Friday, December 14, 2018

Companies Must Take More Responsibility for Education

It's well known that there is a serious shortage of IT talent both of the type that is capable of developing new systems as well as the type that is capable of managing a digital organization. Companies that go through a digital transformation process, and a few have, find themselves in a world of new issues. Business models inevitably change, with cost of entry dropping in some cases and profitability of new ventures becoming more unpredictable, or at least reactive to different pressures.

Many companies still rely on the traditional education system to produce the needed people. But that system is incapable of responding to new challenges quickly enough. While companies seek more agility, the educational system, by its nature, is limited in its capacity to be agile.

So companies have responded by providing training programs, which can be good, but usually are limited in their scope and depth because of the constraints of taking people out of production in order to train them.

What's really needed is a radical transformation in the overall educational and corporate training systems. They need to communicate and work together more effectively. Institutions need to respond to the needs of business. Corporate training needs to be an extension of the education provided by the institutions. It already often is informally but not so often formally.

Deloitte and others have said that “Companies should invest more in educating and training workforces for the digital era.” There is probably no alternative if companies are to remain competitive.

They're right. Companies need to put more resources into education.

Wednesday, December 12, 2018

Impact of AI on humanity

AI is moving ahead quickly - so quickly that our traditional social institutions may not be able to keep up. Yet, AI promises to be pervasive within just a few years. When you look at how quickly Google has moved into our fact finding space, and how much we rely on it, we can get some sense as to how quickly AI can move.

This will raise some important questions. As humans work more closely with AI constructs, ranging from programs to intelligent robots, eventually those robots will become almost indistinguishable from humans, raising questions as to the rights of the robots, and the rights of humans vis-a-vis the robots. As humans work more closely with AI designed to augment their own capabilities, those capabilities will be vastly overcome by the technological. This will raise questions as to the responsibility for decisions and actions. Reliance on code - which is basically what AI is -  will increase the feasibility of amoral corporations and governments slanting that code to suit their own purposes in pursuing profit and power.

Pew Corp did a study asking some "979 technology pioneers, innovators, developers, business and policy leaders, researchers and activists" to answer these and related questions in a canvassing of experts conducted in the summer of 2018."

They found a variety of concerns, and opportunities for humans, but all agreed that massive change is in the works - with some saying that such change is likely to extend over the next fifty years or more. The change will not come as once, meaning that humans will need to be very responsive in dealing with the change as it comes. But it will come fast, which means that some people will be displaced and left behind. Which in turn means social unrest, more populist uprisings, perhaps dictatorships.

It's a massive challenge calling for restructuring of our social, educational and government institutions. The survival of our society - of humanity as we know it, is at stake. To gain a greater insight into these issues, check out this article on the Pew website.







Wednesday, December 05, 2018

AI for Better Customer Service

Companies, particularly retail businesses, have been making greater use of Artificial Intelligence to enhance their customer service. They can't always go totally online, so it is in their interests to enhance the customer experience by improving convenience and helping to build customer loyalty. This has been approached by providing customer service personnel with technology like tablets loaded with useful data and related AI apps, as well as apps designed to effectively close a sale and facilitate immediate delivery. With many companies that have not gone totally online, this has expanded to include a variety of new AI technologies and the means to deliver them. The latest trend includes the use of wireless technologies that can track customer movements, including when the enter the store, so they can be approached with knowledge of their interests and preferences.

One lesson that has been learned is that in many cases, direct human interaction is necessary before the deal is closed. Which means the technology must remain in the role of supporting the human activity rather than replacing it. The strategic issue has been to define the best mix of human and technological involvement in the process.

This is a process requiring continuous improvement which in turn requires that the actions of competitors must be closely watched in order to maintain or build on product differentiation.

 

Friday, November 23, 2018

Automation of Accounting


Over one-third of respondents to a recent Consumer Technology Association (CTA) survey say they plan to automate accounting tasks. McKinsey & Co estimates that about 20 percent of the tasks in a typical recording and reporting cycle can be automated and nearly 50 percent of those tasks can be mostly automated. "CIOs could consider looking at the ways their accounting department collects, processes and reports financial data. Many firms have been automating the process of producing and submitting regulatory filings, for example."

Most of the regulatory bodies in the world have set the stage for automating their filings by having adopted XBRL (eXtensible Business Reporting Language). XBRL presents a tremendous opportunity for companies to fully automate their process of preparing and submitting regulatory reports. It can fit into any accounting system from SAP to EXCEL spreadsheets.

This opportunity is not available for Canadian companies in their filings since Canadian regulatory authorities are way behind the rest of the world in adopting XBRL. However, Many of those companies need to file with the SEC in the US, and the SEC has required the use of XBRL for years. The movement to inline XBRL is even better,  because it makes possible the automation of the whole filing, since with inline XBRL, the need for a separate text based document is eliminated.

All of which means that XBRL fits beautifully into the process of digital transformation.


Monday, November 19, 2018

Watch Where Your Data Goes

Many of us have linked our phones to our cars. Such linkages enable hands free usage, making them popular. These linkages work through the use of bluetooth, a powerful but famously insecure technology that enables wireless transmissions over short distances. When a linkage is established, it makes all the personal information on your phone available to your car. Something many of us don't always think about.

Such information would include contact details, call and text logs, and perhaps even full text messages.

This vulnerability was brought to our attention in February by exposure of the CarsBlues Hack and since then has been addressed by some of the car manufacturers, so that some 2019 models have installed preventative measures. But others haven't. So this means when you give up control of your car, such as by selling it or returning it after leasing, it means you should wipe out the information in your car system. This can be done by using the settings function for your car's system. There are usually two steps - delete the phone connection, then delete the associated data from the system. For most cars, this is a relatively simple operation.

The problem with personal data on cars is similar to the issues around the growth of IoT devices, where any number of devices are connected to the internet. When you discard these devices, its wise to delete the data from the devices and also any related internet sites. This is not always simple, but worth doing in any event.


Tuesday, November 13, 2018

Smart Contracts Have Weaknesses to Address

The most common and at this point the most useful application of blockchain is for smart contracts. An industry is growing around this application, including Ethereum, Eos and Tazius, among others.

Smart contracts are designed to automatically implement contracts that involve some routine procedure that can be programmed. Program code is developed and entered into the blockchain for processing. Once an implementation is initiated, it cannot be changed; all blockchain based contracts are immutable. Code can contain errors, so proper development techniques are crucial.

Smart contracts are encrypted and so the encryption keys pose a risk. They need to be fully protected. Most attacks on blockchain contracts so far have involved attacks on the keys.

Setup is therefore critical for smart contracts, and must often involve legal reviews and audit reviews before they are executed.

Some commentators have given a false impression that blockchain contracts are free of risks and do not require any reviews or such procedures. Because of the need for accurate code, strong encryption keys and effective access control, this is simply untrue.

Thursday, November 08, 2018

The Need for IT Oversight

IT Governance has been a major area of concern to Boards of Directors for many years. The problem stems from the fact that the members of the Board usually have limited understanding of IT, yet the Board has overall responsibility for firm governance and is accountable for financial stewardship and results. And IT is a major element of corporate activities.

Many Boards have approached this issue by appointing a member of IT management to the Board, which helps improve communications. Others have formed an IT Oversight Committee, that is closely tied into IT governance and reports regularly to the Board. Still others have formed a digital strategy think tank, which obviously offers insight into IT Strategy for the Board to consider.

There is a place for all of these groups in corporate governance. And several different ways to organize these IT groups, some better than others. The best approach is to make them high level committee, reporting directly and regularly to the Board. Members of the ITO Committee must be very knowledgable about IT and involved in it's management or governance. Functional management groups, such as AI Implementation, Data Management, etc. would need to channel into the ITO.

In this way, overall IT Governance is a network of top management and Board members where IT becomes an integral part of Firm Governance.

It is now all but impossible to avoid IT in firm governance. So, the issue is not to consider including it, but rather how to include the IT issues in a way that can optimize Board awareness and lead to decisions on IT strategy that are most likely to enable achievement of corporate objectives.


Tuesday, November 06, 2018

AI Implementation Levels

The most common approach to AI implementation is to approach it as an exercise in automation. Companies look to the processes in their organization and decide which ones can be automated, thus removing or reducing the human content and saving money.

