Monday, September 19, 2011

Businesses need a creative side

Recently there has been a lot written about Steve Jobs’ departure as the chief executive of Apple. As of this month, Apple is the largest publicly traded company in the world by market capitalisation and the largest technology company in the world by revenue and profit.

The fascination people have about Jobs is his ability to bounce back and have great breakthrough. He started Apple in 1976 with Steve Wozniak and Mike Markkula, which came with the first commercially successful lines of personal computer in the 1980s. After a tug of war with Mike Sculley, Jobs resigned from Apple.

During the years of his absence the creative output and the share price of Apple went down. In this period Jobs formed Pixar, an animation company, that he eventually sold to Disney. He returned to Apple in 1996 and the rest is history.

Jobs has become iconic as the best second act story in business history.

So my analysis will focus on the ever constant tussle between the creative view versus the accountant’s view of running business.

First, the creative view of running a business beats the accountant’s view of running a business. Without the creative side there is no business to even speak of.

The creative side requires imagination coupled with action to bring about the thing imagined into actual existence.

Accounting then comes into play to measure the impact of the actions taken, which is an after-the-fact phenomenon because the accounting process is focused on reporting factual historical information.

This is why it is easier to look at things based on hindsight about what actions should have been taken to yield the best results. Accounting reporting does not take the risk of predicting results arising from possible actions, which is the domain of the creative part of business.

Second, accounting reporting is a useful accountability tool to use to measure the impact of the creatives in the business in terms of rands and cents. It brings about controls that help to maximise value.

However, the value in a business is mostly attributable to the creative energy that is flowing within the key parts of the business. So this accountability function played by accountants makes them the hated part of the business because they ask the tough questions that affect the final output of the business and the efficient use of the company resources.

This also causes accountants to be risk averse within the organisation because they focus on the bottom line impact of every decision made within the company.

So why is this relevant?

In most companies where you have the creative types running it, great value is created if it is balanced by the proper accounting teams.

If you have one extreme it would be the tech bubble of the 2000s, which showed the impact of creatives being given unfettered freedom in running the business without the proper accounting checks and balances. This led companies to be overvalued even when they had no sustainable tangible revenue potential to speak of, but only showed the creative potential.

Read more

No comments:

Post a Comment