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Strategic
Strategic management accounting management
revisited: building on insights accounting

from the business model field

Robin Roslender 1
Business School, Aalborg Universitet, Aalborg, Denmark
Received 10 January 2022
Susan Hart Revised 23 May 2022
7 October 2022
Business School, Durham University, Durham, UK, and 13 December 2022
27 December 2022
Christian Nielsen Accepted 30 December 2022

Business School, Aalborg Universitet, Aalborg, Denmark

Abstract
Purpose – This paper aims to identify and discuss insights from the business model field on the creation
and delivery of value to customers that provide new thinking in relation to the strategic management
accounting field.
Design/methodology/approach – The customer emphases exhibited in parts of the extant strategic
management accounting literature are highlighted and amplified using insights from the business model
literature, including those relating to value propositions, customer value creation and delivery and meeting
customers’ value expectations.
Findings – The paper demonstrates that in addition to providing valuable insights for accounting to
management, an extended strategic management accounting concept enables accounting and reporting to
customers, now identified as major stakeholders, in the context of integrated reporting.
Practical implications – Through its customer resonances, the paper affirms strategic management
accounting’s practical utility for organisations seeking a strong position in highly competitive marketplaces,
via the addition of a focus on accounting to customers.
Originality/value – The paper’s use of insights from the business model literature further reinforces the
view that strategic management accounting potentially constitutes a pivotal development within both
managerial and financial accounting and reporting.
Keywords Accounting to customers, Business model, Customers, Integrated reporting,
Strategic management accounting, Value creation and delivery, Value proposition
Paper type Conceptual paper

1. Introduction
The term strategic management accounting (SMA) entered the managerial accounting
literature in 1981, coined by Simmonds to identify an externally oriented complement to the
discipline’s traditional internal emphases. Simmonds’ thesis was an early contribution to the
set of more relevant, strategic developments sometimes designated the new management
accounting (Kaplan, 1994, 1995). Unlike the generality of managerial accounting concepts,
SMA failed to attract much interest in North America, most of its founding literature being
produced by UK-based academics. Since its inception, SMA has generated a sizeable Journal of Accounting &
Organizational Change
academic literature, although not a massive one. An attractive idea, as Tomkins and Carr Vol. 20 No. 1, 2024
pp. 1-20
observed 1996, SMA had no agreed definition, something that has contributed to a © Emerald Publishing Limited
1832-5912
continuing amorphous focus. In a major retrospective on the evolution of the SMA approach DOI 10.1108/JAOC-01-2022-0008
JAOC over the previous 25 years, Langfield-Smith (2008) affirms the continuing absence of a
20,1 definition, suggesting that SMA is an example of a concept that the interdisciplinary
accounting research tradition recognises is best understood by embracing definitions
informed “in action” or “practice”, i.e. performative rather than ostensive definitions
(Mouritsen, 2006).
The early advocates of SMA envisaged it as a promising management technology,
2 capable of contributing to the restoration of managerial accounting’s relevance and utility
within the strategic management environment. This emphasis is less prevalent nowadays
as researchers have followed the performative definition pathway or conducted surveys of
the uptake of techniques associated with the SMA concept. New thinking in relation to SMA
as an insightful practical development has been largely absent. The present paper seeks to
address this lack of new thinking on SMA, by drawing on insights emanating from the
business model (BM) field, which has experienced a significant expansion and a growing
influence within business and management during the past two decade. To date, the BM
concept has not impacted managerial accounting thinking to any great extent [Becker and
Endenich (2022) make only passing reference to the BM concept]. It has begun to embed
itself within financial accounting and reporting, however, principally following the
International Integrated Reporting Council’s (IIRC) decision to afford the BM a pivotal role
within its Integrated Reporting (IR) approach to corporate reporting (IIRC, 2013, 2021). In
doing so, the IIRC has affirmed customers as a key stakeholder group whose information
needs IR is designed to meet.
The paper is organised as follows. In Section 2, a brief review of the development of the
SMA literature to date affirms that the continuing growth of their domination of the
marketplace, customers should continue to be the principal focus of any refreshed SMA
concept. Section 3 provides a wide-ranging, although not comprehensive introduction to the
BM concept, which identifies its central customer-focused insights, inter alia the value
proposition and the creation and delivery of customer value, as identifying a means of
rejuvenating SMA as a practical development. The detailed arguments in support of this
proposal form the content of Section 4, which also identifies accounting to customers as a
significant further dimension of SMA. In Section 5, a variety of information that might be
incorporated within any exercise in accounting to customers is identified and discussed. The
paper concludes in Section 6 with some brief observations on the role a refreshed and
significantly reformulated SMA concept might play in the future development of IR and a
greater focus on stakeholder accountability.