While this approach can be useful, and perhaps even a way to start, Gartner, in their release "Building the AI Business Case", points out that it is a mistake to stop there. They argue that many organizations are missing the best of what AI has to offer. That the way to approach AI is to find ways in which human effort can be augmented. That involves looking at decisions that need to be made and considering how AI can help that rather than looking at processes that can be automated.

There are several levels of AI - Reactor, Categorizer, Responder, Learner and Creator.

The reactor level involves simply automating existing processes, eg. filling orders. It's the most basic level. The categorizer level , as the name implies, is AI that can identify categories of transactions and apply algorithms to enhance those decisions.

A good example of responders is driverless cars. That level of AI can identify and react to a number of particular situations. This is quite a sophisticated level of AI. Which raises the issue that one of the considerations in implementing AI is the risk appetite of the organization, or its risk appetite in particular interactions, some being more sensitive or critical than others.

Learner levels can learn from experience and then use that experience to augment future decisions. One example of a learner level application is medical diagnosis - obviously a critical application.

An organized approach to AI implementation is critical to gaining the benefits and also to avoiding unnecessary risks. The Gartner paper offers some useful guidance.

Friday, November 02, 2018

Intelligent Automation, a Path to Digital Transformation

Digitizing parts of an organization is a complex process, involving determining what processes are used in the business, and which of them would benefit from automation. And the complex interaction between humans and technology needs to be taken into account.

Many organizations are now automating these processes using smart bots that can monitor an activity and learn how the processes work and determine which ones should be automated. For example, they can follow the work of an insurance representative, track the interactions with customers and potential customers, including the reactions of the people in different scenarios and learn from the experiences. In other words, the bots use machine learning.

The idea is to reduce repetitive, manual tasks to leave more time for the more interesting and important relationship enhancing work. The human/technology interaction is referred to as orchestration and the objective is to optimize it.

For a more in-depth article on this subject, check out this link.


Wednesday, October 31, 2018

Machine Learning, AI and Digital Transformation

AI refers to a variety of technologies, some pretty basic and others very advanced. Basic AI has been in use for many years. As for the advanced - well, it's hard to define that, since it keeps changing so fast.

A powerful use of AI now is in the area of autonomous data analytics. The word autonomous implies that the analytics are able to stand on their own - able to make their own decisions. This is what is happening with the help of AI and machine learning.

Companies have more data available to them than at any time in history. However, that data is of little use unless it is analyzed so as to yield useful insights and prospective information. Also, the analysis must go a lot further than simply being sufficient to support a particular hypothesis. Rather it must be mined to yield the secrets and lessons it holds.

Autonomous analytics, aided by AI, supports that approach by being able to recognize relationships in the data that can then be used to formulate further lines of enquiry. That's where machine learning comes in. All of this is automated. In addition, the analysis can encompass very large bodies of data, maybe even all the data available to a particular company.

Techniques for implementing such systems are advancing quickly and several companies have been reporting useful results.

For a good paper on this subject check out this one.

Friday, October 26, 2018

AI and the Trough of Disillusionment

Artificial Intelligence adoption is playing a major role in the implementation of digital transformation by businesses. The hype is strong and expectations are running high.

Recent Gartner surveys show that a major part of AI implementation is likely to be in the area of customer interaction. It's not going to happen in the next year or so. Five to ten years is being put forward as the most likely timeline. Can the hype survive such a wait? Not likely.

AI still needs to go through the Trough of Disillusionment as identified in Gartner's Hype cycle. With so much emphasis on customer interaction, that trough could be deep. Past and current attempts to have customers interact with computers have been rife with frustration on the part of the customers. Even the established and simple process of calling a company and being met with an array of choices in the form of selecting numbers still does anything but encourage customer interaction.

Of course, the new AI systems will be a lot better than that and will be conversation based. But they had better be very good. Anything less will bring us back to our experience with the more primitive systems of the past. And the trough of disillusionment could then be a canyon. For more on Gartner's take, check this out.

Monday, October 22, 2018

Facial Recognition - A technology to watch

There's a growing realization that facial recognition (FR) technologies, aided and abetted by AI, are becoming more powerful, will be used more often and pose a significant threat to privacy.
In the past, tests have shown that facial recognition is often not very effective. For example, at Boston Logan Airport, volunteers posing as terrorists could only be successfully identified 60% of the time during a test, a rate that was determined to be unacceptable.

The AI component is becoming more powerful, however, and performance will be better in the future.

Given the widespread interest in using FR for a variety of purposes, a major purpose being safety, its use will increase rapidly. Along with this will be a need for new regulations to protect individual privacy.

It will not be possible to seek permission for all applications, so other means will be required, such as oversight boards, and notices to inform people that FR is in use. It will be necessary to define when permission will be required. Or when people may be allowed to wear sunglasses. Lots of issues will arise. See this article for example,

The use of AI will likely be useful in dealing with privacy, by introducing logic that deactivates FR in certain circumstances.

The privacy implications of FR is a major issue in the battle of technology vs privacy and developments merit close scrutiny and monitoring.


Saturday, October 20, 2018

Some Outstanding IT Trends for 2019

Gartner recently released their much anticipated list of IT strategic predictions for 2019. There are a few trends that stand out.

In 2019, efforts will continue to adopt AI, but this will be a rocky road because of skills shortages. Although it may begin to improve by year's end. Also, AI will likely enter into emergency care of chronic patients through powerful AI screening techniques. Thus freeing up emergency rooms for true emergencies.

Privacy will continue to be under attack on several fronts. Increased use of facial recognition technologies will mean that roadside cameras and mobile phones will be able to identify people easily. Think about that. However, Gartner anticipates that public security monitoring will increase without opposition because of fears about public shootings. Also, privacy in social media will continue to be a problem which will remain unabated because people will continue to use social media.

Also in the privacy domain, blockchain has serious loopholes (particularly because it contains text fields that may not be encrypted), which will lead to more privacy issues as blockchain gains more adoptions.

There are other interesting insights or 2019 and beyond. Read the full list here.

Friday, October 12, 2018

How SYSCO is moving to the Cloud

Sysco is one of the world's largest corporations involved with food distribution. In this time sensitive industry, IT systems that are reliable and timely with good data and excellent responsiveness are critical.

There is no tolerance for downtime. Cloud systems offer up parallel systems so if a system goes down, action shifts seamlessly to the other systems. There is lots of scalability so the company doesn't get caught in lack of resource.

For these and other reasons, Sysco decided to move their systems to Amazon Web Services (AWS), one of the world's foremost cloud services. Sysco was in the midst of large ERP installations and upgrades, which are major, very expensive projects with the potential for downtime, particularly when the new services go live.

Sysco opted for a "strangler" technique of implementation, which involves identifying particular sets of functionality in the legacy systems and their ERP, rewriting them as modules so as to work in the new chosen systems and then implementing them on AWS. Eventually, the old systems can be shut down.

In recent years, they have been employing this method with considerable success. Costs are reasonable, and functionality is preserved and improved.

For a summary of this experience, check out this website.

Tuesday, October 09, 2018

Advanced Technologies Need Not Scare You

A growing body of research and literature is pointing out that many traditional jobs will be eliminated or substantially reduced because of the growth in availability of big data, and use of analytics, Artificial Intelligence and Big Data. As a result, many people are concerned about their jobs.

Some will indeed be eliminated, for sure, but in most cases, they will have little to worry about. In fact, they will have some new and interesting challenges.A recent study by the World Economic Forum directly addressed this issue. It has some very positive messages.

There is nothing new about technology incursions into the workplace.We've all experienced it. Taking accountants as an example, the more routine aspects of the job - bookkeeping and preparation of financial statements have been automated for years. The more judgemental parts of the job, such as valuation of assets, have remained largely with humans. However with the use of AI, more of these judgements will be supported and/or initiated by the AI software.

Already, AI is being used to support decisions. But it will move well beyond that. The way it is likely to play out is to imagine how decisions are often made now - through groups of people with different skill sets. Imagine when one of the members of the group is a computer, or an AI engine - one who fully participates in the discussion. Perhaps think of it as a robot. It can listen to ideas, comment on them and offer suggestions. It brings to bear past decisions in similar circumstances and the results of advanced analytics.

The people are still doing their jobs, but with more useful information at their disposal. Less time is spent on the mechanics of the analysis and more on the judgements and decisions to be made. Not everyone is going to know how to do advanced analytics, but some or all are going to need an understanding of them and how to use the results. Therefore as the technology evolves, the level of the people jobs will rise to more challenging and interesting levels.

