Does the Accountant Role Include Helping Clients Make the Right Data-Driven Decisions?
Data can be used to create information. Information is then used to create knowledge. Finally, knowledge is used to develop wisdom.
This simple idea is based on the DIKW pyramid.
Are you familiar with the DIKW pyramid? No, it is not one of the Great Pyramids of Giza. No, you did not learn it in elementary school, akin to the food pyramid. Most people are unfamiliar with this pyramid.
Within the accounting landscape, things are changing. Business owners are looking at their accountants differently and expect more. They are looking for someone that can provide the data they need to make informed, data-driven decisions to keep up with the rapid changes of their business.
Justin Hatch, CEO of Reach Reporting, shares that “Financial professionals provide the foundation for the DIKW pyramid. These first levels are vital if the business owners is going to take effective action. It is only in the upper levels of the pyramid that businesses can make positive decisions that positively affects their business results.”
What does the acronym DIKW stand for?
I – Information
K – Knowledge
W – Wisdom
Let’s get down to the nitty-gritty; the DIKW pyramid represents a flow and transformation that can help business owners capitalize on their resources to make more informed decisions.
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The solid base of the pyramid consists of data. But just not data; accurate, current data. Data supports everything and makes accountants vital to the business owner’s ability to make wise choices. Businesses become flooded with all kinds of financial data corralled in financial statements in hopes that they can understand what it all means.
Making sense of this barrage of data is necessary if business owners want to survive and drive strategic growth. But presenting this data in a way that is understandable and consumable takes time and skill.
Once you have the data presented in a meaningful way, you must ask the correct data the right question to get a meaningful answer. You might miss an opportunity or drive right off a metaphorical cliff if you neglect to do so.
Information is the next level in the pyramid. It is when data has meaning. Data turns into information when provided with context. When you pull data out of cells of a spreadsheet and arrange it into charts and graphs, it becomes more meaningful.
Information is still just a presentation of data and has not been acted upon nor applied.
Knowledge brings together data and information over time to create theories, biases, and potential solutions. Knowledge comes alive when information is examined over time and collides with real-life experiences, allowing business owners to develop strategies that drive their business forward.
Wisdom is the sultan of swat! The king of crash, the colossus of clout, THE GREAT BAMBINO! (Can you reference that quote?). Wisdom is the pinnacle of the pyramid where all things come together and awareness is enhanced. At this level, business owners can make the decisions that will positively affect their customers, employees, and business.
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Many business owners get caught up in the thick and thin of data and spend most of their time making decisions at the bottom level of the pyramid. Worse yet, they are making decisions based on inaccurate data. Few businesses engage their management team’s higher cognitive thinking because they are not working in the upper portion of this pyramid.
It is in these upper levels of the pyramid that successful businesses thrive. It is in knowledge and wisdom that the best decisions are made. As a financial professional, you break the cycle of your clients spending too much time at the bottom of the pyramid trying to make sense of their data.
Your offering should help businesses make more informed decisions and drive strategic growth for your clients. Your clients are experts in their industry and need you to provide them with the data and information to empower them to make informed decisions.