Kirstin Gillon of the IT Faculty shares the results of a major ICAEW research project with Shanghai National Accounting Institute and technology company Inspur. This article covers how businesses are using big data in China, and the implications for finance.

The relevance of China

At the end of 2016, ICAEW set up a new research project on big data and accounting with the Shanghai National Accounting Institute (SNAI) and technology company Inspur.

Over the course of this year, we interviewed a range of people from eight major businesses in China, including internet businesses and large state-owned enterprises in more traditional industries. In November, we published our key findings in a bilingual report, co-authored with SNAI.

So, why have we been studying big data in China? Because it is, simply put, one of the best places in the world to do so. After all, data doesn’t get much bigger than in China.

With the world’s largest mobile phone user base, and rapid adoption of mobile platforms and payments systems, China is generating a wealth of data that businesses can use to improve their decision-making and transform their business models. The sheer scale of data in China enables many new types of platform-style businesses that would not be viable in smaller economies. Therefore, businesses in China present some great examples of the potential power of big data to transform economies.

Innovating with data

To understand the changing demands on accountants, we need to understand how businesses are transforming because of big data. The research highlighted a range of ways businesses in China were innovating with big data:

• New business models: Big data enables many kinds of new business models that exploit the scale of Chinese users and data. For example, sharing business models and platforms is a major trend in China, with mobile payment platforms providing a lot of data as well as easy integration for O2O (online to offline) services. Our conversations with companies in the internet and banking sector also showed how the combination of big data and mobile payments systems are shaking up traditional financial services and providing greater access to finance for many individuals and smaller businesses.
• Precision marketing: In most of the companies studied, marketing and sales functions were at the forefront of using big data. Marketing departments in particular have access to new sources of data, especially through the internet, which provides very specific insights into customer behaviour and preferences and translates it into measurable benefits, such as increased sales, increased customer engagement and higher success rate of marketing campaigns.
• Product planning and investment: Our research also highlighted how big data can enable a shift from supply-led planning to demand-led planning. It becomes possible to get a much better understanding into the specific demands of the market and thereby take a more strategic and evidence-based approach to business planning. This represented a significant change to decision-making approaches in some of the companies studied, especially the state-owned enterprises, which perceived it as a big area of potential value.

Organisational issues

However, delivering value from new IT systems is a complex organisational task, and the research highlighted many practical issues that are not unique to China.

In particular, all the companies had issues or challenges around data, echoing the experience we see in large companies across the world. Many of the technology investments seen in our research aimed to link internal data from different systems.

However, this was not a straightforward task. A consistent theme throughout the research was the lack of data standards across companies. Internal systems were usually built to meet the needs of individual departments, making it difficult to integrate data from different systems and departments in practice. As a result, strong central governance over data quality and standards was a key part of success with big data platforms.

There were also a variety of issues related to people and culture. Every company highlighted the importance of collaboration between departments to deliver benefits from big data, which changes decision-making cultures and enables more real-time decision-making. It puts a greater premium on asking questions, building evidence and trying things out, leading to more accurate predictions, greater automation of decision-making and less need to apply human judgement.

Consequently, leading companies recognised the need for wider organisation and cultural transformation, and the chief executive officer typically sponsored the adoption of big data across the company. When IT departments were primarily driving big data investments, they were much less likely to achieve their full potential.

The role of accountants

So, how can accountants help businesses make the most of big data? There is certainly an opportunity for accountants to take a stronger role in data governance activities, based on the discipline, rigour and structure in thinking that accountants already have around financial data. Furthermore, finance functions have a unique position that provides an overview of the business and enables it to understand the controls and processes in place in other functions.

We also saw accountants making use of big data themselves in their work. In many cases, this was helping business functions to make better decisions. For example, the research provided a range of examples of better analysis and new insights, especially in cost management and product planning. This typically involved using new sources of data, linking internal data from different systems or updating models with real-time data. 

Accountants were also using big data to help with more traditional accounting work, such as tax compliance and working capital management.

Changing skills needs

A strong and consistent theme throughout the research was the desire for accountants to have more IT skills. For example, one business wanted the finance function to lead data governance activities but accountants did not have the skills around data to do this without a lot of guidance from the IT department.

This did not generally mean that accountants should develop deep technical skills in data, programming or other IT areas. Rather, companies typically wanted accountants to become more comfortable with the use of IT systems and data, and the high-level way that systems work. This would make it easier for accountants and data scientists to have good quality conversations about how accountants could use data, and enable them to frame their requirements better.

But this needs to be complemented by good business understanding. The most effective accountants with big data worked closely with business functions. They were able to understand the key priorities of the business and work effectively with them to manage costs better, based on the insights from data. There were also examples of close working with product development functions, giving quick evaluations on potential new products, and helping in the risk management processes.

Trends such as automation can free up the time of accountants and big data provides the means for new and better analysis and insights. However, technology skills must go hand in hand with greater business and commercial awareness in order for accountants to get the benefits from big data.

• The full report is available at icaew.com/bigdata

Presenting key findings in Shanghai

In November, Kirstin Gillon and ICAEW Technical Director Robert Hodgkinson spent a week in China, sharing the key findings of the report with members, universities and senior figures in the Chinese accountancy profession.

The centrepiece of the week was a session at the SNAI Annual Forum on innovation in management accounting, which focused on big data. Attended by 1,000 senior accountants, and watched online by many more, Kirstin presented the findings in a session about business innovation. 

Over the course of the week, Robert and Kirstin visited eight cities in Mainland China and Hong Kong SAR to give lectures, participate in events and meet senior stakeholders. This included a lecture to members of the Chinese Institute of CPAs, lectures to leading universities such as Xi’an Jiao Tong Liverpool and Jinan, and a meeting with Chinese internet giant Tencent to present the findings from the research.

About the author

Kristin Gillon, technical manager, IT Faculty