2. Strategic management accounting: a brief retrospective

The history of SMA dates back four decades to Simmonds’ advocacy of a new direction in
managerial accounting he believed held out great promise for practitioners (Simmonds,
1981, 1982). His founding conceptualisation envisaged management accountants focusing
on practices pursued by a company’s competitors in parallel to those pursued internally.
Although sometimes portrayed as competitor costing (Guilding, 1999), Simmonds’
characterisation of SMA identified the necessity of assembling a much broader information
set. In addition, Simmonds asserted that SMA required the utilisation of non-financial
indicators, a practice soon to become more widely pursued as managerial accounting
embraced the relevance agenda later in the decade (Johnson and Kaplan, 1987). The next
milestone in the evolution of SMA occurred at the height of this renewal process, being
closely associated with Bromwich and Bhimani (Bromwich and Bhimani, 1989, 1994;
Bromwich, 1990). They continue Simmonds’ external emphasis and, strongly influenced by
target cost management, incorporate the twin foci of products and markets, and thereby
customers, alongside competitors. Their famous comment about releasing management Strategic
accounting from the factory floor (Bromwich and Bhimani, 1989, p. 95) and the identification management
of attribute costing as the enabling accounting technique highlighted a very different
approach to costing than activity-based costing as advocated by Cooper and Kaplan (1987,
accounting
1988, 1991). Non-financial numbers were again recognised to be integral to SMA.
Interest in SMA waned in the mid-1990s, before being revitalised in the work of
Roslender and Hart, who had secured funding from the Chartered Institute of Management
Accountants (CIMA) for a study of SMA practices in the UK at the time of the millennium
3
(Roslender and Hart, 2002a, 2002b; 2003; see also Roslender et al., 1998). The researchers
advocated a specific characterisation of SMA, regarding it as a fundamentally
interdisciplinary (and subsequently interfunctional) concept. They portray SMA as:
[An] attempt to integrate insights from management accounting and marketing management
within a strategic management framework (Roslender and Hart, 2003, p. 260).
Roslender and Hart identified customers as a key focus of SMA, subsequently identifying
the increasing importance that brands held for customers, commending brand management
accounting as an additional focus within SMA (Roslender and Hart, 2006). At the end of the
decade, they affirmed that customers should be recognised as the principal focus of SMA,
commending the exploration of extant and alternative approaches to customer accounting
or “taking the customer into account” (Roslender and Hart, 2010; see also McManus and
Guilding, 2008; Weir, 2008; Roslender and Wilson, 2008).
Roslender and Hart’s decision to pursue a specific, although still wide-ranging SMA
concept was at odds with what had now become the widely accepted practice of identifying
SMA with the many of the techniques associated with the new management accounting
over the previous quarter of a century. Langfield-Smith (2008) advocated this broader focus,
as had previous researchers such as Guiding et al. (2000), Cravens and Guilding (2001) and
Cadez and Guilding (2008). Langfield-Smith also argued that these new techniques all
shared an explicit “strategic” emphasis, together with Shank’s strategic cost management
(SCM) technique (Shank, 1989; Shank and Govindarajan, 1989, 1992a, 1992b, 1993). SCM had
emerged contemporaneously with activity-based costing and target costing, although by the
late 1990s it had begun to fade from view. Nevertheless, echoing Shank (2007), Langfield-
Smith concludes her review observing that while SMA, SCM and several related techniques
may no longer be widely discussed in the literature, they had become widely embedded
within practice, including beyond the accounting and finance field. The paper concludes
with the following recommendation:
Given the spread of management accounting work to other functions in the organization future
research should not just be focused on the output of accounting departments. Understanding how
management accounting practices come to the attention of organizational actors and how they are
implemented and developed will be a source of interesting research (Langfield-Smith, 2008, p. 224).
The continued steady accumulation of the SMA literature has evidenced a shift away from
its previous technical emphases in the direction of “in action/practice” or performative
studies. Nixon and Burns’ 2012 special issue of Management Accounting Research includes
three longitudinal SMA-underpinned case studies and a fourth paper that explores the
operation of strategic performance measurement systems from the perspective of a second-
generation strategic management perspective. A number of papers have followed in the
wake of this special issue, among them Lachmann et al. (2013), which documented the use of
a broad range of SMA techniques in German hospitals, while Carlsson-Wall et al. (2015) later
documented the presence of SMA practices in the context of “close inter-organisational
JAOC relationships” between suppliers and customers. In a follow-on of this strategy-as-practice
20,1 framing applied by Carlsson-Wall et al. (2015), Lapsley and Rekers (2017) investigated the
utility of the SMA concept in understanding processes involved in bringing new theatrical
productions to major centres of staging. They document the importance of social processes
in relation to SMA practices. In a study which connects the SMA literature to understanding
value from the customer perspective, Turner et al. (2017) explore the use of SMA techniques
4 including customer profitability analysis, competitor performance appraisal, value chain
analysis and strategic costing in creating links to hotel performance. Similarly, Pavlatos and
Kostakis (2018) document the relationship between management team attributes and
