related documents
RR76 - The Impact of Electronic Business on Accountants - A Shareholder Value Perspective
ACCA Research Report No. 76
While the opportunities presented by the Internet appear abundant, there are many difficulties inherent in achieving e-business success. A plethora of e-business models have been proposed and, during the first wave of the new economy, 'being online' was seen as a route to instant riches. However, after the meteoric rise of the 'dot.coms' in the period 1998 to 2000, there has been a dramatic fall in share values and a realignment of opinion about the long-term benefits of e-business strategy.
Participants in this study felt that e-business was here to stay and instead of accountants viewing e-business as a threat they should view the changes taking place as an opportunity. So, accountants can no longer ignore the new economy but, while there is growing interest in the area, there is no widely accepted framework that outlines what accountants need to do – as individuals in businesses and as a professional group – to succeed in an e-business environment. This study provides a starting point for those accountants who wish to broaden their role from balance sheet accounting to strategic accounting.
Hence, it is recommended (section 7.2) that in order for accountants to contribute fully to the development of new e-business initiatives they need to seek broader responsibilities, and to embrace the technological changes as they arise. To do this, they may have to move out of their traditional financial functions and roles. The study also includes recommendations that:
Phillips and Kirby, 2002
Executive summary
While the opportunities presented by the Internet appear abundant, there are many difficulties inherent in achieving e-business success. A plethora of e-business models have been proposed and, during the first wave of the new economy, 'being online' was seen as a route to instant riches. However, after the meteoric rise of the 'dot.coms' in the period 1998 to 2000, there has been a dramatic fall in share values and a realignment of opinion about the long-term benefits of e-business strategy.
Participants in this study felt that e-business was here to stay and instead of accountants viewing e-business as a threat they should view the changes taking place as an opportunity. So, accountants can no longer ignore the new economy but, while there is growing interest in the area, there is no widely accepted framework that outlines what accountants need to do – as individuals in businesses and as a professional group – to succeed in an e-business environment. This study provides a starting point for those accountants who wish to broaden their role from balance sheet accounting to strategic accounting.
MAIN FINDINGS
- When asked about their use of specific technology at work, 100% of respondents had a personal computer or laptop and 100% used e-mail. The Internet was used among the sample to perform sector-related research (76%) and accounting-specific research (65%) (section 4.2).
- The primary uses of e-business can be split into three broad areas: information, reducing cost and marketing (section 4.3).
- Fifty per cent of respondents work in organisations that use cross-functional teams to drive their e-business activities (section 4.3).
- Respondents felt that technological changes will provide the most opportunities in their sector. 'Price competition' was rated the second lowest environmental influence (section 4.4).
- The results suggest that being market oriented is a key attribute if an e-business wishes to enjoy a higher level of business performance. Being market oriented may produce superior quality, enhanced productivity and stronger loyalty among current and future customers (section 4.5).
- The areas where most strategic accounting activity is performed relate to: the provision of information about future commitment for strategic projects and programmes, reporting on the strategic goals, objectives and projects or programmes of the firm, and measuring deviations (section 4.6).
- High levels of strategic accounting resulted in higher levels for all four measures of shareholder value – overall, EVA, CVA and CFROI, whereas low levels of strategic accounting led to low levels of shareholder value (section 4.8).
- From the case interviews, it would seem that the most common functions performed by accountants in the development of a company's e-business strategy are:
- business case assessments
- project appraisals
- implementing financial control processes and procedures
- designing customer profitability models and systems
- evaluating the future merits of technology choices (section 5.3).
- It was generally believed that accountants would continue to play an important role in the development of in-company e-business initiatives and it was suggested that in order to create and manage the 'knowledge intensive' enterprise, intangible assets require systematically developing, maintaining, leveraging and renewing – (section 5.4).
- Specifically, it was suggested that there was a need to change the training of accountants, particularly with respect to broadening their understanding of business and developing their personal effectiveness skills (section 5.5).
- The study identified four critical 'Cs' of e-business activity focus: communication, customers, cash flow and complex relationships (section 6.0).
- Based on the results of the survey and interviews, the study proposes a four stage model that identifies the path organisations pass through as they migrate along the e-business path. Those phases thought important were:
- level 1 – information brochure
- level 2 – market orientation
- level 3 – revenue generation and
- level 4 – transactions (section 6.1).
RECOMMENDATIONS
Accountants need to appreciate the fact that the Internet is a disruptive technology and they therefore need to understand salient e-business strategy issues. The changes currently taking place suggest that the new economy will utilise significantly different approaches from those currently employed. Accountants must understand the organisational changes that need to take place and reposition themselves in the organisational hierarchy where they can produce useful information for the formulation and implementation of e-business strategies. While accountants have the technical skills to remain influential in an e-business environment, however, the results of this study suggest that they need to reactivate their political skills and adopt a greater holistic understanding of business issues (section 7.1).Hence, it is recommended (section 7.2) that in order for accountants to contribute fully to the development of new e-business initiatives they need to seek broader responsibilities, and to embrace the technological changes as they arise. To do this, they may have to move out of their traditional financial functions and roles. The study also includes recommendations that:
- strategic accounting could be used as a mechanism to assist accountants reposition themselves in an e-business environment
- their training and continuous professional development should be rethought
- more emphasis should be placed on developing their business acumen and personal effectiveness
and - the accounting bodies need to ensure that students and qualified accountants possess first class skills in communication, negotiation and change management to enable them to influence their peers, rather than to direct subordinates, during the e-business strategy decision-making process. Such skills should include effective leadership and team working, and be developed in partnership with organisational capability.