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So what is big data?

Big data has been the feature of many articles in professional accounting journals such as CIMA’s Financial Management. But what exactly is big data? Originally it referred to more data than information systems could process. But today we have systems capable of processing and analysing millions of transactions in seconds . So  what does it mean now? Well, I think the answer to this question will depend a lot on who you ask. To me big data is still data analytics, with maybe some external or social data sources thrown in., with a defined purpose of adding value or saving resources (such as cash or time). This is of course a very broad understanding of what big data is, as value will not mean the same thing to all organisations.

I read an article on Forbes recently which has a similar approach to big data as that I suggest above. The key point the author notes is not to care too much about defining things like big data, but to remember “who cares”. To quote directly from the article “the goal should be to solve a business problem by using new analytics, not to worry about defining a term. That’s because definitions are a distraction from the simple question of “Does this data contain information that is valuable for my business?”


Tacit knowledge in management accounting

I read a short piece by Bill Fischer in the April issue of Financial Management (CIMA’s monthly journal). The woes of Toyota was the main subject – in case you’re not aware, Toyota have had major safety concerns on a number of its models in the past year or so. Fisher quotes from a book by Paul Ingrassia (Crash Course: The American Automobile Industry’s Road from Glory to Disaster). In this book, Ingrassia writes how Toyota ignored its own “three nevers” principle when deciding to manufacture some of its models in the US e.g. the much reported on Camry model with its jamming brake and accelerator pedals. The “three nevers” principle is: never build a new product, in a new facility, with a new workforce. In the case of the Camry in the US, all three were broken. But surely, you might say, a company as large as Toyota would have rules and procedures about how things are done? They do of course, but a large amount of tacit knowledge – or know-how in the heads of experienced employees – never gets written down and passed on. In the case of Toyota, such tacit knowledge cannot be passed on in a new country, with a new plant, model and workforce in a short time period.
Any what’s the relevance of tacit knowledge for management accounting. Quite a lot actually. If you have studied accounting, do you remember those early first year lectures where management accounting was defined for you? Compared to financial accounting, management accounting is unregulated and loosely structured. While two management accountants having a chat about budgets will both know what a budget is, it’s quite likely that they do their respective budgets in very different ways. There’s a good chance too they do not write down how they prepare budgets or do any other work for that matter. Many academics have written in the importance of tacit knowledge and management accounting practices. For example, the work of Burns and Scapens (2000) uses institutional theory to help explain why management accounting practices remain stable. One reason they offer is that management accounting may become engrained and accepted. This does not imply that management accountants follow rigid rules saying what they should do, rather that the work they do becomes tacitly accepted.
So when you get you first job as a management accountant, sit back, listen, figure out what is going on. In other words, you’ll have to pick-up the tacit knowledge of what management accounting means in the organisation.

Burns, J. & Scapens, R. 2000, “Conceptualising management accounting change: an institutional framework”, Management Accounting Research, vol. 11, pp. 3-25.

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