According to the WEF study, "As companies begin to formulate business transformation and workforce strategies over the course of the 2018–2022 period, they have a genuine window
of opportunity to leverage new technologies, including automation, to enhance economic value creation through new activities, improve job quality in traditional and newly emerging occupations, and augment their employees’ skills to reach their full potential to perform new high value- added work tasks."

One of the results of these strategies we will hear more about will be augmentation strategies - strategies to augment existing jobs and processes with advanced technologies.

Sounds like an exciting new time, time to accept the challenges, not to be afraid of them.

Friday, October 05, 2018

Challenges Facing the Alignment of Business and IT Goals

The extremely fast growth in the rate of change in technology is creating new challenges for management, both the traditional business managers and IT management. For several years, there has been a recognition that the objectives of IT and the business overall need to be aligned to produce optimal results. Generally, this has been addressed by ramping up the role of the IT executives in the organization - creating CIO VP positions, having the CIO report to the CEO rather than the CFO, placing the CIO on the Board and other similar organizational and cultural steps.

All of this is good, but not all organizations have implemented these steps and even those who have are facing challenges.

A major source of the issues is simply the pace of change, which is rapid and unprecedented. The realization by business managers of the importance of digital transformation has led to growing requests to their IT people, from artificial intelligence to machine learning to the impact of the internet of things to simply automating greater swaths of the business activities of the organization.

The pressures on IT have led to resource, cost and budgeting issues, which of course sends pressure back to the business leaders.

To address these issues, both business and IT leaders need to change their outlook - and skill sets.

Business leaders (those executives who have not traditionally been part of the IT community) need to gain a greater understanding of IT management issues. This can be achieved by appointing the CIO as a VP and reporting to the CEO. This makes the CIO a peer with other senior executives with the concomitant elevation in the level of discourse between them. The organization also needs to create means by which the two groups can interact  - advisory committees, working groups, etc.

Such appointments can also lead to changes in the perspective of the IT leaders. Greater involvement in business issues through the board and other committees, will shape their perspective on the demands placed on IT. Over the long run, these changes will serve to shape the executive positions themselves as well as their educational processes, with people interested in business management gaining greater IT knowledge and IT managers enhancing their general business knowledge.

This is the trend anyway, but explicit recognition of it in corporate management will help to speed the process.


Tuesday, October 02, 2018

The Scope of Digital Transformation

Digital Transformation has been defined as "the profound transformation of business and organizational activities, processes, competencies and models to fully leverage the changes and opportunities of a mix of digital technologies and their accelerating impact across society in a strategic and prioritized way, with present and future shifts in mind." (i-scoop)

Implementation of digital transformation requires a defined strategy and all of what that implies, including definition of activities, processes, timelines and responsibilities. It also requires careful identification of technologies - those in place and those that might be adopted. It requires digitization of numerous processes in the organization, including those that have never been digitized before. True digital transformation is comprehensive.

Digitization of processes require proper process management, which includes business process reengineering and change management. Inevitably the involvement of the people carrying out these processes is required to make this work. People involvement is necessary all the way through, but one of them is in areas being changed that involve interaction with customers and other stakeholders. People who are closest to customer service should be involved, perhaps even the customers themselves.

In digital transformation as currently practised, there is an increased reliance on the latest technologies - big data retrieval and analysis, artificial intelligence, machine learning and internet of things in managing corporate assets. These are prime areas where digitization might replace some or all of what people are currently doing.

It's easy to see that digital transformation is a major area of corporate management - transformative and long term. Evolution of cultures and technologies cannot be ignored.

Future articles will delve more deeply into these issues.

Wednesday, September 05, 2018

The Value of Augmented Analytics

Most people agree that data is the lifeblood of most companies in the current environment. More and more data is available, but this leads to a need for a great deal of work to make good use of it. Raw data needs to be collected, cleaned, analyzed and insights generated that are useful in conducting business.

To do much of this work requires data scientists, but those professionals are notably scarce. Also, their business instincts may be low. Others can try to fill in, but with varying degrees of efficiency.

This is where augmented analytics comes in.

Augmented analytics makes use of machine learning and artificial intelligence to automate the cleaning, analysis and insight generation aspects of the process. Augmented analytics engines build a database of business-based algorithms to enable the generation of insights from the analysis that will be based on specific business elements and relationships. This is more than a data scientist would normally be able to do without significant additional training.

The analysis from augmented analytics is likely to be more relevant than any conventional analytics and, in addition, requires little or no human intervention.

It's a technological answer to a business need in a data-based world. Most large Business Intelligence providers are getting into augmented analytics.

Thursday, August 30, 2018

Cybersecurity - Looking to the Banks for Guidance

The growing complexity and urgency of cybersecurity is leading to a good deal of strategic thinking in business. Companies are and have been responding as best they can but they are still often searching for direction in the overall strategy for strengthening their security in cyberspace.

Banks have special demands put upon them and have special needs for good cybersecurity, so it makes sense to look to banks for guidance on what direction cybersecurity might or should take.

KPMG did this by discussing the major challenges facing their banking and financial clients in three major areas of the world - Asia, Europe and the US.  The results were published in a white paper on the firm's website.

Some of the major issues raised were:
  1. Cybersecurity needs to be seen as a business issue and not just a technology one. Nothing new here, but it seems  business is still struggling with this concept. Some of them are addressing this issue by creating a dedicated cybersecurity organization reporting directly to an Operational Risk group, thus enabling the business to own the issue.
  2. As with other industries, banks have experienced increased regulatory requirements, so regulatory risk has continued to grow as an area of concern. since regulatory risk can detract from other more threatening areas of risk, increased regulation carries a risk itself of shifting the cybersecurity actions of companies away from the most serious threats to that of compliance.
  3. Banks have been integrating their activities on money laundering and fraud with other cyber controls, raising a prospect of more efficient and hopefully more effective controls.
  4. Increased tailored training of business, non financial people on how cybersecurity incidents work - what they look like and what to watch for.
This brief white paper provides some interesting insights into the direction of cybersecurity controls and is worth a read.

Wednesday, August 15, 2018

Balancing Human and AI Activities

AI and machine learning has been making inroads into many aspects of commerce, with one of the notable areas being retail. Leaders like eBay are using a combination of AI and humans to achieve the best they can in customer service.

In a simplistic sense, AI basically uses data and algorithms to achieve the intended results. While powerful, modern AI has its limitations. For example, humans are better than machines at empathizing. Customers act differently with humans than they do with machines. Humans are better than machines in establishing the contest of particular purchases - for example, wedding and anniversary gifts call for different sensitivities than many other more routine purchases. Machines on the other hand are better at finding nuances in data being used, in determining product categories for particular market segments, even in determining customer clothing sizes.

What this means is that human and machine activities must be carefully thought out and implemented. Experience has shown that these activities should be as discrete as possible, so they don't overlap.

Effective implementation of AI also requires the means to update that strategy as experience accumulates.

For a particular use-case, check out this link. 

Friday, August 03, 2018

How AI is Affecting Accountants

The accounting industry is gearing itself for a major upheaval because of the implementation of artificial intelligence. The massive changes on the way - and already happening - are truly impressive. A recent report by PWC makes this clear.

In a global sense the report states that GDP will be up by 14% by 2030 as a result of AI. A high portion of this growth will come the replacement of workers in routine jobs by AI, something which is not new for technology but will be speeded up and enhanced with AI. And there will be new jobs for those who must manage and supervise the AI applications.

The impact of AI by augmenting or replacing humans is well known. The PWC study goes a lot further. To illustrate, it includes the following example of an AI application:

"An online insurer has leveraged an AI bot to automate the claims process from beginning to end. Instead of the days or even months it traditionally took to settle a claim, the bot is able to complete the entire pipeline from claims receipt, policy reference, fraud detection, payout and notification to customers in just three seconds."

Both accountants and auditors are deeply affected by this kind of application. Both are required to have a knowledge of the control system. Since this control system has been placed entirely under the actions of an AI bot, the accountants and auditors need to have a good understanding of how that bot works - in principle and in practice. They need to know how to test the effectiveness of that bot.

Multiply this by thousands to AI bots and you have an appreciation of why people are calling the AI revolution transformative.



