Not exactly the words you would expect to hear from a respected former executive, and even less so from his wife Shoshana Zuboff, a Harvard business school professor.
Nevertheless a revolution is precisely what they believe has got to happen to shake up the way companies are managed, in order to stamp out the neglect and disregard with which they say consumers are increasingly faced.
If Maxmin and Zuboff’s predictions are even narrowly correct, accountants who do not embrace the evolution of the current capitalist model will be out of a job very soon.
Those who do hold their arms wide open to the predicted developments in the way consumers buy and companies are run will still have to adapt a great deal.
This theory has found support in unsuspecting quarters. David Phillips, partner at PricewaterhouseCoopers and staunch advocate of changes to financial reporting structures, concurs.’I would perhaps agree that if the accountancy profession doesn’t move into the real world it’ll become irrelevant. It has been complacent over the past 20 years,’ he says.
According to Maxmin and Zuboff, the hundred-year cycle, in which economic models evolve, is upon us. The revolution is here, they claim, after almost 10 years of research, personal experience and anecdotal evidence.
And it is consumers’ growing anger and frustration at ‘inward-looking’ companies that is really driving change, although the couple admits that this revolution is a natural cycle in the metamorphosis of capitalism.
An example of this disregard to consumers is, says Maxmin, all too apparent in the way the airline industry is currently being run.
‘They’re in financial trouble and the service is terrible,’ he says.
‘They can’t see straight. But with all the banks, all the intelligence and the money at their disposal what is it they do? They charge for sandwiches!
There’s a level of absurdity. That’s an example of trying to squeeze out of the old model. And what they should be doing is using all that intelligence to invent a new one.’
But the problem is, say the authors of the new business bible The Support Economy, company executives are only there to look after their own interests.
The current model and business practices are so ingrained in their psyche that they cannot even reflect upon change.
Maxmin argues: ‘Capitalism is a book with many episodes. So this is nothing to be afraid of. It is to be embraced, celebrated and it offers vast new opportunities for wealth creation.
This is, after all, what accountants are increasingly about – wealth creation. Gone are the days that accountants merely counted beans.
It is here that accountants enter the field of play. According to Maxmin, the revolution ‘is going to require different metrics to the way you construct the balance sheet, because there has to be accrued trust – valuation is not just going to come from the assets, but from the alliances and federation that you actually work with’.
This theory is backed up by research conducted by Accenture, which suggests that 40% of valuation will come out of alliances made in the next four or five years.
Zuboff and Maxmin go even further. They claim that soon we will be able to do away with statutory financial accounts.
Maxmin says: ‘In my view, accountancy has always been an art form and cash flow is the only reality. And once you have cash accounting, then you won’t need management accounts, financial accounts or statutory accounts.’
And auditing, as we know it, will in essence become as extinct as the dinosaur, because of auditbot, continuous auditing software, claim the authors. He adds: ‘We already have an auditbot in existence. Once you have distributive systems that auditbot can just go off. Distributive systems have to balance themselves anyway.’
The fact that so many companies are forced to restate is enough proof for Maxmin that auditing has to change. ‘That a company mis-states billions is so ludicrous. It’s absurd for management, the board, the auditor, the analyst and the stock market,’ he says.
Zuboff explains that a different approach to auditing will evolve in which the process will focus on the quality and performance rather than just the figures.
But credit where it’s due. Leaders in the accountancy profession on both sides of the Atlantic have not been totally ignorant of some of the issues raised by Maxmin and Zuboff and have been grappling with them for a while now.
Books have been published, talks held and discussion groups staged. Yet little of substance has emerged so far.
PwC’s Phillips says: ‘The profession is moving slowly. One thing I’ve learnt is that we’re trying to get a behavioural change, but also dealing with people who have a conservative view of things. The problem now is how to keep the momentum going. The danger is that we have a lot of talking shops, but haven’t turned it into action.’
However, we might be rounding a corner in the UK with the launch last month of a consultation into how to put a value on people in companies.
The taskforce headed by Denise Kingsmill has been reviewing the growing body of evidence that the recruitment, retention, training and development of people are key factors in an organisation’s competitive advantage and, ultimately, its profitability.
Here there is already a glimpse of change. In fact, Phillips says that the whole issue has been debated over here and in Europe more than in the US. The UK has recently begun enjoying even more empowerment in the guise of new legislation allowing a shareholder vote on remuneration packages. Not only has this greatly empowered people, it is also having an immediate impact.
Despite progress in some areas. Phillips does not yet believe that consumers have enough power ‘to flex their muscles’. This again puts the onus back on corporations.
The majority of Zuboff and Maxmin’s theory focuses on the Western world – after all, those who live in the developing world are more concerned about where they get their next bucket of water from, rather than where they can get a good deal on car insurance.
But Zuboff and Maxmin reckon that the developing world could leapfrog industrialised nations in this respect.
With no need to build manufacturing structures, they could move straight into what they call the ‘support economy’ applying the latest business models and metrics.
This is perhaps not just the beginning of change for the corporate world. It may even signal a shift in world power.
Either way accountants will have to be at the forefront or watch their profession die out.
- For more, see www.thesupporteconomy.com.
SOME OF ZUBOFF AND MAXMIN’S METAPRINCIPLES
All value resides in individuals
This is the fundamental inversion that reveals a wholly new system and entails the distributed imperative. Individuals are recognised as the source of all value and all cash flow. This value is realised through relationships of deep support with individuals and is distributed in individual spaces. Distributed capitalism thus entails a shift in commercial logic from consumer to individual, as momentous as the eighteenth century shift in political logic from subject to citizen.
Relationship economics is the framework for wealth creation
Distributed capitalism creates wealth from the essential building blocks of relationships with individuals. Using the new framework of relationship economics, enterprises and their federations invest in commitment and trust in order to maximise realised relationship value. Wealth is created in the realisation of relationship value in individual space and depends upon the quality of deep support.
Markets are self-authoring
Markets for deep support are formed in individual space as individuals opt into fluid, dynamic constituencies that hold the possibility of community for individuals, as well as for the federation advocates who provide deep support.
Federated support networks are the new competitors
Under distributed capitalism, enterprises are linked into federated support networks. These dynamic and fluid federations are the new competitors.
They achieve economies and differentiation through the configuration, quality, and consolidation of deep support in each relationship, while providing unique aggregations of products and services.
- Source: The Support Economy, Why Corporations are Failing Individuals, published by Penguin.
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