The opportunity economy : enduring lessons from the ride and fall of the new economy

In this paper we argue that the business model underlying the new economy is based on the following interrelated and self-reinforcing forces: 1. The development of a new strategy of opportunity, which focuses on the use of creative innovation to open up new market spaces, rather than using exploitive innovation to prolong the life of existing products. 2. The democratization of competition thanks to the Internet and to process outsourcing. 3. Taken together, these forces result in a profound shift in the source of value creation in firms from processes and physical assets to people. With the drivers of business success so fundamentally transformed, almost all aspects of the firm and its management also need to change, from valuation, resource allocation and worker compensation, to what it takes to retain workers and promote innovation. But while the rules of business have changed, there has not been a corresponding shift in awareness among most managers. Assuming that there is nothing new in the New Economy is a profound and dangerous mistake. Managers that are so short sighted will find that they have not only lost out on the opportunities that the new economy continues to provide, but that the market downturn has only deferred, rather than eliminated, the threats that change poses to their firms.En este artículo debatimos que el sistema de comercio subyacente en la nueva economía está basado en las siguientes fuerzas interrelacionadas entre si, y que se auto refuerzan: 1. El desarrollo de una nueva estrategia de oportunidades, la cual se enfoca en el uso de la innovación creativa como forma de abrir nuevos espacios de mercado en lugar de usar una innovación explotadora para prolongar la vida de los productos existentes. 2. La democratización de la competición gracias al internet y al proceso de búsqueda externa. 3. En conjunto, estas fuerzas desembocan en una profunda brecha en la fuente del valor de creación en las firmas de los procesos y la asistencia física a las personas. Con los conductores de los éxitos de negocios transformados de manera tan fundamental, casi todos los aspectos de la firma y su gestión también necesitan cambiar, de la valoración, asignación de recursos y compensación a los trabajadores, a lo que requiere mantener a los trabajadores en plantilla y promover la innovación. Pero mientras las reglas de los negocios han cambiado, no ha habido un ajuste correspondiente entre la concienciación de la mayoría de los managers. Asumir que no hay nada nuevo en la Nueva Economía es un error tremendo y peligroso. Los managers tan cerrados de miras encontrarán que no sólo han perdido las oportunidades que la nueva economía sigue proporcionando, sino que también, pero que la desaceleración del mercado sólo ha aplazado, en lugar de eliminar, las amenazas que el cambio plantea a sus empresas

A critical analysis of the "innovators dilemma" : why should new technologies cause great firms to fail

The disruptive innovation (DI) theory developed by Clayton Christensen has been one of the most influential management concepts in recent years, being required reading at such prominent companies as Microsoft, AT&T and Cisco Systems. In this paper we describe the disruptive innovation process and analyze the underlying assumptions of both the theory and of its practice implications. We argue that there is much misunderstanding in the business world as to the exact meaning of the theory and a clear need for greater clarity on when it arises and what firms can do about it. In particular, we find that the theory makes implicit assumptions about the availability of information that may be hard to sustain in most circumstances. Our analysis gives rise to the conclusion that the standard models of management control cannot fully explain why disruptive innovations should necessarily cause well-run firms to fail, while at the same time startups are able to succeed. That leaves two possibilities: that the process is invalid as a descriptive phenomenon, or alternatively, that some other force is driving the DI phenomenon. It is the second possibility that we focus on in this paper, developing a model based on Prospect Theory that more fully explains why managers at large firms would react differently to a DI than those at startups. Better understanding the assumptions underlying DI theory and its practice implications is critical for those whose responsibility it is to develop the firm’s strategic control systems, in particular, to management accountants.La teoría de la innovación disruptiva (CI) desarrollada por Clayton Christensen ha sido uno de los conceptos de gestión más influentes en los últimos años, siendo requerido en compañías tan dominantes como Microsoft, AT&T y Cisco Systems. En este artículo describimos el proceso de innovación disruptiva y analizamos las asunciones subyacentes tanto en la teoría como en sus implicaciones prácticas. Discutimos que hay muchos malentendidos en el mundo de los negocios en lo referente al significado exacto de esta teoría, y que se encuentra una clara necesidad de claridad para cuando surge y lo que las compañías pueden hacer al respecto. Concretamente encontramos que la teoría hace suposiciones implícitas sobre la disponibilidad de información que en la mayor parte de las veces puede ser difícil de obtener. Nuestro análisis llega a la conclusión de que los modelos de control de negocios estándar no pueden explicar del todo por qué la innovación disruptiva debería provocar necesariamente que las empresas bien conocidas fracasasen, mientras que al mismo tiempo ayuda a las nuevas a triunfar. Eso deja dos posibilidades: que el proceso es inválido como un fenómeno descriptivo, o alternativamente, que alguna otra fuerza es la que conduce el fenómeno DI. Esta segunda posibilidad es en la que nos centramos en este artículo, desarrollando un modelo basado en la teoría de prospectos que explica en más profundidad por qué los managers de compañías grandes podrían reaccionar distinto al DI que aquellas que están empezando. Una comprensión más profunda de las suposiciones subyacentes de la teoría DI y sus implicaciones prácticas es crítica para aquellos cuya responsabilidad es el desarrollo de la estrategia de la empresa y sus sistemas de control, particularmente, las cuentas de administración

