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Reprinted from Personal Computing 10/1986, pp. 66-71. Spreadsheets: The way we look at the numbers has changed Spreadsheets are distributing the power of the office numbers wizard to people throughout the organization and making the use of numbers seem less intimidating. The spreadsheet is often cited as the reason business embraced the personal computer. This is because spreadsheets made budgeting, financial analysis and forecasting much more fluid tasks – and also turned hours of hand calculations into seconds of machine time. But just as importantly, the electronic spreadsheet has made working with numbers less intimidating for a broad spectrum of business people who have very little or no statistical background. Some 2.7 million personal computers were purchased in 1985 according to Dataquest, Inc., a market research firm owned by Dun & Bradstreet. For the same year, two million spreadsheet programs were purchased, making it the leading software category, as it has been cumulatively since 1980. Including the projections for this year’s sales, approximately 7.1 million copies are in the hands of users. (Word processing was a close second through 1986 at 6.7 million copies.) Dataquest estimates that more than two million spreadsheet programs will be sold each year through 1990. Clearly, in a business environment spreadsheets and personal computers go hand in hand. At the same time that the activity of “running the numbers” on desktop computers has proliferated, people’s attitudes about problem solving have changed. No longer confined to a semi-elite class of accountants and programmers, the activity of manipulating numbers is friendlier now than it was a decade ago. As more people have learned how to plug data into formulas and press RECALC, the mystique of being the numbers jock has begun to disappear.
The kind of person using spreadsheets in corporations is changing. One indication is the difference in job titles of people attending Lotus 1-2-3 seminars given by the American Management Association, a not-for-profit business education group in New York City. According to Beth Ranney, senior program director, when the classes were begun in 1984, the people who attended were mainly accountants and financial analysts. In 1986, though, office administrators and secretaries are the ones attending. Ranney says that a kind of trickle-down effect has taken place. “The first wave were professionals who were really amazed how the product spiffed up their jobs. The second wave is made up of those people who are being delegated the task of entering data for their managers. They perceive value in using a spreadsheet, but it is not something they would have chosen to implement. It’s a chore that’s been delegated to them.” Rather than simply concentrating on keystrokes, continues Ranney, such users are broadening their knowledge about how spreadsheets work and, in particular, how macros can automate a lot of what they do. Part of the motivation of managers sending their support staff to seminars, she says, isn’t entirely altruistic. Some managers fear that they “have become known as the company’s Lotus guru; they don’t want to become shackled to the job because nobody can replace them. They don’t want to see their own career growth become limited,” she says. Novice spreadsheet users who do not have a bookkeeper’s or accountant’s background have often been able to transfer fundamental computing skills from word processing. These include learning how the keyboard interacts with the screen, loading a program, entering data, formatting the information and saving it. But word processing’s influence is even more fundamental than that – it served as a model for the electronic spreadsheet. Dan Bricklin, co-author of VisiCalc, the first spreadsheet program for personal computers, recalls that when VisiCalc was conceived in 1979, “I was modeling on the concept that word processing was liquid words – a kind of magic blackboard for words. What spreadsheets do is give you a magic blackboard for numeric calculations. Word processing knows about paragraphs and page breaks; spreadsheets know something about summing columns and other calculations.” |
One set of numbers Bricklin notes to explain the explosive growth of spreadsheet users is the falling price of the personal computer. “When we started with personal computers, they were 80 to 100 percent of the price of an average automobile. Today, they’re about 10 percent of the price of an automobile. Just about anybody who needs a computer for a business application can now afford one.” Ed Belove, vice-president of research and development at Lotus, which publishes 1-2-3, the program which has continued to be the largest selling spreadsheet since dethroning VisiCalc in 1983, says that when the electronic spreadsheet was first introduced no one expected it would have such a large impact. “Dan [Bricklin] wanted something that would balance his checkbook and help him with his business-school problems. In the early days, very few people realized – including both Dan and Bob [Frankston, VisiCalc’s programmer] - just what it was they had put together. Let’s face it, VisiCalc is what put the personal computer on the corporate map. “In some respects, the only really creative innovation in personal computing software has been the spreadsheet,” says Belove. “Virtually everything else is an adaptation of something that was done elsewhere. Personal data bases are still an adaptation of data bases from mainframes and minis. And there had been dedicated word processors before.” Belove acknowledges that there were financial analysis tools available on a time-sharing basis on mainframes before VisiCalc, “But they were a very different kind of tool. There wasn’t the basic grid