Summary: Discusses the links between digitized technology deployment and management accounting. Bhimani argues that ‘in digitized organizations management approaches have to be reconsidered’.

Digitization and Economic ‘newness’

• Technologies do not just influence the particular function of products

  • Extends to “what could be produced, how, where and by whom”

  • Railroads: Shipping options and economics of transportation

    • Enabled department stores because consumers could travel into towns from suburbs

  • Motorcar: Consumer mobility

    • Shopping centres expanded because consumers had access to motorized transportation

  • Electric lifts

    • Construction of high-rise buildings

• Digital technologies mobilize far-reaching social and economic effects

  • Network effects

    • Not common to all new technologies

  • “Knowledge creation, transfer, and processing take place faster today than has been possible with past technology usage”

  • “The new economy…favours intangible things – ideas, information and relationships” – (Kelly 1998)

• The term ‘new economy’ is “controversial”

  • Some support the idea – e.g. (Tapscott 2001)

  • Some don’t support the idea – e.g. (Shapiro and Varian 1999)

  • Some say that lack of clear definition causes confusion – e.g. De Cock et al. 2005)

  • Existence or lack of existence does not matter – e.g. Bhimani

    • “Beliefs [mobilizing] change” is more important

• When firms implement “a new strategy based on altered economic reasoning, financial controls and cost management priorities also change”

• Innovative business models lead to more profound changes in management accounting

The Economics of Change

• “Gap between the world and our understanding of it grows wider”

• Crash after dot-com boom signalled that the idea of the new economy was flawed

• (Tapscott 2001) – Characteristics of the modern commercial environment:

  • New infrastructure for wealth creation

  • New business models

  • New sources of value

• Organizational networks are now more important to the framework of economic activity

  • New management accounting techniques required

• Globalization is a fundamental restructuring of all economic activities

  • Based on advanced information technologies

  • Not simply a new layer of economic activity

  • Putting pressure on management accounting system changes

• “Informational model of development” – (Castells 2001)

  • Makes information technologies different to previous technologies

• “The existence of knowledge-creating organizations” – (Castells 2001)

  • Leads to alternative business models

• ‘Boundaryless’ enterprise

  • Intel COO Paul Otellini May 2003 in Business 2.0: “At Intel, computing and communications will be indistinguishable. We will be a true convergence company”

• ‘New’ implies radical transformation, not just evolutionary change

Levels of Digital Impact on Economic Activities

• Digitization has led to information goods

  • E.g. E-books, digital music recordings, mobile messaging platforms

• 3 areas of concern:

  • Managerial issues

    • New pricing approaches

    • Quality factors

    • Strategic issues

  • Organizational concerns

    • “Web-enabled business operations have alternated many traditional organizational relationships”

    • Balancing controls and process is now more firm-agnostic

  • Macro-level systemic forces of change

    • Effects of managers and management accountants operate within digitized organizations

    • Changing form of alliances

    • Economics that have traditionally determined value chains may have altered

    • Trust in business relationships is changing

Strategy

• Taylorism – late 19^th century

  • Idea that decision-making activities and managerial actions are distinct

• Activities are now more interlinked

  • E.g. Mark Hurd (CEO of Hewlett-Packard in Fortune 8, August 2005): “I have a hard time separating strategy from operations because they all have to flow together”

• Financial managers and management accountants are more strategic now

  • Highlighted by focus of strategy made by professional bodies

• Traditional business structure makes it hard not to dissociate accounting from strategy

  • Practioners “should reposition their role within organizations to have a strategic focus” – (Nyamori et al. 2001)

    • Leading to emerging cost management approaches

      • E.g. Activity-based management, product life cycle costing, target cost management, strategic investment appraisal

• “Notion that strategic...

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