Thursday, 17 January 2008

Now ‘models’ are replacing ‘views’

Think about accounts. All businesses have to produce financial accounts for their auditors, shareholders and regulators. Back in the bad old days of BC – Before Computers – those were often the only accounts produced. Now, of course, almost every business also produces a variety of routine management accounts plus ad hoc analyses as needed.

These are possible both because we have computers to do the work and because we keep lots of financial data in databases. This data constitutes a model of the business (see my post on Types of Model). To the degree that it’s a good model all the required accounts can be derived from it. The accounts are views of the model and there are an unlimited number of valid views.

This change from creating a few predefined views to creating a model is not restricted to accounting. In fact it’s pretty general.

The trend to model building
In the past when people wanted to communicate a design or understand a thing or process they created a view of the thing or process. These views included maps, accounts and blueprints and required special materials, tools and skills. Usually sets of these were needed to define a territory, business or design and it was difficult to keep them in synch. Each kind of view was defined by a list of allowed elements or features (a meta-model); other elements and features being either ignored or indicated by annotations.

Now an organization is increasingly likely to build a digital model of the thing of interest from which it can derive any number of views. The model is also defined by a list of allowed elements or features but a longer list than for any view. From the model we can produce both familiar and novel views and there is no synchronization problem.

Examples include:

  • Maps: Many maps are possible for any territory. For instance they may show or omit roads, railways, and contours. Nautical charts show almost nothing on land but a great deal about the sea. Ordance Survey has digitised its map data and derives actual maps from this resource. Many companies now have Geographical Information Systems that allow them to combine their own data with that available publicly.
  • Accounts: Databases of assets and transactions support many kinds of financial and management accounts.
  • Engineering design: Traditionally engineers produced plans, front and side elevations and cross-sections. CAD models can yield both blueprints and lists of parts and jobs.
  • Building design: Construct IT at Salford Univ. has proposed that building projects should be based on a shared database that fully defines the building.

Being digital these models support many kinds of analysis and processing that were either impossible or very expensive when only views were available, eg calculations of load, simulation of performance or experience.

  • Civil engineers can show what their constructions will look like when complete.
  • Aeronautical engineers can simulate airflow and thus calculate performance and fuel efficiency.

Back to accounting

However, most accounting ‘models’ are not good enough to simulate the consequences of changes in processes or trading conditions. Some organizations have built good enough models but not, generally, as part of their accounts.

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