My brief stint studying bookkeeping
To understand how technology will revolutionise the process of developing and executing business strategy, let's start with bookkeeping.
How bookkeeping works
I am old enough that I learned old-fashioned double-entry bookkeeping at school.
- We recorded transactions by hand on specially pre-printed journal and ledger pages.
- Each transaction was recorded on a journal page, and then also on two different accounts in the ledger pages (the so-called double entries).
- Every time you got to the bottom of the page you totalled up all the numbers and recorded that at the top of the next page before carrying on.
- At the end of the process, you transferred the totals to your income statement and balance sheet.
- If you got everything right, all of the double-entries matched and your balance sheet would balance. If it didn't you have to go back and figure out where you'd gone wrong.
Scaling bookkeeping for larger organisations
Of course, schoolboy exercises were quite simple.
But, the whole process would become exponentially more complex for larger organisations.
So they split the work between teams and consolidated the different teams' work at the end.
Bookkeeping was quite an undertaking!
How technology changed bookkeeping
By the time I reached the workforce, this process had been taken over by computer systems. I don't think I've ever seen someone do manual bookkeeping in real life.
At first, these systems were fairly simple.
- Bookkeepers typed the transactions into the computers instead of writing them onto the pre-printed pages.
- But, the computer could add the numbers, consolidate the accounts and transfer the balances to the income statement and balance sheet far more quickly and accurately than any human bookkeeper could.
Then, as other parts of the business also got computerised
- It quickly became easier to have those other computer systems create the financial transactions directly into the accounting software. You no longer needed the bookkeepers to do it manually.
- You could connect your electronic cash register, point-of-sale system, or your ERP software directly to your accounting system.
- You could also connect your HR and payroll systems to your accounting software.
What happened to the bookkeepers?
Before long, there was much less need for bookkeepers to enter the transactions manually.
Of course, that didn't mean we needed fewer accountants.
Instead, freed from the tedious task of recording transactions, they could focus on more value-add activities, like financial analysis and planning.
Automation elevated accounting to new heights. And artificial intelligence (AI) took it even further.
And that is what technology invariably does. It starts off being quite simple and really just replicating existing manual processes. Sometimes, in those early stages, it can seem more trouble than it is worth! But it gradually gets clever and cleverer until you can't imagine how you ever did things without it.
How strategy lags behind bookkeeping
Business strategy development and execution is a long way behind accounting and bookkeeping in this process.
Using general-purpose office software for strategy
Most businesses I know still use products like Microsoft Word, Excel and PowerPoint for their strategy processes (or the equivalents from other vendors). The more progressive might use collaborative whiteboard tools like Miro and Mural.
That's a step up from doing it using pen and paper, but only a very small one. We've essentially traded pre-printed paper templates for on-screen templates.
Those templates don't do any work for you. They will never get cleverer or better at it.
It would be the equivalent of bookkeepers creating PowerPoint templates of ledger and journal paper, manually typing the transactions onto them, adding up the numbers and manually typing the balances onto other PowerPoint templates for the income statement and balance sheet.
This adds no value to the process. They do nothing to relieve the administrative drudgery.
Most technology just makes strategy 'prettier'
Many organisations I know use PowerPoint for their strategy documents just because it makes it easier to produce documents which look 'pretty'.
But if our main criterion for selecting software for strategy development and execution is its ability to produce 'pretty' output, then we are missing the point.
What we need software to do in strategy
What we need is software that will
- help us to develop and execute better business strategies more quickly and consistently, using capabilities like analytics, machine learning and Generative AI.
- elevate strategists and enable them to focus on higher-order, more value-adding activities in the same way that accounting software did for accountants.
The statistics about how many strategies are ever successfully executed are sobering. Studies suggest that as many as 90-98% of strategies are never implemented. That is a terrible indictment.
We need technology that will enable us to do better. Not just software that helps us to make our strategies look pretty.
Technology is not, of course, the whole solution. But it must be a part of it.
The importance of standardisation
One advantage that bookkeeping has had is that it is much more standardised.
The Italian Mathematician Luca Pacioli defined the rules of double-entry bookkeeping in 1494. He didn’t invent them - they probably existed for several hundred years before. But he did write them down and codify them. And people have stuck to them by and large, ever since. Not only stuck to them- but used them as a foundation to develop a substantial body of accounting standards.
In contrast, business strategy only really emerged as a discipline in the mid to late 1900s. And it’s far from simple, standardised, structured or rigorous.
I think we strategists actually make it worse. We seem to be constantly coming up with new theories and models. Half the time, I think we’re just coming up with new words to describe the same old things. Trying to make ourselves sound cleverer, more value-adding and higher priced perhaps. But not necessarily moving us closer to a solution.
The result is, that not two strategies ever look the same. They’re structured differently. They use different terminology. They’re written to sound clever. They’re presented to look pretty. But in doing so they sacrifice consistency, clarity and utility. In fact, a lot of what I see is just plain waffle. Sadly, people seem to have come to accept this - and the dismal results it delivers.
So the first problem we need to solve is to strip strategy back to its bones; to get to its fundamental building blocks. To strip back the waffle. To express ourselves more clearly, simply and consistently.
This is what will enable us to build software which enables and elevates business strategy in the way it has done for financial management.
This is what will enable us to build strategy software which can be integrated with other systems in our business ecosystem to allow the more fluid exchange and processing of information.
And this is what will enable us to overcome the restrictions imposed by our antiquated ways of working.
Overcoming the planning cycle
The origins of the planning cycle
One of these restrictions is the planning cycle. For most organisations, strategic planning was so onerous that it was originally done in 5-year cycles. Through herculean effort, most have since reduced that to one-year planning cycles (sadly too often linked to the annual budget process).
We see a similar process in accounting, with firms producing the 'annual accounts'. But behind the scenes, most organisations now have near-real-time access to accounting information. This is enabled by the accounting software.
The need for real-time strategy development and execution
We need strategy systems to allow us to strive towards the same. Real-time, adaptive strategy development and execution.
Because, as we all know, changes in the environment, from competitors and regulators, etc. don't conform to our planning cycles. If your competitor makes a big strategic move the day after you've put the finishing touches to this year's business strategy, it may be out of date before you've even started.
So we need software that can enable us to sense and process such changes more quickly. So that our strategies become living, dynamic processes, not static out-of-date documents collecting dust in the boardroom filing cabinet.
To do this, we need to be able to integrate systems for collecting and disseminating information. And we need to be able to add artificial intelligence for assessing and processing it.
Microsoft Word, Excel and Powerpoint are inadequate platforms for building such systems.
The StratTech Revolution
We're not there yet. It's a journey. As the accountants did, we need to start adopting and improving technology in service of our business strategy development and execution processes. We need to start with small steps and progress steadily.
That's the journey StratNavApp.com is on. Our invitation is for you to join us.