What’s Not to Love About the Spreadsheet?

Originally published junio 24, 2010

Consider the ubiquitous spreadsheet. What’s not to love about the spreadsheet? The spreadsheet puts the user in charge. The spreadsheet is easily changed. Put simply, spreadsheets put people in control of basic computer processing. The spreadsheet makes every person in control of their own information processing destinies. And this control must be very popular because the spreadsheet is found everywhere.

So what’s not to love about the spreadsheet? What’s the problem here? In fact, is there a problem at all here? The answer is that given a true corporate perspective of information, there is much to be desired in the environments where management relies on the spreadsheet for basic decision making.

To understand the perspective that questions the value of the spreadsheet, consider this not-so-far-fetched dilemma. A corporation decides to hold a management meeting. Each of the departments attends and brings their best, most up-to-date information – all based on their own departmental spreadsheets. Management goes around the room. Sales paints a very rosy picture. Revenues are up and are projected to be going even higher. The sales department suggests that a new plant be opened and the sales force be increased by 50%.

Next, marketing speaks from their spreadsheet. Marketing sees that there has been an increase in revenue. Marketing's numbers show that revenues will be slowing. Marketing suggests no new increase in hires or plant capacity.

Accounting starts to give their perspective. Accounting has spreadsheet figures that show that there has been no increase in revenues. In fact, accounting shows that there has been a downturn and suggests that there be a layoff.

Manufacturing notes from their spreadsheet that costs of manufacturing have been dramatically increasing. The rise of fuel prices has made the cost of manufacturing go up significantly. The profit margins have been steadily decreasing. Based on manufacturing’s spreadsheet, there is no plan for any new plant capacity. In fact, manufacturing suggests that it may be wise to outsource some manufacturing processes.

Finance comes along with their spreadsheet. Finance looks at revenue, decreasing margins, manufacturing costs, and sales productivity. Finance suggests closing a plant and laying off 10% of the workforce immediately.

So there you have it. The management suggestions go all the way from hiring 50% more people and opening a new plant to laying off 10% of the work force and shutting down a plant. And all of these suggestions are backed by spreadsheets that have been laboriously and assiduously prepared. Each department has its own figures on their spreadsheet and each department is convinced they have the right and true information.

What is management to do? Management can make any decision it wants, and there will be a spreadsheet to back it up. The problem is that in the real world making any decision is not proper. There will be one proper path for directing the affairs of the business, and spreadsheets have not helped one iota in making or even discovering the proper decision to be made.

It is at this point that the corporation discovers that there is nothing magical about the spreadsheet. Management discovers that it is the information on the spreadsheet that is what is important. The spreadsheet is almost worthless if it doesn’t have the right information. The spreadsheet, in fact, may be a liability when incorrect information is presented on it. When incorrect information is presented on a spreadsheet, it achieves the cachet of credibility, even when it is not credible information at all. And wrong information with credibility is worse than no information at all.

So what is needed for the information that goes onto a spreadsheet? What is needed is that information across the corporation be:

  • Integrated
  • Accurate
  • Complete
  • As up to date as is possible
  • Granular
  • Historical
  • Centrally available
Of all of these characteristics of information that should go onto a spreadsheet, the characteristic of integration is the most important. When corporate information is integrated, it represents information across the entire corporation. This means information from manufacturing, shipments and order processing is integrated. It means that information from China is integrated with information from Europe, Canada, and Australia. It means information from the healthcare line of products is integrated with information from the office supplies brand, from the automotive brand and from the agriculture brand. With integration of information, there are no small pockets of disparate information.

Accuracy is always important. If a corporation is making decisions based on inaccurate information, then the decisions being made will suffer.

Completeness of information is also an important issue. For a corporation to make proper decisions, it is necessary to see the large picture of what is going on, not looking at just a subset of what the corporation is doing.

The timeliness of information is important as well. As a rule, the more current the data is, the better the chance that proper decisions can be made. Making a decision for today based on three-month-old data does not make sense.

It is important that data going into different spreadsheets be as granular as possible. The finer the level of detail, the greater the chance of serving many and diverse audiences. Stated differently, the more summarized and the more aggregated data is, the fewer are the audiences that will be served. Granularity of data is one of the fundamental factors of highly flexible data.

And data needs to be historical. The value of historical data is not always obvious. Just one quick example speaks to the business value of historical data.

Companies speak of the value of getting to know their customers. Companies know that it is less expensive to sell to an existing customer than it is to sell to a new customer. But how is it that corporations get to know their customers? Corporations get to know their customers through historical data. Knowing the consumption habits of consumers is the key to success. And why is that? The reason is that consumers – around the world – are creatures of habit. Once the life patterns of a consumer are laid out, the consumers stick to those patterns throughout their lives. Therefore, because consumers are creatures of habit, historical data is absolutely essential to being able to predict the patterns of behavior for the consumer going into the future.

And last, but certainly not the least, information needs to be available to all departments. When people do their analysis for the corporation, everyone is singing from the same songbook. Yes, there will still be differences of opinion. There will still be different perspectives. But with the corporate data as has been described, there is a basis for the resolution of differences of opinion, something not possible when there is management by spreadsheet.

There is no doubt that the spreadsheet is not going away any time soon. But there is also a maturity and learning curve that accompanies the spreadsheet that is not immediately obvious. Organizations are just now discovering that the spreadsheet is not a panacea.

SOURCE: What’s Not to Love About the Spreadsheet?

  • Bill InmonBill Inmon

    Bill is universally recognized as the father of the data warehouse. He has more than 36 years of database technology management experience and data warehouse design expertise. He has published more than 40 books and 1,000 articles on data warehousing and data management, and his books have been translated into nine languages. He is known globally for his data warehouse development seminars and has been a keynote speaker for many major computing associations.

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