AIS-Ethics as an Ethical Domain: A Response to Guragai, Hunt, Neri and Taylor (2017) and Dillard and Yuthas (2002)

In this paper, I analyze the claim that AIS-ethics is a distinct subset of the broader fields of accounting and ethical studies. Guragai Hunt, Neri and Taylor (2017), building on Dillard and Yuthas (2002), call for the creation of a subset of business ethics with the intent to not only apply existing ethical concepts to AIS activities, but to establish “AIS-ethics” as a distinct area of practice and research in its own right. Their objective is for AIS-ethics to play the same role in AIS that Bioethics does in medicine. In order to analyze this argument, I analyze the examples provided in the literature on the impact of accounting information systems on ethics. My analysis indicates that there is a need to be more specific as to where exactly ethical issues arise in AIS, and most critical of all, why they do so. Too often, the existence of ethical problems in AIS is presumed to be so self-evident that no further explanation is needed—or provided—about what those ethical issues are, or what the circumstances are that give rise to them. Moreover, the behavior of a decision-maker in an AIS context is sometimes attributed to ethical considerations when a more detailed analysis indicates that the underlying cause of that behavior is either economic and/or not directly impacted by the presence of the AIS system. To remedy this lack of clarity as to what is an ethical problem in AIS, I argue that a necessary condition for individuals to consider that they face a decision with ethical consequences is that they perceive that there is a conflict between their sense of morality and the other sources of guidance relevant to making that decision

Reengineering business reporting creating a test bed for technology driven reporting

Building on the work originally done for the Enhanced Business Reporting consortium of the AICPA, this paper develops a test bed for innovation in business reporting. As with flying test beds in aviation, the object is to explore the impact of new technologies and techniques rather than to create a product intended for immediate implementation. The starting point of our analysis is that if the financial reporting system was being built from scratch today, it would look very different, taking into account fundamental changes in the two drivers of financial reporting: First, the dominance of market making by professional investors, which includes such intermediaries as pension and mutual funds, which is how most ordinary individuals interact with the market; Second, the reduction in the variable costs of disclosures to technology-enabled firms, while time taking a broader view of the cost of reporting to include the opportunity cost to the firm from faulty disclosures and the cost to professional investors of having to extract the data they need from statements that were not designed for their needs. Taken together, the consequence of these two changes is that a system being designed today has to rethink the entire process by which financial data held by the firm is translated into decision relevant information by users. This process takes place both within the firm and outside of it, with a handover of financial statements taking place at the boundary between the firm and its users. Given these changes it is time to ask whether the location of that handover boundary point is still appropriate: whether the firm should continue to aggregate and condense information extensively before releasing it, or whether sophisticated users would prefer to have access to more information in closer to its raw format so that they can manipulate and aggregate it as they see fit. Based on this conceptual model we discuss the building blocks of a 21st century reporting system and the technical architecture needed to implement it. It is our hope that this paper will help create an open source test bed that will develop new ways to measure, manage and communicate firm performance in the 21st century.Creándose en el trabajo hecho originalmente por Enhanced Business Reporting Consortium de la AICPA (una iniciativa colaborativa y dirigida al comercio en el que los usuarios y los proveedores del capital trabajan juntos), este artículo desarrolla un banco de prueba para esta innovación. Como con los bancos de prueba que vuelan en la aviación, el objetivo es explorar el impacto de nuevas tecnologías y técnicas, en vez de crear un producto para una implementación inmediata. El punto de inicio de nuestro análisis es aquel en el que si el sistema de elaboración de informes financieros estuviera siendo creado desde cero hoy en día, se vería muy diferente, teniendo en cuenta los cambios fundamentales en los dos impulsores de estos informes. Primeramente, el dominio de la creación de mercados por parte de inversores profesionales, que incluye intermediarios como fondos de pensión y mutuos, siendo la forma más ordinaria en la que estos interactúan con el mercado. En segundo lugar, la reducción de los costes variables de las divulgaciones a empresas con tecnología, mientras se adopta una visión más amplia del coste de la elaboración de informes, con el propósito de incluir el coste de oportunidad a la empresa desde divulgaciones defectuosas, y el coste a inversores profesionales en extraer la información necesaria de las declaraciones que n no están diseñadas para sus necesidades. Como consecuencia a estos dos sistemas, un sistema que está siendo diseñado hoy en día debe de reflexionar sobre el proceso completo, por el que la información financiera poseída por las empresas se traduce en la decisión de la información relevante por los usuarios. Este proceso sucede tanto dentro como fuera de la firma, con una entrega de declaraciones financieras que toma lugar en el límite entre la firma y sus usuarios. Dados estos cambios, es hora de preguntarse si el lugar de esta entrega del punto límite es aún apropiado: si la firma debería continuar juntando y condensando información de forma extensiva antes de publicarla, o si los usuarios sofisticados preferirían tener acceso a más información más base para así poder manipularla y juntarla como ellos lo crean. Basado en este modelo conceptual, debatimos los bloques compilados de un sistema de informes del siglo XXI, y la arquitectura técnica necesaria para implementarlo. Es nuestra esperanza que este estudio ayudará a crear un banco de prueba de código abierto que desarrollará nuevas formas para medir, gestionar, y comunicar el desempeño de la firma en este siglo