Thursday, July 19, 2018

Digital Transformation is a Long Term Strategy

There are degrees of digital transformation, but the term is generally meant to refer to maximizing the use of digitization in the organization. "Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how you operate and deliver value to customers", according to The Enterprises' Project.

That's a sweeping project that affects every aspect of the business. It means eliminating many paper based processes, and even whole jobs. It means training in new functionality and systems. It means overcoming the natural resistance to change of people.

Large scale implementation of technology, enterprise systems for example, has taught us that these - the people issues - are the most difficult part of any technology implementations.

So while some companies approach digital transformation as an event - something that just needs to be implemented and then life goes on - other wiser organizations recognize that it is much more than that. It is the beginning of the implementation of a new basic strategy, one that will become an ongoing part of the fabric of the organization. A recent article in Forbes Magazine puts it well, It is a journey.

It starts with strategic planning, with all the implications of that process - consultation, discussion, agreement, strategic objectives formulation, champion identification, project scheduling, action plans, monitoring, assessment and re-assessment and ongoing revision and refinement.

Remember that initial definition above - fundamentally changing how you operate and deliver value to customers. Those are fundamental to the business and any changes like that require a strong commitment by the people involved. Definitely not a one-off project.

Thursday, July 05, 2018

Disaster Recovery in the Cloud

When companies move their applications to the cloud, they need to update their Disaster Recovery Plan. The biggest reason for this is that, in the cloud, there is an increased reliance on independent service providers, or vendors. To do the update, the company needs to assemble and review all the contracts with the vendors. They also need to obtain and review all the Service Level Agreements (SLAs) with those vendors. SLAs deal with such issues as performance, uptime, service response, including any penalties against the vendor for service failures.

The vendors provide security and privacy for the data, which needs to be reviewed. Often audit reports are essential to achieve the necessary level of reliance. This is particularly true in cases of shared environments, where assurance need to be obtained about the level of effort going into ensuring that the privacy of the data is protected.

With this background, the DR plan needs to be developed and tested in conjunction with the vendors. For more, click this link.

Friday, June 29, 2018

Business Needs to Look After the People

Possibly the most important issue we face in the modern world is the fact that economic "progress" of the post war (WW2) period has left a lot of people behind. It's true that economic progress has been phenomenal, with vast numbers living better lives than anyone has in history, nevertheless a lot of people have been left behind or, equally importantly, have felt they have been left behind.

This became an issue in the popular mind when we started talking about the 1%. Attention turned to the growing gap in personal incomes such as that between workers and CEOs. Now we see it in the growing populist movements around the world, and it is abundantly clear that the end result of these movements could be, and is likely to be, very ugly.

It also appears to be clear that we cannot rely on governments to resolve this issue. There is growing recognition that business helped to create the problem and needs to help to resolve it.

But what exactly should they do?

PWC recently released a report that offers some guidance on what business can do.

  1. Global connectivity and local initiative must go hand-in-hand

    Increasingly corporate performance is measured globally. However, their work has major impacts on local communities. Overall objectives and initiatives need to be aligned between global objectives and local community objectives.
  2. Look beyond financial performance

    Corporate performance has traditionally been measured on financial results only. It rings hollow to certain communities, however, when a company announces that it has achieved record profits but has closed several plants, some of which were the lifeblood of those communities. Over recent years, some change in corporate reporting has been made. Corporate performance has increasingly included sustainability reporting, that focuses on impact on the environment. That's great, and is starting to have a positive impact on corporate behaviour. Corporate reporting has also been expanded to include ESG (Environmental, Social and Governance)  But it is questionable whether the change in behaviour has extended to the impact on society and communities. The reporting has in many cases, but there is much more to be done. Companies can't be totally responsible for those communities, but they can be held responsible for significant actions they take that impact on the communities.
  3. Technology doesn’t care. But we must.

    Technology is people neutral. If people are harmed by the effect of technology in a corporation, only the management and other people in the corporation can help direct that effect to as positive a result as possible. 
  4. Educate for the future

    Education and retraining must be a responsibility of the companies involved. They are often the first to see the need for new skills and the opportunities for education to develop those skills. They need to play a role in meeting the needs of the future.  

The changes needed in corporate reporting recognize that we are at a crossroads in our society and significant change is required to make it sustainable. Failure to do so will result in a governmental and environmental upheaval .

A better explanation of these guidelines is included in the PWC report.

Monday, June 25, 2018

Digital Transformation - Change Management on Steroids

KPMG recently released their 2018 Global Manufacturing Outlook, a survey of 300 CEOs, part of a larger study which involved obtaining data from 1300 CEOs in 11 countries.

The results point to larger trends in business and are relevant far beyond manufacturing. All of the trends we know about are represented there - digital transformation, with growing use of artificial intelligence and the consequent encroachment on human activity by machines. This is probably the biggest worry to people working in manufacturing - or most other businesses.

The survey shows that this will increase in intensity, along with greater integration and collaboration across the world among companies. Of course this leads to the need for people to constantly learn new skills, which is not new but now a permanent part of the landscape. For example, there is a strong indication that the need for data scientists will continue to grow.

We started to hear about change becoming the only constant back in the 1960s. Since then, that has been a fact of life.  But now the pace of change has accelerated to the point that it is likely to bring about radical societal change. Of course, this will bring resistance from some quarters. Some people always resist change. So the study identifies a resurgence of territoriality (political and economic) as one of the major risks of doing business over the next twenty years. Of course, we see this already.

In a broad sense, the transformation going on today boils down to a huge exercise in change management, with a need for strong leadership, clear foresight, good strategic planning, and tight management of the risks. It's change management on steroids.

The survey is available on the KPMG website.

Thursday, June 14, 2018

How Analytics can be Used to Fact Check News Items

Companies have been focusing on the capture of big data using tools such as Hadoop for a few years now. However, it appears that many of them still do not identify big data as a strategic resource worthy of enterprise wide analysis. As a result, while there is much data available, it is being used in scattered ways by various departments operating in silos.

Some of the major analytical tools - Cloudera, Hortonworks and Map R have responded with high level and sophisticated offerings using artificial intelligence and machine learning techniques. They feel this will make the tools easier to use and more powerful.

A good example come from Cloudera, in the form of their application Reuters Tracer. This remarkable tool is used by Reuters News Agency for analyzing twitter feeds, fact checking them and producing results in a matter of milliseconds.

They recognize that Twitter has become a major news source but that it is difficult for people to sort through all the "noise" and determine what is true and what isn't. Reuters Tracer "processes about 13 million tweets daily, capturing events as they happen and determining: is an event true, is it newsworthy, and what is the scope and impact of that event."

"If a tweet is an opinion, Reuters Tracer can determine whether it comes from a recognized expert, and is therefore of news value. In delivering its results, it provides journalists and businesses with a 'newsworthiness score' for each event that rates its assessed level of accuracy and credibility." These results can be produced in as little as 40 milliseconds - basically real time.

Fact checking in the old sense has become something of an industry Reuters Trace can automate, if not  all, much of the fact checking needed to provide a sound basis for decision making.

Many companies are considering applications like this for their own business purposes, perhaps with a big data source like customer or supplier activity with analytics embedded to focus on key strategic decisions. Auditors can definitely use tools like this to improve the analytical techniques used in audits - something that is badly needed.

For more, check out these references - A recent article on the subject and the Cloudera website.


Monday, June 11, 2018

Digital Transformation requires BPR

In the current frantic push of enterprises to digitize their operations, in the form of digital transformation, there is one old process they can't get away from and that's Business Process Reenginering (BPR).

BPR has been around forever, but really came into prominence during the heyday of big ERP (Enterprise Resource Planning) implementations in the 80s and 90s. Those implementations were very difficult and costly and it soon became obvious that BPR was necessary in order to fit the technology and the business together and at the same time make best use of the technology to optimize the business.

Now, the situation of ERP systems is very different. They are well established in, and in many cases, central to the processes of the business. Where once they were the disruptive technology, now they are the legacy systems. Many companies are moving them to the cloud.

Cloud based ERP systems are different from those legacy ERP systems. Partly because ERP has evolved in recent years, and partly because of having transformed to cloud applications, which require new and different operational and security processes.

In the process of digital transformation, many organizations are now using DevOps, which involve automating the processes of software development and IT teams. Since the IT teams must necessarily be concerned with BRP, the DevOps processes must be consistent with the BRP efforts, particularly where they meet.