that VisiCalc introduced, with formulas in each cell – and then there’s the concept of recalc. In a way, the spreadsheet succeeded in making everybody a programmer in a very non-threatening way.” At New Jersey Bell, for example, financial planners could share time on a mainframe to do financial modeling, but it took the release of Lotus 1-2-3 for them to have computing power at their fingertips. “We’re able to accomplish more things than we could do before,” says Irv Darwin, director of depreciation and a timesharing user since 1964. His analysts build macros and update records whenever they want to (and not when the mainframe is free) and produce graphics good enough for high-level presentations. Darwin says the overall benefits of spreadsheets are striking. One of Darwin’s duties is to plot the financial impact of replacing crossbar switching equipment with state-of-the-art electronic switches. “One thing that’s critical to us is how long crossbar switching equipment is going to be in service before it is replaced. [They are supposed to be entirely phased out by 1988.] When you try to explain to regulators the amount of investment that we have in this equipment over the years, it’s much more understandable if they see it graphically displayed rather than having to decipher a lot of numbers.” A 6-pen color plotter will provide the pictures. Then there is the cost difference. Darwin feels that the $4,000 to $5,000 the company paid to purchase his Compaq Portable II pales in comparison to the more than $100,000 in timesharing charges spent in the year before he switched over to 1-2-3. Darwin uses worksheet templates and macros to automate the processing of data that flows into his office every month. He also employs his knowledge of 1-2-3 in his Wharton, N.J., home, where he calculates the optimum time to purchase heating oil on a compatible personal computer. (Darwin designed the worksheet at a time when oil prices were continually going up.) |
Spreadsheets have affected the way businesses of all sizes work. The effect has been felt everywhere, according to Belove. “It has just changed the face of doing business. It used to be that a computer was rare in a small business, or even in a large business, on the vast majority of people’s desks. Programmers had terminals. Order entry people had terminals. But the spreadsheet has made it almost impossible to find a business without computers today.” Amy Wohl, publisher of an office automation newsletter, The Wohl Report On End-User Computing, estimates that there has been a 400 to 700 percent increase in productivity going from a calculator to a spreadsheet. Financial analysts have benefited most, she says. Among chief executives and chief operating officers of the Fortune 500 companies, financial analysis is the overwhelming reason to use a computer, according to a survey by Kepner-Tregoe, Inc., a consulting firm in Princeton, N.J. When the senior executives were asked what they “most frequently use the computer to accomplish,” 26 percent of the respondents who used a computer selected financial analysis. Word processing was a distant second at 7.6 percent. Productivity increases due to the proliferation of spreadsheets sometimes facilitate job reductions. Irv Darwin says that his own department is able to produce more work with the same manpower. On the other hand, according to a district manager in the accounting department at Pacific Bell in San Francisco, the introduction of the personal computer streamlined the budget process and all the what-if analyses to such a degree that the number of clerks was cut down from 17 to two. At the same time, recalculation time went from a couple of days to about four hours. While the obvious productivity gain is the exponential increase in speed doing a calculation electronically rather than on paper, the real gain is that managers can now investigate more possibilities. “It’s enabled you to do all kinds of things that were just not feasible before as an individual,” says Belove. “It’s all the what-if things that would have involved a lot of mechanical calculations. You just didn’t bother trying them. The spreadsheet allows you to poke around. How does this feel? Let me look at the alternatives.” What happens if taxes go up so much or interest rates come down so much? A business can be prepared to quickly react to changing circumstances in order to maximize its return or minimize its losses. “You can make more intelligent decisions,” Belove says. “You can look at an acquisition and examine 10 different scenarios instead of two.” A spreadsheet also makes it possible to shine a light on some corner of the business that a manager may never have been aware of before. Can the marketing department’s twice-monthly sales brochures be consolidated into once a month without causing a falloff in revenues that would exceed the savings in printing and postage? On a broader level you can have the computer do a lot of the analyses for you and flag certain areas of the business. As an example, Belove says: “Let me find those [sales] people who are not returning a rate greater than 15 percent and let me discover why.” Spreadsheets also are fostering an increased awareness of budgetary analysis. Managers who wouldn’t do that before are now thinking in those terms and starting to look at their own budgets the way top management would. Electronic spreadsheet use has become the most widespread among middle management, says Belove. Now, instead of accountants being the only ones to do financial analysis, “It’s line management, the people who are worrying about the financial aspects of the company from day to day as part of their jobs, even though it is not the main part of their jobs. So, for example, if you’re a product development manager who has to budget your project, but whose major job is to get the product out the door, the spreadsheet gives you an incredible tool to manage something that in the past would have been difficult to get a handle on.” And if your boss asks you to justify why you allocated resources in a particular way, you can go back to the spreadsheet and show him, he notes. |
