Innovation: How to manage it

Managing innovation? Why put a damper on creativity? No, that is not the idea. The purpose of managing innovation is to organise all the free-flowing ideas in order to avoid chaos and to actually put all the great ideas into action.

 

Here are the steps to how you can manage innovation:

 

  1. Envision

 

To envision an idea is a critical step in the innovation management process. The envisioning process should put the plan in place to reach the innovation goals. Words alone are not enough. Leaders of innovative companies need to emphasise that innovation is a strategic imperative and they need to back up their words with their actions.

 

  1. Engage

 

The next step, to engage, is where ideas are generated. In this process, companies engage employees, customers and partners to capture and share new ideas. To formalise the engagement process transforms it from an unfocused and ineffective “suggestion box” to a proactive and productive approach that efficiently produces targeted innovations.

 

  1. Evolve

 

With this step, companies evolve ideas to increase their quality and value. Early feedback will allow ideas to be improved upon and problems to be raised so they can be solved or prevented. Give people a platform to exchange information, add comments and refine ideas, and remember, in order to get the most out of ideas, they need to mature. Developing these ideas in a virtual team setting provides the medium to bring group knowledge together and share it with subject matter experts, communities of interest and others by discussing, commenting and contributing to concepts.

 

  1. Evaluate

 

Companies must identify the ideas that they believe will succeed. A lot of companies are overwhelmed by too many ideas. They want to use the “wisdom of the crowd” to provide some direction on where to focus. The goal is to take potentially thousands of ideas and turn them into a more reasonable number that you can evaluate. Companies can identify the best ideas by tracking which ideas are getting the most attention, views and comments. They can also provide mechanisms for the community to rate the ideas, from a simple “like” to providing specific feedback or validation on details like technical feasibility.

 

  1. Execute

 

The best idea in the world will have no value unless it can be transformed into a reality. The execution process takes the input from the previous processes to execute an official project which will further build on the idea. Companies should have a repeatable project management method and should plan projects based on the deliverables to be completed. One of the clearest challenges that companies face in the execution phase is simply getting projects delivered on time and on budget while maintaining quality.

 

In conclusion, successful innovations are the result of carefully examining the target market and the available technology to meet customer needs. Essentially, innovation management means to be innovative in order to come up with solutions, before competitors have realised there is a problem.

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The labour cop out on jobs

By Jerry Schuitema.

 

There are a number of follies in the intensified hype around job creation. One that came from the recent job summit is setting some target, albeit vague, of creating some 275 000 000 jobs a year. We should have learned by now that there are many forces outside of measures we can take ourselves that can turn the employment environment on its head.

 

Another is an attempt to create some form of tangible cohesion between representatives of groups that are so widely fragmented themselves. There can be no greater forces for cohesion in a group than having a common purpose and accepting a common fate, and the extent to which these can be forged in efforts such as the job summit will ultimately determine its success.

 

The only counter we can create against outside forces is a flexible economic construct that can absorb the bad times and exploit the good times to the fullest. In a business sense this can only be built on the principles of having a common purpose and sharing a common fate; a subject I have dealt with in depth in the revised version of my last book Common Purpose; Common Fate (a free pre-publication PDF copy of which can be downloaded here).

 

One can only find a common purpose by being outward looking; by making a contribution to the outside world — specifically customers or the needs and wants of others. Customers create jobs – not capital, labour or even government. By its very nature, jobs (and profits and taxes) are an outflow of that. So the concepts of job retention or job creation are inward looking and mostly end up in a toxic trade-off.

 

Unemployment is the outcome of losing jobs faster than we can create new jobs. Fix the problems causing job losses and job creation will take care of itself. We cannot do so by simply making some “sacrifices” by corporate capital in where it invests, who it buys from and occasionally waiving a dividend; or by labour being “less militant” in fighting retrenchments. The latter is something of an inconsistent trade-off for not insisting on a retrenchment moratorium.