All of this means that digital transformation can be a tremendously complex affair.

Here's another article on this general topic.


Thursday, June 07, 2018

Blockchain and the Accounting Revolution


It is being said that blockchain will revolutionize accounting, because it enables an independent record of all transactions in a separate distributed ledger which is available, shared, independently recorded and unchangeable. Essentially, the entries would flow from the record of smart contracts, under which commitments entered into by parties to a transaction would become part of the shared distributed ledger and then the settlement of that contract would be automatically implemented by the contract and also recorded in the distributed ledger. Thus all parties to the contract would have a record of the entire transaction stream from beginning to end. Since these entries flow from the agreed contract and are then generated by that contract independently of the parties, it forms a tremendously valuable part of the audit trail for those transactions. Some have even suggested that this would eliminate the need for auditors, and although this is an overstatement of its effect, there is absolutely no doubt that it will transform the way that auditors work.

The aspect of blockchain that involves creation of the distributed ledger has been referred to as triple-entry accounting. For those with some knowledge of accounting history, this is a jarring nomenclature, as it evokes memories of Yuji Ijiri, the noted professor at Carnegie Mellon University who published a monograph of that name in 1982 along with a paper in The Accounting Review in 1986 outlining the nature of triple-entry accounting. Some academic writing has focused on this similarity and asked the question is the triple-entry accounting of Ijiri the same idea as that of blockchain? Some have said no and others yes, at least conceptually.

It’s not a simple issue. The essence of Ijiri’s model was the introduction of a new measure of performance called momentum and a Statement of Force that shows the rate of change in the organization. The addition of the Force Statement to the traditional Balance sheet and Income statement gives rise to the triple entry concept.

In blockchain, the third element to the accounting process arises from the creation of the distributed ledger that shows a complete record of all transactions in the enterprise – a very different concept.

However, the distributed ledger could easily be used to create Force Statements as it contains verifiable dates of all events through cryptographic methods. So, a logical conclusion is that the Ijiri and blockchain concepts are very different but at the same time that the two are very compatible. Will the Ijiri concept make a comeback? Who knows?

Blockchain is being adopted quite extensively, particularly in situations where smart contracts make sense. And an industry is forming around it. But it has not reached the level of general adoption across the spectrum of accounting. Whether it will remains an open question. But there is no question that it will be a major force in accounting providing new and better accounting controls and perhaps leading to the extension of accounting into new dimensions, like those of Ijiri, or something like that.







Wednesday, May 16, 2018

Digital Transformation Driving Companies Back to the Basics

Digital Transformation is the latest mantra for companies; the latest big buzzword.

Of course, it's more than that. There's reality to the phrase as a survey recently released by PointSource confirmed. "At least a quarter of companies plan to invest more than 25% of their budgets in artificial intelligence (AI), blockchain, voice-activated technologies or facial-recognition technologies. Yet over half of these organizations (53%) feel that they’re unprepared to effectively use the technologies they plan to acquire."

This is a telling finding. The companies recognize the potential of these technologies, and are jumping into their acquisition, but have not clearly determined how exactly they are going to use them.

The most basic element of strategic planning, whether it be corporate planning or IT planning, is to study the overall objectives of the organization and develop a plan that is consistent with those objectives - a plan that helps the organization to achieve those objectives.

Yet, Greg Ng, vice president of digital engagement at PointSource, points out that "Digital solutions and strategies exist to solve so many of the problems companies face today. But decision makers consistently struggle to parse down to just the digital capabilities that are right for them."

Therein lies the problem. finding those solutions that actually fit with the corporate objectives and will help to achieve them. It's an old problem, and the solution has been around for years - focusing on that aspect of corporate strategic planning that begins with defining the objectives, identifying the potential solutions, analyzing which solutions are likely to work the best, and writing action plans that will make them a reality. It's not as simple as it sounds, and not as romantic as re-imagining the company, but it's as essential an approach as it ever was, perhaps even more so. For more, see this article and the related study.

Friday, May 11, 2018

Fully Integrated Corporate Reporting

There has been a great deal of change in corporate reporting to shareholders and other stakeholders in recent years. Notable has been an increased reliance on the investor relations section of websites and inclusion on the sites of data oriented disclosures that encourage and facilitate downloading select data for analysis.

There are other changes that have been regularly promoted by various people and organizations but not yet widely adopted. This would include integrated reporting, under which sustainability and financial reporting are combined in an integrated fashion to provide a wholistic picture of the operations of the company.

Some companies provide a separate integrated report, whIch leaves the company with a situation in which they have three different reporting vehicles out for consumption – the integrated report, the traditional annual report and the IR section of the Website.

While these companies deserve recognition for their efforts to innovate, nevertheless, this multi-report world seems an inefficient and wasteful approach.

Perhaps it would make more sense to integrate all three into one single IR Website. At present, the annual report is usually included as a PDF in the Website. Sustainability and governance disclosures are usually included as separate sections of the website, separate from the IR Section. But it is never integrated. This despite the fact that the annual report is a relic of the age of print, and people rarely read the print version any more. Also, it is in most provinces not a legal requirement.

Although companies are usually tight for time in simply complying with legal and regulatory requirements and don’t have a lot of time for innovation, nevertheless innovation of this kind, where the number of reports could actually be reduced, would seem to be a form of innovation that could be very viable.

Perhaps reporting companies should include fully integrated reporting in their set of objectives for their business reporting activities.

Wednesday, May 02, 2018

How to Build a Smart Decision Making System

You want a smart decision making system? OK, it goes like this. Start with a body of good solid data. Not necessarily big data but data that is comprehensive in a particular important aspect of your business. Then, identify the business decisions that are prime subjects for automation. Add advanced data analytics that can be used to identify trends and dominant features of the data. Blend in some AI, that uses machine learning to identify the trends, anomalies and other characteristics and spit out optimum courses of action to advance business interests. Finally, identify the business processes that are used to make those decisions. Integrate the technology with the business processes, adjusting and modifying the processes where necessary.

Right away, we see some of the challenges. How good, really, is the data. Is it readily available, balanced, nuanced, rich? Is it in usable format and platform independent? Are the data analytics reliable, accurate and consistent? Will the decisions reached with the AI be consistent with business policy and culture? Fundamentally, how well can the data, analytics, AI and processes be integrated? What if any will be the role of people? How will we manage the changes in people activity?

With this quick glance at the landscape, it's easy to see why AI implementation is proceeding slowly. Management can envisage the benefits. But the devil is in the details.

Nevertheless, there is a lot of activity in the business world developing smart decision making systems. We can expect to see a lot more over the next few years.

Monday, April 30, 2018

Plan Carefully in Moving to the Cloud

Various surveys show that a priority of many IT Directors is to move applications to the cloud. We also know that a great many companies have a large number of legacy applications, which means they will be faced with the issues around moving those old applications to the cloud - often referred to as lift and shift.

In some cases, this will mean that significant advantages of the cloud will be sacrificed, notably that of scalability. This could mean you pay more for less.

Selecting the right cloud vendor is one of the early and most important decisions. As is the selection of an IT migration specialist to help wth the transition. And then there's establishing suitable and effective channels of communication, especially if there is a high volume of data, as there usually is with business applications.

High volumes of data also raise the issue of storage cost, which can be a substantial part of the overall cost of cloud based applications.

Of course, moving applications to the cloud usually is a significant project, requiring extensive and careful planning and execution, not to mention maintaining security. These few comments are the very top of the tip. Suffice to say that established pre-conceptions about the benefits of cloud computing cannot be taken for granted.

For more detail on this topic, check out this link.

Friday, April 27, 2018

Priorities Among IT Professionals Not What You Might Expect

Solarwinds has released its 2018 survey of IT professionals. This time, they contacted 803 professionals from North America, the UK and various other points around the globe as to their views on IT priorities now and in the near future.

The conventional wisdom as to priorities focuses on artificial intelligence (AI), machine learning (ML), and blockchain. But there is a hype cycle at work here and with some of these, the cycle has not yet reached the stage of disillusionment. Nevertheless, C-Suites are trying to explore these technologies and how they might help them in their businesses.

IT Professionals, on the other hand are those charged with the job of inplementing technologies, and have a huge say in what ultimately goes live. The survey reveals that Cloud/hybrids are the top priority for this group. Second is the more general category of automation and third is big data analytics. Maybe these technologies are further along than others in the hype cycle. At the bottom of the heap are AI, ML and Blockchain.