Hope or hype? Blockchain and accounting

Gartner’s hype cycle of technology famously progresses from the "peak of inflated expectations" to the “plateau of productivity” via the “trough of disillusionment”. Accounting researchers and practitioners -like researchers and practitioners in many other fields- have jumped onto the blockchain bandwagon for fear of missing out on what has been hailed as a world changing technology. Unfortunately, there is a pervasive lack of understanding of what blockchain is, and misconceptions about what it can do. A fundamental problem is that blockchain was derived from bitcoin and there is a great deal of difficulty in defining what blockchain is, and how suitable the methodology for a trustless, public cybercurrency application is to a public blockchain between trusted partners. It is time, we believe, to look at blockchain in accounting with more objectivity. We undertake a detailed exploration of blockchain and identify several key factors that will defines the uses of this technology, namely, the distinction between public and private blockchains and the importance of processing costs as a validating mechanism

Lessons for China and other developing economies from the crisis in US auditing

The continuing series of business scandals, from Enron to WorldCom have severely undermined the credibility of auditors and audited financial statements in the US. With developing economies such as China looking to emulate western models of corporate governance, what lessons should they draw from these apparent failures in auditing? There is a danger that those opposed to modernization of accounting and auditing will use these scandals as an excuse to delay the adoption of new standards and methods. Indeed, the Enron/Andersen scandal was apparently one reason that Chinese authorities watered down proposals to require firms seeking new Class-A shares to hire a foreign auditor to supplement their local auditor. In this paper we discuss a more productive lesson that developing countries seeking to bring their accounting infrastructure up to Western levels can draw from the recent US experience, using China as a case study. China is the most important of all developing economies, and its impending entry into the WTO makes reform there particularly urgent. The path that China takes is also likely to serve as a role model for much of the rest of the developing world, especially in South East Asia. We argue that developing countries have the opportunity to “leapfrog” existing auditing techniques in the West that have proven to have serious shortcomings, and instead, go straight to the cutting edge methodologies of continuous assurance and tertiary logging. Continuous assurance is a type of auditing which, by making use of the “electronization” of the firm, produces audit results simultaneously with, or a short period of time after, the occurrence of relevant events. In comparison with the traditional financial statements audit, continuous assurance is distinguished by being timelier, more comprehensive, more accurate and more supportive of the management process. These capabilities are especially valuable for Chinese firms who face an environment with weaker legal, regulatory and management controls than in the West. However, the tenuous nature of The International Journal of Digital Accounting Research Vol. 3, No. 5, pp. 33-60 ISSN: 1577-8517 34 the auditing infrastructure in China makes it essential that it also adopts tertiary logging as a way of “guarding the guards”. We discuss how logging the audit in a continuous assurance setting will increase the deterrence capability of peer review, as well as serving as a source of institutional memory in the case of mandated auditor rotation, the separation of auditing from consulting and the unique Chinese proposal for dual auditing.La constante serie de escándalos financieros, desde Enron a WorldCom, han perjudicado considerablemente la credibilidad de los auditores y las auditorías financieras en la US. Con economías desarrollándose como China imitando los modelos occidentales de gobierno corporativo, ¿qué lecciones deberían extraer de estos fracasos aparentes? Existe el peligro de que aquellos que se oponen a la modernización de la contabilidad utilicen estos escándalos como una excusa para aplazar la adopción de nuevos estándares y métodos. De hecho, el escándalo Enron/Andersen fue una de las razones por las que las autoridades chinas rechazaron propuestas que requerían la búsqueda de un auditor extranjero para complementar a su auditor local. En este artículo discutimos la productiva enseñanza de que los países en desarrollo que buscan alzar su estructura financiera a los niveles occidentales pueden aprender de la reciente experiencia americana, usando China como caso de estudio. China es la más importante de todas las economías del desarrollo, y su próxima entrada en el WTO hace que una reforma sea particularmente urgente. El camino que China siga probablemente servirá como modelo para el resto de países en desarrollo, especialmente en la Asia del sudeste. Debatimos si los países en Desarrollo tienen la oportunidad de hacer el “salto de rana” con respecto a las técnicas comerciales que en oriente han probado presentar serios problemas, y en su lugar, ir directos a las metodologías de filo cortante de constante asesoramiento e inserción de tertulias. El asesoramiento constante es un tipo de audición en el que mediante el uso de la “electronización” de la empresa, produce resultados de auditoría que simultáneamente, o un corto periodo de tiempo después, comparables con la ocurrencia de sucesos importantes. En comparación el sistema tradicional financiero, el asesoramiento continuo es distinguible por ser flexible en el tiempo, más comprensivo, más acertado y por apoyar más el proceso de desarrollo. Estas capacidades son especialmente valiosas para las empresas chinas que afrontan su entorno con controles legales, reguladores y de gestión más débiles que en occidente. Aun así, la naturaleza tenaz de The International Journal of Digital Accounting Research Vol. 3, No. 5, pp. 33-60 ISSN: 1577-8517 34 declara que la infraestructura de gestión en China hace necesario adoptar la deforestación terciaria como una manera de “guardarse las espaldas”. Discutimos cómo hacer esto en un escenario de asesoramiento constante incrementará la capacidad persuasiva de las reseñas de personal, así como servir como una fuente de memoria institucional en el caso de que se necesitase una rotación de auditores, o la separación de la auditoría con respecto a las consultas y la propuesta única de China acerca de la auditoría dual