 

The cohesion we seek at national level can only be effectively created at an individual company level – the wealth creating cells of our economy. Jobs are created and or sustained by an ability to create wealth, not simply redistributing wealth creation itself. It’s much easier to create cohesion around wealth creation because all can subscribe to the company’s common purpose of serving customers; irrespective of individual motives such as making a profit or receiving a wage. The latter are entirely dependent on the former, and the more these motives can be aligned to the former, the greater its flexibility and strength.

 

The single biggest drawback that continues to bedevil all efforts at creating flexibility and economic strength, is the cop-out by organised labour. It consistently behaves as a beneficiary or recipient rather than a contributor. Yet, as shown statistically by a national Contribution Account© of average company wealth creation and distribution, they are by far the biggest group beneficiaries in wealth distribution. But, because value added itself represents both contribution and reward, it can be argued that that share represents contribution as well; meaning that they are the biggest contributors to wealth creation. Unfortunately, that part is the most rigid and inflexible in its individual units of the wage itself. When wealth creation is lower, other interests, particularly capital, scramble to protect earnings and when unit costs are inflexible you simply have to reduce the number of units.

 

As long as wealth creation itself is under pressure, job losses will be the illogical outcome. I say illogical because faced with a socio economic crisis of nearly 4 out of ten employable people being out of work, it should make sense for labour to be more militant against retrenchments, and less militant if not more accommodating on wages. At the very least, it should not stand in the way of those enterprises who have such a solid relationship between all of its stakeholders that some sense of common fate, tangibly expressed in fortune sharing, is endorsed by labour itself. But it could even go much further and commit to protecting customer interests at all times and doing nothing that will harm customers, who are the real job creators for business.

 

Companies themselves can go a long way in creating labour flexibility: by encouraging an understanding of the value-creating (rather than profit) paradigm of business, and being consistently transparent about the performance of the company in an accounting expression that makes sense to all. The two pillars of optimum wealth distribution are to meet the legitimate expectations of all of the stakeholders and to encourage continued contribution.

 

These are far more manageable than one may think. All one has to do is change the lens through which one see business: from an institutional and money view; to a people and relationship view. That’s all. Do that and see what happens.

 

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Management’s responsibility

Throughout the audit of a set of financial statements, the phrase “management/director’s responsibility” appears. It is included in the engagement letter, the financial statements and the auditor’s report.  But what does it mean?

 

Management is responsible for the management of the business, for implementing and monitoring of internal controls in the business, and in terms of the Companies Act (“the Act”), for maintaining adequate accounting records and the content and integrity of the financial statements. These financial statements must be issued annually to reflect the results thereof.

 

These financial statements are used by various users (shareholders, directors, banks, SARS, etc.) to make certain decisions (buying and selling of shares, valuations, credit terms, etc.), and therefore need to be a true representation of the business. It is therefore critical that all transactions are valid, are recorded accurately and completely in the correct financial year, are classified correctly, and that all assets and liabilities that exist are recorded at the true cost/value thereof.

 

In terms of the Act, financial statements are to be prepared using either International Financial Reporting Standards (“IFRS”) or IFRS for Small to Medium-sized Entities (“IFRS for SME’s”).  Luckily management is not responsible to be experts in the above-mentioned standards, as the Act does allow for management to delegate the task of preparing the financial statements to someone with the knowledge and skill set to be able to perform this task. The Act does, however, not allow management to delegate the responsibilities that go along with it too, so they need to ensure that when they do delegate the task, that it is to a responsible person and that they review the financial statements before approving it.

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

From Xero to Hero

The internet and modern communications technology has changed everything, including the way that businesses keep their records up to date; one new approach we recommend has at its heart the cloud based accounting software, Xero.

 

In a nutshell, Xero allows you to update and view the financial state of your business in real time, from almost anywhere. And, as your appointed advisors, because we can see exactly the same information you can, we can give you the advice you need, when you need it.

 

Why do we like Xero so much? Because it’s so easy and convenient for our clients to use. Nobody knows more about your sales and purchases than you do. So it makes perfect sense for you to record your business transactions, as they happen, rather than months after the event.

