Spreadsheet Replacement, The Evolution of Data Analysis

By Edwin Miller

Since the 1980s, the electronic spreadsheet has been a staple in many industries. Accounting, business and research analysis, management consulting, finance, and other industries that manipulate large amounts of data rely heavily on spreadsheets. Yet when compared with much of today’s technology, it is apparent that the spreadsheet is rapidly becoming outdated. It’s surprising, in fact, that we rely on highly manual processes to ultimately make decisions when some studies suggest that 88% of spreadsheets contain major errors. There’s no doubt that the spreadsheet has served us well, but the time has come to begin thinking about a spreadsheet replacement as data analysis methods evolve.

We at 9Lenses really enjoyed this recent podcast by NPR’s Planet Money that describes how the spreadsheet’s adoption was initially slow as it replaced bookkeeper jobs and was hard to understand without context. Ultimately, people realized that the spreadsheet provided productivity gains that enabled more business with fewer people, and its adoption quickly took off. We couldn’t help but see the parallels in the digital transformation movement; while in theory it seems obvious that businesses would want to replace manual, error-prone tools with better and faster technologies, the same barriers exist. Despite the apparent dangers of relying on spreadsheets, industries such as finance and management consulting are so deeply reliant that they are having a difficult time replacing spreadsheets with new technologies. NPR’s research demonstrates why, in much the same way that the spreadsheet took time to catch on, so will the technologies that eventually replace it.

Spreadsheet Replacement- Three Reasons to Use a Digital Platform

1. Manual Processes Introduce Error

While the spreadsheet automates number crunching, it still requires humans to manually input data and create the formulae for the calculations, inviting human error. Worse, it doesn’t tell you when there is an error. It simply gives you a conclusive number, and unless that number is wildly different from what is expected, there is no easy way to identify an error.

There are numerous examples that illustrate the dangers that follow from reliance on spreadsheets. The infamous London Whale incident is perhaps the most well-known of these- a simple syntax error in one cell of a spreadsheet led to billions of dollars in trading losses for J.P. Morgan. Spreadsheets rely on manual processes that are susceptible to error, and consequently, Excel has even gained the title of “the most dangerous software on the planet.

The London Whale isn’t alone; this article from CIO.com describes eight of the worst spreadsheet mistakes in history. In each case, a simple error in a single cell led to millions or billions of dollars in losses.

2. Fewer People Needed For More Business

Industries have been known to adopt new technologies more slowly because new tools can be treacherous, as they make things easier and faster, they can also erase jobs because they decrease the number of necessary billable hours. The spreadsheet certainly had this effect in the world of accounting. As it decreased the hours needed for Go to the full article.

Source:: Business 2 Community

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