adoption of SMA with Greek manufacturing businesses, while more recently, Hadid and
Al-Sayed (2021) has examined the role that organisational culture and information systems
play in determining a range of SMA practices in the UK manufacturing industry.
Interest in exploring further SMA’s strategic management emphases and, in particular,
its customer resonances has been much less evident. In an unpublished 2011 working paper,
Roslender and Hart sought to differentiate between strategy and strategic management,
arguing that while the former was implicitly reliant on an exclusive concept of strategy, and
principally the preserve of the minority of managers inhabiting the upper reaches of the
organisation, by contrast, strategic management was a more inclusive concept (Roslender
and Hart, 2011). This reconceptualisation of strategy had begun in the later 1970s and
subsequently informed the development of strategy theory, now increasingly referred to in
the strategy literature as strategic management theory. Roslender and Hart argued that
much of the evolving SMA literature had yet to come to terms with this shift from strategy
to strategic management, despite the latter term’s growing presence in discussions about
SMA and similar ideas. Nixon and Burns’ contribution to the special issue of Management
Accounting Research on SMA discussed several related ideas, making reference to a second
generation of strategic management theory that SMA researchers have largely failed to
address (Nixon and Burns, 2012).
In March 2015, CIMA published an Executive Summary Report prepared by Graham
Pitcher with the title: Management Accounting in Support of the Strategic Management Process
(CIMA, 2015). The report draws on most of the well-known contributions to the SMA literature,
again affirming that the term SMA continues to display little currency within the management
accounting profession. The various techniques previously identified as SMA, including
attribute costing, life-cycle costing and target costing, are also concluded not to be widely
subscribed (CIMA, 2015, p. 10). In a more positive vein, however, the report found evidence that
some constituents of what twenty-first century managerial accounting has evolved into, e.g.
benchmarking and customer profitability analysis, are regarded as making a useful
contribution to the strategic management process. The implication of the report is that
management accountants need to recognise that they potentially have something important to
offer in support of strategic decision-making and the strategic management process more
generally. However, the report concludes that this is unlikely to happen as a matter of course, as
other organisational players may be perceived to have more to contribute.
Roslender and Hart’s (2010) advocacy of customer accounting was underpinned by the
continued advance of the customer orientation approach within marketing management
(Blocker et al., 2011). In addition to reiterating the virtues of borrowing from the growing stock
of customer (and brand) measurement metrics present in the marketing management literature,
which often resonated with accounting’s familiar “counting” practices, they argued for the
development of customer self-accounting (or perhaps “recounting”). Although at first sight an
ambitious, even improbable programme to pursue, the emergence of new social media
technologies was identified as providing a means to make such initiatives more realisable. At
the same time, however, Roslender and Hart acknowledged that such a development would Strategic
have the consequence of positioning SMA on the periphery of the managerial accounting management
discipline, even more so than many if not most practitioners already considered it to be.
Over the following decade, it became evident that any rejuvenation SMA, and especially in
accounting
its customer accounting formulation, necessitated the incorporation of some new thinking.
Counting either customers or customer attributes in ever more inventive ways, many of which
might appear distant from received accounting practice, continues to be identifiable as an
exercise in accounting. Customers remain the subject of the account (=story) that business 5
enterprises seek to tell. The more that customer performance measures improve, the more
successful the enterprise can claim to be, with success also normally being accompanied by
improved financial performance. Underpinning this arrangement is the assertion that
customers exist for the benefit of business, i.e. its shareholders, the providers of financial
capital. While this view may have prevailed throughout the greater part of the past three
centuries, the emergence of the requirement for businesses to embrace a customer orientation,
where the opposite is the case, i.e. businesses exist for the benefit (or at the behest) of customers,
signifies a fundamental change in the business environment. The assertion that “our customers
are our greatest asset” has become more visible within the contemporary business narrative,
although like the same perspective on employees, it continues to be viewed with considerable
scepticism in some quarters. Nevertheless, recent business history is littered with enterprises
that have failed to recognise the sovereignty of their customer base.
Any new thinking had, therefore, to continue to embody Roslender and Hart’s
perspective on SMA, i.e. incorporate insights from managerial accounting, marketing
management and strategic management. This in turn would affirm the fundamental
interdisciplinarity of SMA together with its various techniques, including target cost
management, brand management accounting and attribute costing. In so doing, it would
continue to constitute a distinct departure from what would normally be regarded as
accounting. It should also continue to be strongly customer focused. To accomplish this, it
was recognised that it would entail an engagement with the concept of customer value, i.e.
what customers value in market offerings, as distinct from the more familiar financial value.

