New Zealand mid-sized companies are missing opportunities presented by the fast-paced march of technology disruption, according to the global head of audit & accounting for BDO, Chris Smith.
Smith, in New Zealand recently to attend an audit conference, says companies worldwide are struggling to stay abreast of rapid technology changes that are sparking renewed examination of standards by financial and regulatory authorities.
From those examinations spring new standards and compliance measures which force businesses to comply, costing valuable time and money.
"There is a disconnect between the standards and the technology they are seeking to address," said Smith, a senior member of BDO's global operation which has offices in 166 countries and US$9 billion in revenue as the world's fifth-largest accounting and business advisory company.
"It's the same all round the world and I am hearing it is the same for New Zealand. As the regulators struggle to rein in the technology, so the businesses they are regulating are faced with wave after wave of compliance changes."
The key, he says, is to get ahead of the technology growth curve, to adopt preparedness as a key business element and to understand that the measures needed to grow their business in a rapidly changing world need not cost the earth.
One example is data analytics. It is proving highly effective in understanding consumer patterns, the effect of external policies and economies of scale. It can make accurate predictions, capture business intelligence and provide the basis for new products and directions – with software able to translate vast reams of information into easily understood resource that helps with important business decisions.
Various reports and studies from round the world point to the innovative use of data driving enhanced profitability. Research commissioned by analytics company SAS recently found nearly three-quarters of organisations (72 per cent) say analytics helps them generate valuable insight and 60 per cent say their analytics resources have made them more innovative.
That is despite only 39 per cent admitting analytics is core to their business strategy, while 35 per cent reported it is used for tactical projects only. In spite of the acknowledged value of analytics, 65 per cent of organisations surveyed said they were not getting the most out of their analytics investments.
However, they are now pursuing rapid analytical insight as a priority as they push into emerging technologies like artificial intelligence (AI) and the internet of things (IoT). The research involved over 600 businesses and business people.
Another study, by the Aberdeen Group, showed predictive analytics users are twice as likely to identify high-value customers and market successfully to them. Other research (from MicroStrategy, 2018) show that, worldwide, 60 per cent of enterprises now use artificial intelligence to drive process and cost efficiencies while 57 per cent use data analytics to support strategy and change.
The renowned global organisational theorist, Geoffrey Moore, said without "big data", companies are "blind and deaf, wandering out into the web like a deer on a freeway."
Big data, however, has been said in the past to have a big price tag attached, afforded only by the likes of Fortune 500 companies.
"That's not true any more," says Smith. "Data analytics solutions and predictive analytics were once the preserve of big business but technology – as it always does – has moved on and is now available to a much wider range of businesses for comparatively cheap cost."
BDO's New Zealand chairman, David O'Connor, said over 80 per cent of New Zealand businesses were small-to-medium enterprises but many (and maybe even most) were caught in the day-to-day challenge of doing business and coping with compliance changes caused by that same technology advance.
"So many are missing out on an opportunity to grow – and grow quickly – in a cost-effective way. It's also true that many of our small and medium businesses are owned by baby boomers – many of whom are now looking for a buyer but don't really have an exit strategy worked out.
"Developments available in data analytics for SMEs can be done without huge expenditure. However, the difference that can make to profitability and the potential sale of a business can be huge," says O'Connor.
"Universities have geared themselves up to turn out graduates with both hard and soft skills to meet the new market needs and hiring the right person or people need not be a vastly expensive business either."
However, most New Zealand SMEs were too busy to tackle such issues themselves which meant the selection of a business partner to guide them into the best solutions was vital.
Smith says firms like BDO are themselves changing their function and hiring staff with new skills designed to meet the challenges of the rapidly changing market. In audits, for example, it was becoming important not just to audit the normal company reporting – but also to audit data.
If a company gathers data which is not valid (the slang term is "dirty data"), the insights offered can not only be unhelpful, they can be damaging. Smith says companies like BDO are increasingly moving into not only finding solutions for companies seeking data analytics change but also auditing the data itself.
Will Parker of BDO Information Systems added that the ability to interpret data for the specific audience was also crucial: "We refer to it as 'ABC' data interpretation. What 'A', the Accountants want to see, will differ from 'B', the 'Banks' and 'C' clients are interested in.
"For example, a simple "six-pack" business dashboard showing key business performance measures in an annual return can allow a business owner to quickly understand their position without having to be an expert in reading financial statements.
"While this is useful, it is still only a start. Nowadays, clients want to be able to access data analytics regularly and expect reporting they can access both in their offices and via their devices. At BDO we have a number of solutions that harness technology and data analytics so that you can make informed decisions when you need to."
For more information on BDO's data analytics services, click here