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Reprinted from Personal Computing, issue 4/1982, pp. 58-63. Scenarios For Success: The Vision Of Spreadsheeting With more timely and complete “what-if” information, better judgements are being made in corporate financial planning What if you had married your first girlfriend instead of your last? What if you had pursued your interest in music rather than going into sales? What if you had a son instead of a daughter? Questions like these tantilize and tease most of us at least partly because the answers are beyond our grasp.
Commonly, forecasting involves the construction of a mathematical model of the company, the identification of options or variables, and an analysis of the impact these variables could have on the model. Such an undertaking involves considerable time and work-hours. And the larger the company, the more complex the model and the more numerous the options. Taking them by storm It is no surprise then that some of the most popular personal-computing programs, which are sweeping into corporate headquarters and small businesses alike, are those that are devoted to business modeling or electronic spreadsheets. There are an estimated six to 12 versions of this type of software, offered by various vendors, and these products include VisiCalc, T/Maker II, SuperCalc, CalcStar and MicroPlan. Instant changes Basically, all the programs offer a blank spreadsheet – a large sheet of paper divided into a forest of columns and lines – with user-defined categories, values and relationships, as well as a what-if function. The what-if provision is so essential for businesses because it permits the user to ask, for instance, “What would happen if an entry were doubled?” The computer answers the question by automatically calculating the effect of this change on every number on the spreadsheet that has been defined as having a relationship to the primary figure. In that way, the annual budget can be updated instantly if interest rates change, for example. It is this combination of mathematical efficiency with a host of non-dedicated values and categories that makes computerized spreadsheeting a most powerful piece of software. As one devotee puts it, “The program is the electronic equivalent of a pad of paper, a pencil and a calculator.” To be a bit more precise, this software also serves as the human who writes on the pad and presses the calculator’s keys. Of course, the computer operator must manually input most of the data and define the variables, but much of the total task is now automated. Since business is, at its core, an exercise in numbers – units in inventory, units of time, income and expenses, etc. – the spreadsheet programs suit a virtually limitless number of applications for the business professional. The most obvious areas involve money: budgets, annual reports, fiscal projections, sales records, and a bottomless list of others. For the small-business owner who deals in a service, for example, spreadsheet programs could be used to analyze the relationship between time spent on a job and the resulting profit. Using the what-if function here could conceivably result in more efficient organization and work patterns. Even the home-computer user could apply electronic spreadsheeting in reckoning a budget (What happens if water rates go up five percent and property taxes increase .45 percent?) Everybody’s doing it The universal and creative nature of applications for electronic-spreadsheeting programs has not escaped international attention. “Spreadsheet,” a newsletter put out by a user organization called VisiGroup, reaches an international audience (in the United States, New Zealand, England, France, and Israel, among others) that includes accountants, farmers, Indian tribes, and a seed-distribution company. The newsletter is filled with “VisiTips” and general information and advice on applications for VisiCalc – the most popular of the spreadsheeting software – and, to a lesser extent, other spreadsheet programs. Although the newsletter is very VisiCalc-oriented, Bob Korngold, its publisher, believes that some 15 percent of the group’s membership uses another brand of spreadsheet program. (VisiGroup can be contacted at P.O. Box 254, Scarsdale, NY 10583; membership dues are $25 per year and include the newsletter.) Which medium for your message? Most users describe spreadsheet-program applications in strictly financial terms. One notable exception is Daryl Scott, director of media research in the New York office of Foot, Cone and Belding, one of the largest advertising agencies in the country. At Foote, Cone and Belding, as at other agencies of its kind, advertising is now a very scientific business – perhaps due in part to the ever-increasing use of computers in the business sector. Television shows, magazines, and other media are carefully studied and analyzed to determine the precise character of their audiences. An advertiser who has used market research to define his potential customers is able to selectively advertise in the media to which those customers are most likely to be exposed. This helps to assure that each advertising dollar spent will reap the highest possible return. In this scramble for advertising paybacks, media-research departments have grown in importance at most agencies in recent years. Moreover, with the reams of statistics they require, these departments arc a natural for computerization. And Scott finds that the electronic spread-sheet is the most convenient program to use for quick and easy analysis of his department’s data. Quick tempo calculations Not only has the program been able to plot out demographics on a clear, easy-to-read chart, but it also serves to analyze advertising expenditures according to specific market or medium. And having added a printer and software that can generate graphics, the research department can now quickly turn out attractively designed reports with charts and graphs that might otherwise have taken many work-hours to do. With the what-if capability of the spreadsheet program, a client can be handed new figures – or even a new graph – within minutes of requesting a look at costs under a different set of circumstances. Since most of the spreadsheet programs are written with financial problems in mind, Scott says that his rather unorthodox application could become even more efficient if a program were written specifically for it. “The