 

With Xero, you don’t need to worry about data backup or software updates – it’s all in the cloud, so everything is always secure and up to date. And rather than paying for us to just typing in your data, you are able to pay us for providing you with valuable advice and guidance that will help you to make your business a success.

 

Contact Zuydam Konsult to see how we can help you implement Xero today.

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The accountant’s new dawn

By Jerry Schuitema.

 

Seeing the numbers through a different lens.

 

Few professions have been through as much scrutiny and criticism as the accountants have in recent times. This in the wake of a number of high-profile scandals that not only questioned their lack of oversight, but whether they were indeed part of the malfeasance in some cases.

 

It may have been somewhat overdone, but not unexpected. When things go wrong, it is fashionable to blame the watchdog rather than the perpetrator: especially when there is a popular perception that the accountant’s primary role is oversight and compliance. Coupled with the concept that the main purpose of corporate capital is to maximize capital- and tax efficiencies in a highly complex maze of multinational structures; and constantly expanding and differing legislation and rules around ethics, governance and sustainability; the accountant’s role in reconciling all of these with financial performance has become far more critical and exposed to public scrutiny and accountability.

 

This has placed them firmly as standard bearers in a particular camp that seeks to defend and protect the classic “institutional” and metric-driven understanding of business. That understanding gave birth in the 80’s to the “shareholder-value” model and is still largely followed today. At the same time, however, some notable thought leaders have baulked at this “dehumanizing” of business and new organisational theories such as the Stakeholder approach; Triple Bottom Line; the Balanced Scorecard, Servant leadership and more recently our own King IV governance prescriptions, tried to redefine business’s role in society and counter the exploitive institutional profit driven view.

 

So there are basically two perspectives of business:

  • Institutions driven by maximum gain for shareholders or
  • Collectives fostering meaningful and mutually enabling relationships between people.

 

It is too simplistic to categorise this as “people versus profits”. That is 19th century ideological rhetoric and ignores the fact that the two are not mutually exclusive. Nor are they irreconcilable and contradictory. It is purely a matter of changing perceptions around purpose — from reward to contribution; from profit to service (which most companies do anyway in their mission and vision statements). There is also an existential reality that to create tangible value, business has to make a difference to others; has to add value to people’s lives through the service or product they provide. An obsession with numbers, costs and profits, will be to no avail if that existential reality is not met in the first place.

 

Can the accounting profession awaken to that new dawn? With some recalibration of their current accounting lens, I believe they not only can, but could become a critical contributor in ensuring not only profitability and sustainability for their institutions or clients, but take a huge leap in improving their current image as well as becoming the most important catalyst in enhancing the understanding of business as collectives creating value for all.

 

Most of what is out there in 3BL, BS and King IV is seen to be burdensome additions; as collateral to the narrow purpose of enhancing shareholder value. I have yet to witness any of these highly costly and cumbersome processes have any effect on popular perceptions of business. In addition, there is little, if any proof that they have indeed specifically contributed to greater shareholder value.

 

What is needed is an accounting lens that aligns all participating parties to a single common purpose of value or wealth creation and a common fate in wealth distribution. The King IV creed of “creating value for all” cannot be captured in a single measurement such as profit. But it can in value-added, or wealth creation which is not only the oldest economic principle known to mankind, but also the most powerful that sustains all other benefits. I have referred to it as the “magnificent metric.”

 

Over many years, I have examined and researched the value added statement as the most suitable lens that can do that. I came to the conclusion that both the VAS and the Cash-Vas were still looking at the numbers from a shareholder perspective and after many discussions with leading practising accountants, I came up with a format called the Contribution Account©. It is neutral in stakeholder priorities and palatable to and understandable by all the participants.

 

Working with this format automatically draws one into the “meaningful relationships” perspective of business. It should, but need not be the main strategic driver but can become a highly effective operational process in transforming perceptions and behaviour. It is the ideal method of sharing financial information with all in the company: and through many different media: print, electronic, social and even role play. It also offers accounting practitioners the opportunity to become communicators, teachers and enablers on a much broader scale.

 

They then take a significant step in becoming part of a new understanding of business in society.

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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