The management revolution sweeping Australia

The days of monthly and quarterly management reports and meetings are rapidly coming to an end. The technology to manage the largest organisation to the smallest on a daily real-time basis is sweeping the world and will vastly increase the ability of managers to react quickly to changes in their business. Those managing on a monthly or quarterly basis cannot react quickly enough to the current rapid changes in markets.

And for shareholders, it will mean that information can flow to the stockmarket at a much faster rate.

I do not believe this revolution has been well-communicated to managers and stockmarkets.

When Rio Tinto chief Sam Walsh told the KGB that one of the first things he did when he took the reins at Rio was to go onto a weekly reporting basis, it brought the enormity of the change home to me.

That action transformed the ability of Rio’s chief executive to manage the company (KGB Interview: Rio Tinto's Sam Walsh, May 9).

Soon everyone, including Sam, will have full access to information on a real-time basis.

It also means the end of executives being able to give misinformation about trends to protect their jobs. CEOs and the people around them will be able to see what is happening for themselves. 

I have been watching some of these trends unfold in the micro and small business space via the work of MYOB and Zero.

But yesterday I was yarning to Steve Lucas, SAP’s global president for Platform Solutions. About three quarters of ASX 20 companies use SAP systems, so when SAP changes direction it has huge impact at the top end. But of course, their rivals will be going in the same direction so we are looking at a basic change in the way we manage companies and government organisations, rather than a particular system.

Initially it will probably be corporations that go down this path, but the smarter government organisations will wake up so that they can also manage in real time. 

SAP's HANA system, launched in 2010, enables CEOs and managers to monitor their business on a daily basis and identify problems or demand surges as quickly as they happen. Managers are able to take action early and have the tools in the system to predict the likely effect of that action.

Because the daily information about a business will unfold in real time, chief executives can avoid the temptation to micro-manage because they must drive overall strategy. But it will be much more difficult for executives to “snow” them because the chiefs can access real time information.

I am not taking sides on the computer industry wars and adjudicating which are the best systems. But rivals to SAP have caught on. Yesterday, global IT systems heavyweight Oracle launched a new in-memory database that allows its enterprise customers to dramatically increase the speed of their processes and access real-time analytics.

SAP's HANA system enables all the corporate information to be on the same platform so that data is used for all functions, whether it be budgeting, result preparation, forecast assumptions and a myriad of other tasks. That makes it much simpler to run any enterprise irrespective of size in real time and will improve the quality of financial performance. It also rids management information from accounting fiddles and gets down to basic cash accounting. And of course, additional features from non-SAP systems that are available on the cloud can be added on.

We are looking at a global trend. Australian enterprises will not have an advantage over their global competitors, but at least they can keep up.