashed up into one, a text document or a text form. An information storage and distribution methodology more or less unchanged since the days of the Pharaohs. Papyrus scrolls, Gutenberg prints or OOXML formats - same stuff, new wrapping.

Quite practical in pre-IT days, but it has a drawback: The moment you manipulate data it loses value and is harder to find, link and reuse. Storing data in manipulated form is simply put, not smart. Nope, it's plainly stupid if alternatives exists.

A letter contains finite information objects, each easily stored using some good old IT standard, say ASCII.
It has a body text, something that could easily be split in finite objects like Introduction, Argument, Closing and whatever you'd like - just name the objects and define the relationships.

And then it has an Address, certainly a finite object if there ever was one. How many "documents" has your address on it? Hundreds? Thousands? How many misspells would there be within that mass? Tens? Hundreds? How many letters do you have to send out when you move? Hundreds? How many letters have never reached you?

Why not have one single "address" object representing that house then linked to any other information object pertaining to the house or you as long as you live in that physical object? One single link to update, no room for errors, no mess.

For textual information I am not interested in stored layout, layout I can apply when I need it thank you. I'm interested in pure information. And most probably a single data object therein and of course how and what it links to.

A "Patient Journal" is a more elaborate "text form" but it consists of finite objects that arises at separate occasions - an inoculation, a surgery, a round of medication, a broken arm. And truth be said the health industry would be better off with finite objects than the form - thus researches can be allowed to see whatever they should see but not more without signing an NDA.

If I want to send a letter, if I need a report to be distributed, if I need a patient journal to be studied in it's entirety I simply apply some logic to the finite objects; start with this object, then add that, then those - and print it out with nice margins and the font of the day.

Keep data in raw form, apply logic when needed, never save manipulated data. Full stop.

Stop this "text document" and "text form" thinking now, time to move onward from the papyrus-scroll-concept and stop bothering with standards for manipulated data. That is bad form and quite foolish. 

abolish accounting

Dennis graciously asked me to do a guest post at his place.

Accman's tagline is "Dennis Howlett on innovation for professional accountants" - not being shy, what better theme than "dump accounting as we know it" could I choose when fishing for some slap-abouts from the accounting professionals?

Go here for the original discussion - abolish accounting.

[Here's the text for the archives as Dennis plows forward fast :)]

Accounting is supposed to be the "glass cockpit" of business.

Oops, nope, it tries but is not.

It should be, but it cannot.

The throttle and pedals and flaps and engines and gauges in the plane are all aspects of the same issue so they work seamlessly together. Without instant engine response and gauge feedback when throttling I would stall and crash.

In business those are separate - throttle (orders), engine (work) and gauge (accounting) - comes in different packages. We're saved from crashing by inertia, but we're not saved from inefficiency.

In the aircraft a gauge is linked to one engine, no doubt, no reconciliation. In business you have masses of reports and documents that represents one single object - order sheet, invoice, shipping papers, production reports, sales reports, support reports - no end to error sources and checks, balances and reconciliation are required.

In the aircraft you're allowed to add any kind of sensor to any part to give you any type of measure. In business the sensors are pre-set and regulated, they're called accounts. That freezes any development of the measurement methods. Actually it froze it ages ago. 

Two steps backward please, rethink and start over again.

• Order, action and feedback must be one. One single system,
• The real world object is the thing of interest, represent that with one single data-object that captures all that happens to it.
• Keep all data in raw form and add logic when needed.
• No more pre-set accounts, abolish accounting (required GAAP reports can be produced out of sight deep down in the basement for the government accounting trolls) and develop Your Own Measurement Methods.

Here's a suggestion:

Imagine that a widget procured by your firm is represented by a widget-data-object and that the widget-data-object is punted from a procurer to supplier to the shipper to the chap on the dock. The widget-data-object presenting work orders and input fields in each step - "Hi, I'm your blue widget with serial number 2346 just arrived from supplier X, please move me to the warehouse. When you're done with it please note here where you put me and hit "completed"." The widget-data-object not only supplies the work order and information needed, but also captures what happens to the real widget in real time.