3. The business model concept

To date accounting researchers have afforded the BM concept only a limited extent of
attention. Fundamental to BM thinking, and of particular significance to this paper, is the
importance it accords to the creation of value for and delivery to customers via the
mechanism of the value proposition. It is on this basis that the BM concept provides an
instructive and compelling avenue towards revivifying SMA, consistent with the customer
accounting formulation identified in the previous section.
Every business has (or has had) a BM or combination of BMs, irrespective of whether
those who own or control the business are aware of their BM(s) or can describe it/them in
any level of detail. The term has become increasingly visible within the business narrative,
widely invoked, although not always understood by those who use the term. In the case of
those responsible for directing businesses it is a prerequisite that they are both able to
recognise and to provide details of their prevailing BM(s) if they are to successfully oversee
business performance. An early example of a successful generic BM is referred to as
the “razor and blades” model. Here, the business sells the razor comparatively cheaply, while
locking the customer in to the “shaving system”, thereby generating a continuing, lucrative
revenue stream from the sales of blades. The same model is also prominent in the case of
desk-top printers, with the cost of print cartridges providing the revenue stream. Another
contemporary example in the UK is the BM adopted by Ryanair, within which the basic cost
JAOC of a flight (with “no frills”) can sometimes be minimal, passengers being induced to purchase
20,1 a wide range of “frills”, some at relatively high cost, thus ensuring further revenue. One BM
that has been discussed in the accounting literature is that developed by Apple, the subject
of a special issue of Accounting Forum in 2013. The special issue presents different
perspectives on how Apple’s BM is able to engage strategic partners to keep customers
locked into Apple’s own digital ecosystem, and thereby raise the probability that customers
6 will make re-purchases as product updates and new products are released.
The function of a BM is to provide a detailed overview of how an enterprise intends to do
business (successfully). An extant BM is a dynamic entity since the basis of successful
performance is always subject to change, often slow but occasion very quick, with
potentially disastrous consequences for a business. Nowadays, it is naive to imagine that it
is possible to have a specific BM in place for a prolonged period, or that it is readily possible
to identify the most appropriate BM on which to embrace. A BM requires to be selected with
care, implemented, monitored and refined (or more extensively reconfigured) as necessary.
The pivotal role a BM plays confirms that it has the same level of importance that a business
strategy holds, suggesting that the two concepts are intimately related. They are not be
regarded as interchangeable terms; however, Casadesus-Masanell and Ricart (2010) arguing
that a firm’s BM is a reflection of its realised strategy, i.e. the logic of the firm.
Within the prevailing accounting and finance perspective a BM is viewed as being profit-
oriented. In the terminology of BM theory; however, this reflects a focus on value capture (cf
Beattie and Smith, 2013). When a business is performing profitably, it provides those who
invest in it with a return on that investment, which might take the form of modest dividends
or more substantial retained earnings that are used for further investments. The term value
capture resonates with the discourse of shareholder value that has evolved over the past
couple of generations. Here, businesses are postulated to exist principally to deliver value to
shareholders, who are identified as being interested in maximising this value on a year-on-
year basis (Friedman, 1970; Rappaport, 1986; McTaggart et al., 1994). Largely absent from
this theoretical perspective is the explicit acknowledgement that the value in question is
financial value. In this regard, value capture refers to the process of transferring the surplus
resulting from successful business performance to shareholders in the form of financial
