Business Innovation, Entrepreneurship and Management Accounting

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Accountants are rarely considered as a source of innovation and creativity. Many in business will argue that accountants can be the Achilles heel of entrepreneurs, too much emphasis on negatives and too cautious with their mind set, focused on compliance rather than revenue generation.

Is this perception true, fair or appropriate? I say it is not true, unfair and inappropriate.

Many accounting concepts are born out of entrepreneurial philosophy. “Just in time” which was first coined by Kiichiro Toyoda of Toyota Corporation, then implemented by Eiji Toyoda and Taiichi Ohno. “Just in time” is in effect an entrepreneurial philosophy of managing waste. That is “making only what is needed when it’s needed and in the amount is needed”. Putting debits and credits aside, the concept of “Just in time” is central to effective use of resources, a critical skill of all successful entrepreneurs. Another Toyota philosophy, Target costing, is used to inspire design changes and break through thinking. Target Costing is about challenge the way products are designed and reengineering production and delivery processes rather than just cost control. The philosophy and folklore of Toyota was not born by executives in today’s global corporation but the entrepreneurial spirit of the Toyoda family business.     

Staying in Japan we can find another example of management accounting that is central to entrepreneurial success. Japanese Entrepreneur Kazuo Inamori is the founder of Kyocera one of the most successful Japanese corporations. Kyocera can boast 53 years of consecutive profitability. Inamori credits his Amoeba management philosophy to his entrepreneurial success. Central to Amoeba management philosophy is a management accounting technique that empowers and engages managers with entrepreneurial responsibilities.

Examples of the role of management accounting and leveraging management reporting to ingrain entrepreneurial philosophy in organisations can be found in leading western corporations such as Handelsbanken and Southwest Airlines.  

Without doubt there is a large section of the accounting profession whose business, knowledge and skill is purely focused on compliance. “Outsourced government services” in effect, preparing and fulfilling legislative requirements on behalf of clients and government.

However management accounting requires different skills and an accomplished management accountant plays a critical role in entrepreneurial success. The skills of an experienced management accountant and the role they play in business growth should not be under estimated.

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