While financial analysis and budgeting are the major reasons to use spreadsheets, Belove says, “It is amazing how ubiquitous they [spreadsheets] are. Everybody out there in business deals with money and deals with numbers – whether they do it directly or indirectly. That’s why they are so universal.” Perusing Columbia University’s 1986 fall catalog demonstrates the broad appeal of spreadsheets. In a section titled “Lotus Professional Series,” you can enroll in 1-2-3 seminars geared to accountants, financial managers, real estate analysts or marketing managers. Such vocation-specific courses are further divided into beginner, intermediate and advanced levels. It was only a few years ago that about the only kind of computing courses universities offered were meant for people majoring in computer science or math. Those who enrolled were the students the rest of us considered a little strange. Yet, as the numbers of spreadsheet users has increased, the number of potential disasters has also risen. Blindly accepting the assumptions in the spreadsheet can spell trouble. “Like any power tool, if it’s used incorrectly, you can get into more trouble than you were in before,” says Tom Needham, senior corporate financial analyst for U.S. Bancorp, the holding company of the Bank of Oregon. As part of the company’s assets liability management support group, Needham relies on 1-2-3 to help in the care and feeding of the bank’s financial model. That involves reducing the bank’s exposure to interest rate risks and determining the amounts that should be charged for loans or given on deposits. A poorly designed worksheet could cause errors. Needham uses an additional program called the Cambridge Spreadsheet Analyst from the Cambridge Software Collaborative to ferret out potential gaffes before they become mistakes of a higher order. The program’s cross-reference capability allows Needham to check the relationships of the cells and the embedded formulas. Jack Grushcow, founder of Consumers Software Inc., the company which publishes a competitive spreadsheet analyzer called The Spreadsheet Auditor, says that today anyone can put together an impressive-looking five-year forecast. The problem is that some people use a stream of consciousness technique to generate the spreadsheet. “They treat it like an electronic cocktail napkin. These things grow as an afterthought, and, consequently, they can become a disaster. This generation wants to see results now, but you’ve really got to take your time.” Bricklin says that using a spreadsheet template or formula that you don’t understand is analogous to doing a contract and using boilerplate language that you don’t comprehend. “You don’t have to be a lawyer to understand that a paragraph can be useful for a certain situation,” he says. Similarly, “You don’t have to be an accountant to know about the usefulness of a certain template. But putting blind faith in it without understanding it is a mistake, just as it would be to use boilerplate from a law book that you don’t understand.” |
Spreadsheets continue to add features. Lotus 1-2-3 release 2 (now upgraded to 2.01), for instance, saved Tom Needham hours of time because it included a data parsing function that let him easily import lines of data from a company mainframe. Instead of having to clean up and reformat the information, he is now able to indicate which part of a line to treat as text, which to treat as numbers and which portions of the data can be ignored. “Spreadsheets have reached a point of maturity,” says Belove, “but that doesn’t mean there’s not a lot more to happen.” Features yet to come include a friendlier user interface. This would enable financial analysts to express problems in a way that is closer to the way they typically express problems. Artificial intelligence techniques that can be used to guide someone who is not an expert through a problem, or through the design of a financial model, are expected as part of the next generation of software. Belove mentions goal seeking and back solving (the ability to work backward through a problem) as other features to look for in future products. The push to network personal computers and have them connect to a larger computer will mean that the new software, including spreadsheets, will be reworked for a multiuser environment. One area that is expected to grow is the much closer integration of the spreadsheet with other applications, particularly data bases. “You should be able to extract data and analyze it in a single step,” says Belove. Finally, the advent of faster and more powerful processors like the 80386, more addressable memory, greater storage capacity and higher resolution graphics will allow the next generation of spreadsheets to make the most of these greater capabilities, including the ability to perform several tasks at once. Spreadsheet programs are now found in a wide range of specific applications. While they are used mainly for budgeting and forecasting, these number processors do everything from tracking the office football pool to calculating the square footage of office space a company will need to match future growth. It is this new versatility that has made spreadsheets so commonplace in business. And, with the manipulation of complex groups of numbers such a familiar – and automatic – part of our daily activity, equations and formulas are no longer quite so unfathomable or threatening. | ||
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