The system would know at all times where the widget is, who owns it at any time, it's value, colour and serial number. Slap on a "report template" that sucks out the data and applies some rules to them and you have the gauges in the plane cockpit. No more reporting errors, no more reconciliation, any kind of report you can imagine today or tomorrow. Real time flying with your own dynamic "business glass cockpit".

Then perhaps accounting could evolve from it's ledger past and start to represent reality as it is, or how you see it.

At least the "department of input & reconciliation" would be redundant.

environmentalism and software

Drive a hybrid. Buy carbon-dioxide offset points when flying. Use the bike. Things you and I can do.

Renewable energy. R&D funding. Taxes on fuel. Tax rebates. Stuff our governments can do.

All good, all important.

Then I read Robert's post about the trend of VCs leaving the computer world and embracing environmentalism - investing in energy saving technologies and the like.

Hang on a second, messieurs les VCs, give the following twist to the issue a think-over:

It's more than driving my x miles per day in a slightly more efficient way, it's also about if I should drive those x miles every day.

It's more than avoiding y percent waste in the production, it's also about what happens after it's produced and before I can use it.

Big picture; where does the biggest waste happen?

In the process.

If I need to spend 30% on top of production costs to pester you with "messages" and 50% on top of that to have the product ready for your whim in a store on high street, well then - 49% of that product is wasted.

When I spend on a book or some music about 80 - 90% is not-for-the-product (i.e. the wrapping,  hard media, advertising, retail, running huge organisational hierarchies and not the words or the sound). Again massive process waste.

Let's do some math. I do two things - I produce (40 hours per week) and I consume (168 hours per week). For the society as a whole, the crucial point is how much I produce of value per unit consumed total - that is what it's all about.

Increasing that relationship is environmentalism. Produce same with less consumption (current focus) or produce more at same consumption (not so PC) or best, produce more and consume less.

Transport takes about 28% of total US energy consumption, but I have a part in the total energy use by industry (I consume products), commercial (I shop and bank) and household (I live in a house).

And all consumption - from food to transport to entertainment - can be translated into the energy consumption, the smallest screw is a product of energy, as is a book, as is my morning coffee. Even hand knitting is a energy consuming production, the knitter has to live and be kept warm while knitting.

If I have to attend two-hour Monday morning meetings for nothing, well then, that would equal to me and my wife having to save 5% of our energy use to keep the equation balanced.

Give it a quick calculation yourself, how much time of your 40 hours of weekly value creation gets lost in messy processes and managing and ad-hoc crises? 30%? 40%? Could you offest that by cycling to work and install energy saving lightbulbs? Let's calculate:

If I and my wife changed our SUVs (not that we have two though) for small hybrids with twice the mileage and cut out every second flight? That would account for a 14% saving to our total energy use.

I work, i.e. produce value for the society on behalf of the whole family, 40 hours per week. So the saving from my transport greeness would amount to 2 hours and 48 minutes per week of my value creation on behalf of two transport consumers.
That is one Monday morning meeting and some water-cooler chit-chat.

What would be easiest to attain? Halve my flying or cut the Monday morning meetings?

Let's increase my attack on the daily waste of time at the office and cut out a bit more than one hour of process waste; dump some meetings, avoid some ad-hoc phones and mails, some corridor walk-abouts and stop waiting for others to finish.
That increase in my "value creation" would have the same environmental effect as me lowering my "energy consumption" to a level where I would no more drive a car and only pedal. And I would have to row the Atlantic for a meeting on Madison Avenue.

What would you prefer? Cut out some panicky crisis management and meetings or row the Atlantic?

Think process and save the world I say. Do not throw out IT just yet, it has more to it than the eye can see, it can do wonders to the process efficiency if you let it.

And yes, I will definitely drive carefully (am using a small diesel), I will cycle more - but I will keep on challenging those ad-hoc inefficient process ways of today. That is also environmentalism.

Just had to mention it.