What the survey indicates is a certain dissonance between what the C-Suite is looking at and the priorities of the IT Professionals. However, these two groups have a common goal - using technology to maximize productivity and efficiency. The survey may simply be indicating that some technologies are less advanced in terms of implementability than others.

Solarwinds recommends that organizations continue to focus on the development of cloud/hybrid technologies. In particular they emphasize implementation of Containers, which are technologies that improve the abilities of operating systems to share applications most efficiently.

As the report puts it, "investment and skills development perspective. IT professionals must remain grounded in the here and now, understanding that containers represent lower-hanging fruit in terms of investment, requirements, and barrier to consume. Specifically, containers enable application portability and promise consistent deployment, scalability, and development agility—all of which are key benefits in hybrid IT environments."

For the report, check out their site.

Friday, April 20, 2018

How Companies Become Digital Champions

PWC has published a study in which they interviewed 1,155 manufacturing executives in 26 countries to develop an index that ranks companies by digital operations maturity, from Digital Novices, Digital Followers, Digital Innovators to Digital Champions.

Out of that study, they developed a blueprint as to how companies can build themselves into digital champions, a distinction that only 10% of companies hold.

Digital champions are defined in the study as companies that have fully integrated digital technology into their systems end-to-end. They analyzed the data according to four ecosystems, which were Customer Solutions, Operations, Technology and People. It's important to note that these are not separate systems in the conventional sense but rather layers of systems within the company. Integration using digital technology is the key.

"Digital Champions distinguish themselves by advancing their capabilities through all four ecosystem layers, creating an organizational environment that takes the greatest advantage of the opportunities from digitization."

They found that companies in the Asia-Pacific area have the most leaders.

The report is available on the PWC website.

Monday, April 16, 2018

AI - Develop, Outsource or Buy?

A recent Gartner survey showed that 4% of companies have implemented Artificial Intelligence and 46% plan to do so. That shows two things - AI is in it's infancy and interest in it is strong.

How they actually implement is an open question. They can develop it on their own, but that's really expensive and requires a major effort. Or they can outsource it from providers like Amazon or Google. A third approach is to buy it from their software provider, which involves waiting until they offer it, and then determining if it fits their organization.

The latter approach is bound to be quite popular for the larger organizations and many medium ones that use SAP or Oracle, because a great many do use one or the other of these. Also, typically SAP or Oracle as the case may be will usually have invested in learning about the needs of the company and can help develop solutions that will be most likely to be a fit.

Most companies will not build their own AI apps. So either of the other approaches, the issue will be how to establish a competitive advantage.  Forrester Research's Brandon Purcell has the answer to that issue, "Data will be the key source of competitive differentiation in the world of AI -- emerging data sources, innovative data transformations, and business-infused data understanding will lead to better models and ultimately better results from AI.

Once again, data rules the day.

For more, check this article.

Wednesday, April 11, 2018

The Future of Corporate Reporting is Digital

The UK’s FRC Lab issued a deep dive report in December that urges regulators, companies, investors and technology providers to work together to realise fully the potential of XBRL and to respond to the challenge of a new European Single Electronic Format (ESEF) for digital corporate reporting due to come into effect in 2020.

XBRL has become the leading technology in the world for digital reporting. It is required by more than 100 regulators in 70 countries, including the SEC, which last year implemented requirements for foreign private issuers to file their reports in XBRL. That was a significant requirement for all FPIs around the world using the IFRS accounting standards. This includes over 300 companies in Canada, most of its largest companies.

In the EU, the ESEF requirement takes effect in 2020. That requirement calls for the use of XHTML combined with iXBRL to present reports. All EU Companies will be required to follow this approach. In the UK, iXBRL is already required by the tax authority and some 2300 companies must comply. Also, over 2000 companies file their reports in iXBRL with Companies house, the national companies registry.

The deep dive report was triggered by the forthcoming advent  of ESEF and a recognition that preparation is required to make it work properly.

The movements of the US, UK and others towards digital reporting point to the fact that a world where corporate reporting is based on paper is rapidly coming to a close. In an increasingly digital world, where companies are engaged in digital transformation at all levels, the expectation of a continuance of paper based reporting is absurd. Paper reports will survive for some time, but they will be secondary reports, expensive relics of the past.

The deep dive report fully supports the power of XBRL and contains several important suggestions, including:
  • for regulators to work together to align reporting requirements and thereby reduce reporting burden.
  • for executives and Boards to ensure that suitable governance is in place so that digital reports meet the needs of users. Companies need to have appropriate processes and procedures in place to manage disclosure in a digital age.
  • for users to familiarise themselves with Inline XBRl and structured financial statements, to ensure that they can maximise the benefit that digital disclosure of fundamental data can deliver.
  • for software vendors to work to educate the market and to continue to innovate in the delivery of high quality software that is easier, more intuitive and more accessible for the preparer community.
Here is a link to the (PDF!) report.

Monday, April 09, 2018

Need for A Stronger Role for Libraries in Digital Information Consumption

With all the fuss during the past year on the reliability and truth of information, especially that available through the digital media and the news media, has led to renewed interest on how people can be confident about the information they have available to them.

As part of the research on this topic, Pew Research Centre did a survey last year on the types of information available and the feelings and attitudes of people about that information. They explored factors such as the following. "How interested are they (consumers) in the subject? How much do they trust the sources of information that relate to the subject? How eager are they to learn something more? What other aspects of their lives might be competing for their attention and their ability to pursue information? How much access do they have to the information in the first place?"

An analysis off these factors led to a conclusion that two main elements contribute to the level of their enthusiasm about information - "their level of trust in information sources and their interest in learning, particularly about digital skills."

Other studies have shown that people must have some trust in the information in order to be able to use it intelligently. But what to trust in the digital world, particularly that of the internet, is a difficult challenge. Levels of sophistication about information reliability tend to vary with levels of education. Also, gaining access to the information requires a certain level of digital skill with the tools being used. This in turn requires some desire to learn those technologies. This desire to learn varies as well. Often the level of sophistication about the information and the desire for learning follow the same track in tandem.

While the Pew study concluded that there is not a "typical user" out there because of the spread of the variations across the population, there is an obvious possible role for a learning mechanism for those who are at all willing to take part in learning activities, which according to the results constitute a large proportion of the population. Pew points to the libraries as a possible resource in this effort.

AS the Study says, "Library users stand out in their information engagement. Overall, about half (52%) of adults have visited a public library or connected with it online in the past year. Those library users are overrepresented in the two most information-engaged groups. Some 63% of the Eager and Willing were library users in the past year, while this is true for 58% of the Confident. Additionally, both groups are much more likely than others to say they trust librarians and libraries as information sources."

Something to think about, especially for those who think that libraries are obsolete. Here's a link to the Pew Study.

Wednesday, April 04, 2018

What we Mean by Information Integrity

With the growing focus on data for purposes of decision making, whether it be big data or regular internal data, there is a growing need for a focus on information integrity. However, what exactly is meant by information integrity is not widely understood.

In 2013, the AICPA Assurance Services Executive Committee’s Trust Information Integrity Task
Force in conjunction with the Canadian Institute of Chartered Accountants published a paper on this topic. The paper provides a full explanation of the meaning of information integrity.

In that paper, "information integrity is defined as the representational faithfulness of the information to the underlying subject of that information and the fitness of the information for its intended use."

These two concepts - representational faithfulness and fitness for intended use - form the core of information integrity.

Representational faithfulness is determined by how well the information "represents the subject that it purports to represent. For example, a weather report is the representation of the weather. Therefore, the integrity of the weather report depends on how well it represents the weather."

The other concept - fitness for use, is clearly related to the concept of representational faithfulness since if the information does not fairly represent the subject, it will be of little use.  But fitness for use goes well beyond this idea. The paper points out that "information is prepared for a specified purpose and includes: (1) the observations about the characteristics of the specific events or instances to which it pertains, (2) information about the environment in which the events occurred or the instances existed and (3) other information necessary for the observations to be used for their intended purpose."

This additional information is often referred to as meta-information. "Information integrity is determined based on both the information’s consistency with its meta-information and its representational faithfulness. Therefore, information integrity includes the accuracy, relevance, precision, timeliness and completeness of the information and its meta-information. Information that is accurate, relevant, precise, timely and complete for a particular purpose can be termed to be “fit for purpose.”