big problem,” he says, “is that there aren’t any packages for specific business applications.” But despite this shortcoming, Scott finds that his co-workers, most of whom have little or no experience with computers, are “playing” with the spreadsheet program and finding easy ways to fit their own style of work into the program’s categories and formulas. On the right track Perhaps a more conventional application for this type of software has been set up in the planning department of CBS Records International in New York. The department is responsible for preparing a yearly strategic plan in which potential markets are examined, their sizes are estimated, and financial projections are compared with market size. The CBS division comprises 26 overseas subsidiaries. In the past, the planning and budget departments, using pencil, paper and calculator, only had time to draw up reports containing two to three scenarios for major subsidiaries. With the electronic worksheet, says Dick Simmel, the department’s director, scenarios can be played out for each and every subsidiary. Simmel adds that if top management wanted a figure to be changed in the “old days,” it would have taken up to two or three days to carry that figure through the entire sheet; now, it takes less than a day. The upshot, Simmel says, is that “management can make probably the best-informed judgments about budgets that they’ve ever been able to make, simply because they have many more scenarios, and can look at the various options open to them.” Although the computer and electronic spreadsheeting have brought the CBS planning department into the modern age of business, as its manager, Simmel is unsure about the benefits of the new versatility. “The computer does so many things,” Simmel says, “that my staff wants to load the world onto it. They’re trying to do a little too much.” Extra efficiency While many find that electronic-spreadsheet programs encourage greater generation of useful data, Stan Broome, manager of operational reporting and development for the New York-based firm Interway (a division of TransAmerica) says increased efficiency is the primary benefit. Broome’s chief responsibility is turning out the company’s annual report and monthly projections of quarterly earnings. Last year, before acquiring the program, it took three workers two weeks to consolidate all the data for the report. This year, with little practice in using the program (it was purchased at almost the last minute), two people were able to complete the same amount of work in less than three days. Under optimum conditions, Broome believes one person can accomplish the task in two days. This would represent a 1400 percent improvement in worker efficiency. On the negative side, Broome found that he was unable to merge files using his program. He is learning to write BASIC to revise the program and so improve its utility. As part of the system’s extension, Broome hopes that the company’s regional offices will eventually be computerized; that a standard format for reporting results can be adopted; and that the outlying offices submit their reports in format and on disk. This would virtually eliminate two of the most time-consuming tasks in using an electronic worksheet: constructing a format and entering data. Broome also plans to use the program for the monthly reports his department does on interest costs. It now takes one worker one day to do this job. After Broome integrates this report into his computer, he hopes it will take only five to 10 minutes of the workday. The real benefit of this increase in efficiency, Broome says, is that “it gives you more time for review and analysis of reports; more time to do things you should be doing but didn’t have time for before.” Meeting problems head-on Peter Eversole, general manager and part owner of Eversole Motors, a car dealership in LaCrosse, Wis., has realized a new level of efficiency in tracking profits and problems with spreadsheet programs. Eversole, who is something of a computer buff (The company has a mainframe, an IBM Personal Computer, and a minicomputer which Eversole built from a kit.), keeps a daily electronic spreadsheet for each of the company’s four departments. He estimates it takes 45 minutes per day to input the data. “I think using the computer has definitely decreased our reaction time to problems,” says Eversole. “The auto business is very volatile, and being able to sense a change in direction means that we can attack any problem immediately. Without that kind of input, we clearly risk economic loss.” Eversole has formatted the program so that – in addition to providing day-to-day information on the state of the company – daily entries are automatically totaled for monthly reports. Since it only takes 45 minutes to input the daily data, he frequently does it himself during lunch – giving the company information about its performance that is only hours old. A faster option At a somewhat larger company, Merrill Lynch Pierce Fenner & Smith, personal-computing support team manager Jack Halbert says that speed is also a factor in his company’s use of electronic-spreadsheet programs. For monthly budgets and other reports that need periodic updating, Halbert points out that once the format has been constructed, the user need only input a “stream of numbers,” and the total task can be speeded up by more than 100 percent. Halbert and his colleagues in the New York office are also using the electronic spreadsheet to do calculation for options strategies and bond swaps, while office managers are using it for budgets, revenues, sales forecasting and analyses. The what-if function is used to compare stocks and options and bonds for swapping. “The use of electronic-spreadsheet programs is in its infancy – just like personal computers,” Halbert says. “But, technically speaking, it’s one of ihe best pieces of software I’ve ever seen.” Considering Halbert’s assessment, it takes the imagination to try to conceive what the fourth or fifth generations of these electronic record-keepers, preparers and analyzers will be capable of providing for information-hungry businesses. New York-based Myron Berger is a well-known consumer-electronics industry watcher. |
Available spreadsheet programs
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| Page added on 22nd September 2004. Copyright © 2002-2005 Marcin Wichary |
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