Continuous auditing: the USA experience and considerations for its implementation in Brazil

Continuous Auditing, broadly defined as the transformation of internal and external auditing through the application of modern information technology, is being increasingly adopted by firms throughout the world. Organizations ranging from Siemens, HCA, the Royal Canadian Mounted Police, BIPOP Bank and the Internal Revenue Service are developing tools and practices that will bring assurance closer to the transaction and reduce through automation, the cost of auditing. A June 2006 PricewaterhouseCoopers survey finds that 50% of U.S. companies now use continuous auditing techniques and 31% percent of the rest have already made plans to follow suit. In this article we introduce the concepts of CA to a Brazilian audience and discuss its further application there

Topological Structure of the SU(3) Vacuum

We investigate the topological structure of the vacuum in SU(3) lattice gauge theory. We use under-relaxed cooling to remove the high-frequency fluctuations and a variety of "filters" to identify the topological charges in the resulting smoothened field configurations. We find a densely packed vacuum with an average instanton size, in the continuum limit, of about 0.5 fm. The density at large sizes decreases as a large inverse power of the size. At small sizes we see some sign of a trend towards the asymptotic perturbative behaviour. We find that an interesting polarisation phenomenon occurs: the large topological charges tend to have, on the average, the same sign and are over-screened by the smaller charges which tend to have, again on the average, the opposite sign to the larger instantons. We also calculate the topological susceptibility for which we obtain a continuum value of about 187 MeV. We perform the calculations for various volumes, lattice spacings and numbers of cooling sweeps, so as to obtain some control over the associated systematic errors. The coupling range is from beta=6.0 to beta=6.4 and the lattice volumes range from 16x16x16x48 to 32x32x32x64.Comment: LaTeX. Self-unpacking, uuencoded tar-compressed fil

The strong coupling constant at small momentum as an instanton detector

We present a study of $\alpha_{MOM}(p)$ at small p computed from the lattice. It shows a dramatic $\propto p^4$ law which can be understood within an instanton liquid model. In this framework the prefactor gives a direct measure of the instanton density in thermalised configurations. A preliminary result for this density is 5.27(4) fm^{-4}.Comment: 12 pages, 4 figure

Instantons and Chiral Symmetry on the Lattice

I address the question of how much of QCD in the chiral limit is reproduced by instantons. After reconstructing the instanton content of smoothed Monte Carlo lattice configurations, I compare hadron spectroscopy on this instanton ensemble to the spectroscopy on the original ``physical'' smoothed configurations using a chirally optimised clover fermion action. By studying the zero mode zone in simple instances I find that the optimised action gives a satisfactory description of it. Through the Banks-Casher formula, instantons by themselves are shown to break chiral symmetry but hadron correlators on the instanton backgrounds are strongly influenced by free quark propagation. This results in unnaturally light hadrons and a small splitting between the vector and the pseudoscalar meson channels. Superimposing a perturbative ensemble of zero momentum gauge field fluctuations (torons) on the instantons is found to be enough to eliminate the free quarks and restore the physical hadron correlators. I argue that the torons that are present only in finite volumes, are probably needed to compensate the unnaturally large finite size effects due to the lack of confinement in the instanton ensemble.Comment: 32 pages, LaTeX with 14 eps figure