That's quite a handful to deal with. It requires some dedicated effort by management to assess the integrity of the information it is using, but this effort is crucial to making sound decisions.

The paper has some ideas for how management can obtain the assurance they need, ranging from making sure they understand the context of the information to obtaining an independent report from an information assurance professional. It's an area that deserves a lot of attention. A copy of the ASEC report can be obtained on the AICPA site.

Tuesday, April 03, 2018

The Need for Trust in Data

The rise of usage of big data, often from outside the company, with the use of data analytics enhanced by Artificial Intelligence in making decisions has led to a confluence of issues around the question of whether the data can be trusted. Since automated decision making can often operate independently of people intervention, and in fact operates along with people, the issue becomes one of governance.

C-suites are beginning to consider this issue since they are in charge of overall governance. They are asking - how does the involvement of machines in decision making affect corporate governance?

In a recent study commissioned by KPMG International, Forrester Consulting surveyed "almost 2,200 global information technology (IT) and business decision makers involved in strategy for data initiatives.The survey found that just 35 percent of them have a high level of trust in their own organization’s analytics."

This is an important issue. Trust is essential in order for people to interact effectively with machine generated decisions. Lack of trust will inevitably lead to the development of informal workaround processes that will not serve the organization well in the long term.

What it means is that machines making decisions need to be managed along with people. So organizational responsibility for data and for analytics needs to be assigned. To establish trust, there needs to be some assurance about the quality and integrity of the data and the integrity of the analytics (models and algorithms) being used.

It's a major challenge. Check out the KPMG Report here.


Wednesday, March 28, 2018

The need for Technology Training

Recent surveys show that managers lack training in the technology they are supposed to be using; in which their organization has made substantial investments, but can't get the full benefit.  For example, West Monroe Partners, a consulting firm, did a survey of 500 corporate managers a few months ago. They found that 44% of the managers received no training in their automation tools. Combine this with the fact most of them are bogged down in administrative tasks, and you can see why this is a problem. Their time for self-learning is very limited.

It's commonly felt that young people grow up with the technology. But they don't grow up with mush that's useful. Facebook, Instagram and Twitter are not core tools for enhancing manager effectiveness.

They learn some of the basics in apps like Excel, Powerpoint and Word in school, and this helps, but it isn't enough for the job market.

Universities generally, with some notable exceptions, have done very little to deal with the lack of training. They often look upon the teaching of technology applications with disdain.

Community trade schools and the like do a good job, and many young people are turning there for necessary life technology skills.  However, the greater burden rests upon the companies and other organizations that adopt new technologies. They need to allocate sufficient resources for training and implementation.  While this has been a mantra for years, clearly they are not doing this. They need to take note.

Monday, March 26, 2018

Blockchain Technologies could Enhance Data Privacy

The recent Facebook data misadventure showed what can happen when data owners give up control of their data. If they did not give up control, then such data misuse could have been forestalled. If the data owners needed to receive assurance from credible sources that the data would be used only for specified purposes, then they could decide whether to grant the permission to use it.

Blockchain comes in two basic varieties - permissioned and permissionless. Permissionless blockchains are open to the public and any participants can join together to create a consensus on the use fo the data. Permissioned blockchain reserves control over the actions in the blockchain to approved participants. Most corporate blockchains currently being implemented are of the permissioned variety.

Facebook did not use blockchain at all, but if they had used permissioned ones, with the data owners as approved participants, then the owners of the data could have had a voice in the use of their data - they could be part of the consensus. If a particular organization approached them to use the data, then the data owners could give them a 'yes' or 'no'. Or they could say 'you can use the data that directly applies to your purpose, but you don't need the data items that do not so relate, such as people's addresses, emails, etc.' The data included in the permissioned activity, in other words, could be screened out to reduce the possibility of misuse.

Blockchain does not provide absolute assurance of proper use of data, because people are still involved. However, it would provide a powerful means of reducing the possibility of misuse. We will be seeing  a growing use of blockchain or perhaps other distributed ledgers for these purposes.

For a good article on this topic, check this out.


Friday, March 23, 2018

The Rise of the No-collar Workforce

One of the ideas put forward in Deloitte's 2018 Tech Trends listing is that of the No-collar workforce. The thought of course is that Artificial Intelligence is taking over a lot of human activities. AI is nothing new, but the power of the AI that is emerging is very new, and raises a lot of important questions.

As Deloitte puts it, we have "Humans and machines in one loop—collaborating in roles and new talent models. Is HR prepared to manage both man and machine? As automation, artificial intelligence, and cognitive technologies gain traction, companies may need to reinvent worker roles, assigning some to humans, others to machines, and still others to a hybrid model in which technology augments human performance."

The question being raised here centers around the idea that HR departments may have to manage machines along with humans. This makes a lot of sense. AI capable machines carry a cost with them. If they are going to replace humans, then someone needs to manage the economics of those replacements. Is it going to save money to automate a particular function or not? If a function is carried out by humans, would it make more sense to simply augment those humans with additional cognitive abilities enabled by AI rather than replacing them?

Of course, it is management's job to allocate and manage the use of resources they have at hand and they have managed humans and technology for some time. What's new is that the role of technology is getting closer to the role of humans and more interchangeable. And as more human/machine hybrids become available, it inevitably becomes very much a HR concern. It's likely that the divisions will become more blurred as time goes on.

Just wait until the machines decide to join unions! Why not? The hybrids will already be members.





Wednesday, March 21, 2018

Digital Transformation - A Major Shift


As more and more companies make the move to digitize their entire enterprise, the challenges are coming out more clearly. A recent survey commissioned by Infosys shows that: "At the present time, respondent organizations use digital technologies for core IT management (79%), customer relationship management (62%) and business process management (60%). Moving forward, they plan to use digital technologies for knowledge management (33%), operational intelligence (31%) and product development (28%). Already, 67% leverage big data analytics. More than half of that group have already made deep learning investments."

"Adoption of AI (56%), IoT (42%) and blockchain (30%) are also growing as organizations proceed down the digital transformation path."

Implementation of applications utilizing such technologies as Artificial Intelligence, blockchain and big data analytics, will result in the elimination of numerous jobs, mostly those involving routine functions. But new skills will be needed and the challenge to organizations is to do the required retraining of their people to be able to handle new business processes, as they become more automated using these techniques.

For a great discussion of the challenges, check out this article.

Monday, March 12, 2018

The Web Needs Fixing

Sir Tim Berners-Lee has written an open letter outlining the challenges facing the web today and pointing in very broad terms what should be done about it. First, he points out that this past year saw the internet as being available to more than half the people on earth. This was indeed a big milestone, but nevertheless leaves almost half without access. That has serious social implications, as it is well known that the internet divide feeds into the social divides of poverty and inability to access important resources and participate in social discourse. Sir Berners-Lee says we need to find ways to expand the accessibility to the Web.

Second, he points to the more recent decay in the quality of content. As he says, "we’ve seen conspiracy theories trend on social media platforms, fake Twitter and Facebook accounts stoke social tensions, external actors interfere in elections, and criminals steal troves of personal data."

To address this important issue, Sir Berners-Lee says we need to get more people, including the major tech companies, involved in an effort to re-focus the Web to take into account social objectives, recognizing it is now one of the most important elements of modern society.

These are big issues, and broad solutions, but they need to be considered and acted upon.

Thursday, March 08, 2018

Smart Contracts May Not be Secure


Blockchain has been cited as a major breakthrough for developing smart contracts, ie contracts that execute transactions as agreed between parties automatically. Ethereum is a widely used form of smart contract based on blockchain. For example, if a transfer of funds is agreed upon between two parties to a third party, the smart contract could make this happen as agreed. The idea is that it would be secure because of its transparency. Nobody could get away with deviating from or changing the contract because their actions would always be transparent to the parties to the contract.

Initially, this theory was not tested because blockchain was hardly ever used. However, since its inception, use has grown to the point that meaningful studies can be carried out on their effectiveness and safety.

Recent research is indicating that Ethereum contracts may not be as secure as originally thought.
For example, in 2016 a hacker stole $50 million from the Decentralized Autonomous Organization. Also, some blockchain based electronic wallets have misfired, losing money and availability to users.

Research on this important issue is ongoing, A significant study at University College London led to release of a preliminary report last week and is bound to reveal further weaknesses in blockchain contracts as it moves forward. For more on the research, click here.


Monday, March 05, 2018

SAP - A Leader in Integrated Reporting

SAP, long an international leader in enterprise financial systems, is also a leader in corporate reporting. This is illustrated in its release of an integrated report for 2017, which can be found at its integrated reporting website.

That website reflects the company's reporting on Financial, Social and Environmental highlights. A separate PDF file is also downloadable from the website that  provides more detail on the integrated reporting.

The financial reports are of course prepared in accordance with generally accepted accounting principles (IFRS). The environmental and social reports are in accordance with the GRI standards. The social reporting website dwells heavily on employee engagement and therefore has a heavy HR emphasis, but the PDF provides a lot more information on a variety of social indicators.

The key to good integrated reporting is to truly integrate the financial, social, and environmental reports and show their inter-relationships and interdependencies. The SAP integrated report addresses this issue head on with a section in the website and in the PDF on "Connectivity of Financial and Non-financial Indicators." While far from the only section that truly integrates, this document serves as something of a focal point for that integration.

On the website, "SAP has used techniques such as linear regression analysis to document the financial impact of four non-financial indicators. We assess each indicator to see what a change of 1pp (or 1% for carbon emissions) would mean for our operating profit." The results for 2017 are set out in a table. The PDF expands on these matters.

The PDF offers up a Combined (integrated) Management Report, and other integrative information. There is also an external audit report on the financial statements as well as on certain of the non- financial indicators. The report also provides negative assurance in accordance with international assurance standards on the other non-financial indicators.

Overall the report is a good example of integrated reporting and while improvements could be made, it does provide a good example for others to follow.




Friday, March 02, 2018

Integrated Reporting - There's a Need - Lets Do It

Integrated reporting has been slowly growing in recent years. Not so much in North America as in other areas of the world. It's time we got smarter.

Financial reporting has a long and influential history and has long formed the core of business reporting by companies. It does a reasonably good job of reporting on the financial results of corporate activities.

However, there is a lot more to the world than money, important though that may be. This is recognized in the current methods of corporate reporting by reporting on sustainability, governance and to a limited extent social aspects of corporate activities. Nevertheless, these are all reported upon separately in most cases. Integrated reporting draws these area together into a single integrated report. Examples of integrated reports are included in the Integrated Reporting Examples Database. The latest winner of the integrated reporting contest sponsored by the IIRC was York Timbers, an African forestry company. Previously the winner was a  gold mining operation - Goldfields - also an African company, albeit with a NYSE listing.

The International Integrated Reporting Framework (IIRC) acknowledges that the criteria for the assessments are reasonably aligned with its International <IR> Framework and encourages further assessment and recognition of integrated reports globally.

Integrated reporting draws together the separate components of corporate reporting into a single integrated report. It has implications far beyond reporting, however, and its full adoption involves a change in corporate management and strategy development to place a greater emphasis on all impacts of corporate activity. That would include, for example, use of balanced scorecards for measuring and reporting performance.

The use of integrated reporting provides a much more meaningful picture of corporate reporting than the divided and overly complex reporting that is currently in place. Hopefully its use will continue to grow.



Thursday, March 01, 2018

What's holding up Blockchain Adoptions?

A recent Deloitte survey showed that of "developers have created more than 86,034 blockchain-related projects, including more than 9,375 that were started by organizations. However, 92% of those blockchain projects had been abandoned, and only 8% were still being actively maintained by their creators."

Clearly many companies have been caught up in the hype and have since learned that blockchain wasn't the answer to their dreams.

Further analysis showed that the most common reason the projects didn't move ahead was because of an initial lack of understanding of what Blockchain could do. Then there's the issue of how blockchain's capabilities fit into the needs of the business. 55% of the companies said that there was a lack of a clear business outcome in the project.

Also, blockchain hasn't been adopted widely as yet, and another "survey found that the number one most significant barrier to blockchain adoption, cited by 78 percent of respondents, was the lack of industry adoption."

Many are not aware that blockchain is a collaborative effort. While that can work in a company - not all companies - it is much more difficult to make it work with other companies - customers, suppliers, perhaps competitors. Most companies need to bring in other companies to have a useful application.

There are other barriers, as outlined in this article in InformationWeek.

While blockchain has established itself firmly in the case of secure contracts, and certain financial transactions, there are many other aspects of business where it is a solution looking for a problem.




Tuesday, February 27, 2018

AI The Answer To IT Management

Artificial Intelligence (AI) is exploding into the landscape and IT management is not exempt from this invasion. AI has strengthened greatly over the past few years and there is a growing feeling that it the answer to current IT management challenges, including service requests, downtime avoidance, security management, and the like.

" 'Over time we expect the traditional SLA model—99.xx availability, etc.—will have no meaning as the system is always on, compliant, secure, agile and flexible,' advises Satheesh Kumar, IBM's vice president of hybrid services, AI platform."

The first step in implementing AI for IT management is in formulating a management strategic plan. AI can be implemented through the introduction of sensors that continuously convey data to the AI engines. These sensors would be smart enough to anticipate problems, thus moving performance issues detection from those that have already occurred to those that are about to occur.

With AI involved, IT management can devote its time to innovation and planning. AI will handle all repetitive and time consuming activities initially and gradually take over more complex matters.

Check out this article for more on this topic.

Tuesday, January 30, 2018

Blockchain Ledgers are not Accounting Ledgers

There is some confusion in accounting circles about the use of blockchain in financial systems and particularly for financial reporting. While there is a role for blockchain, it is destined to be a defined and somewhat limited role. The reason for this confusion is that all the literature about blockchain refers to its central mechanism for recording transactions as a distributed ledger, which accountants think means that blockchain can somehow substitute for accounting ledgers. It's true, there are applications emerging where blockchains serve a lot of the functions of specific ledgers, such as those used for recording certain contracts or sales ledgers and other specific transaction types,  and these are very useful but they serve a different purpose than accounting ledgers. One of the difficulties lies in the fact that a central purposes of accounting ledgers is to record the transactions using accepted accounting principles. In a blockchain, it's unlikely that all participants in the blockchain are going to agree on accounting principles all the time.

This point is made in a an FEI article recently published. Some further research into the use of blockchains in the accounting cycle is being carried out by "The Financial Executives Research Foundation (FERF) in collaboration with Deloitte to explore how blockchain is currently being adopted in the financial reporting community, the potential for industry disruption and the realistic next steps for the technology to be embraced."

As this and other research moves ahead, we are likely to find that there is a distinct role for blockchain, but that it is not a substitute for accounting ledgers.

Friday, January 26, 2018

Can Artificial Intelligence Address Fake News?

To live in the age of information is a challenging experience. We now have more information available than at any time in history. Also, new information is being created at growing rates. This is well documented. The bulk of this information has become available through the internet.

Our naive selves might have assumed at one time that with all this information, the populace would be much better informed. Now we know that to be wrong. A significant amount of the information available on the internet is not based on facts. Rather it is mis-information or "fake news". Or just opinion based, with strong biases. We know that the dispersal of information in the age of the internet is seriously flawed.

The Pew Institute survey recently conducted a large-scale survey of technologists, scholars and others to see where they think the information environment is headed. The overall result was that 51% felt it would not improve over the next ten years and the rest felt it would. The report goes on to provide a wealth of information about those results, leaving the reader to draw individual conclusions. The main considerations leading to the survey result divided into technological issues and human nature. Many of the pessimists felt that the environment would not improve because of human nature.

People, faced with this vast array of information need to choose.They can't and don't want to read it all. There is a tendency of people to seek out the news that confirms their own views or biases. With the new vehicles for conveying information on the internet, notably social media, there is much opportunity to find information that confirms a variety of views and often has no factual basis whatsoever.

So, does the answer lie in technology or in human nature? It's hard to to think that human nature is going to change anytime soon. True, people may become more adept at filtering the information and one hopes we will. But better screening ability may not be enough to overcome the basic impulses to seek out validation of personal views.

Another possibility lies in the advances being made in artificial intelligence. The new AI technologies could be a big help in enabling people to cope - in seeking out more fact based and truthful sources.

While some may rebel at the notion that their information is being managed by computer programs, nevertheless the nature of the new AI technologies is such that they may be the best possible solution.

We need all the help we can get.