value, represented in monetary amounts as either accounting-based values or market values.
If these observations fully characterised the functioning of BMs, then they would readily be
subsumed within the accounting and reporting narrative and its underlying postulates. In their
seminal BM text, Osterwalder and Pigneur (2010) identify that value capture forms only one
component of the fundamental typology of value creation, delivery and capture. At its simplest,
value capture (and subsequent transfer to shareholders) by a business is the result of successful
value creation and value delivery. For Osterwalder and Pigneur, value creation and value
delivery are to be understood in relation to the customer, not the shareholder. This view reflects
the evolution of the customer-oriented marketplace identified in the previous section, in which
successful business performance is extensively, if not entirely, dependent on providing what
the customer seeks in the marketplace: customer value. For much of the 20th century, it was
businesses that largely dictated what to make available to their customers, usually in their own
interests, arrangements sometimes designated as the production-oriented model of marketing
(Lancaster and Reynolds, 2005). A fundamental customer orientation also underpins target cost
management philosophy, which takes as its point of departure the recognition that nowadays
successful products will largely be identified by customers (Hiromoto, 1988; Tani et al., 1994).
Porter’s distinction between the pursuit of value for money in products and those products
that are differentiated in variously nuanced ways coheres with BM theory (Porter, 1985). The
former category of products is attractive to customers because they are recognised to provide
customers with an acceptable product for a similarly acceptable, i.e. modest, financial outlay. Strategic
At the extreme, it is argued that customers will search for the greatest benefit per unit of management
monetary outlay, although departures from this are commonplace. There is an obvious
financial value component to the creation and delivery of this sort of product, which is very
accounting
different to the arrangements associated with differentiated products. What attracts customers
to such products is complex, being concerned with finding value in specific offerings. The value
in question is normally intangible in nature, very often emotional, perhaps offering the
customer the prospect of finding some identity in their acquisition and/or consumption. An 7
instructive example of successful product differentiation is the increasing availability of small
executive saloons from Audi, BMW, Jaguar, Lexus and Mercedes-Benz. Each marque has its
own niche, designed to appeal to different customer segments prepared to outlay relatively
large amounts of money to realise their expectations. Although similar products may be
available from competing manufacturers for lesser outlays, often incorporating many
appealing components but lacking the cache of the marque, they often fail to attract the
committed purchaser.
In contrast to the longevity of the BM concept, the academic BM literature has only
accumulated since the late 1990s, with early contributions from Timmers (1998) and Afuah and
Tucci (2001), with the then recent emergence of e-business also providing a major focus
(Hedman and Kalling, 2003). Thereafter, the BM literature expanded rapidly, with the
publication in 2010 of a special issue of Long Range Planning incorporating contributions from
many of the field’s leading figures serving as a major milestone. In a recent paper published in
the Journal of Business Models, three overlapping phases in BM research are identified:
definitions and concepts; business model innovation; and frameworks and theories for
designing and analysing business models. A fourth phase, based in performative studies, is
seen as currently emerging (Nielsen et al., 2018a). Roslender and Nielsen (2018) have
subsequently acknowledged that in pursuing a performative research agenda, the academic
BM community is following a well-trodden path, widely evident across the business and
management disciplines, including accounting, i.e. the study of BM activity “in action” (or “in
practice”). The knowledge and understanding that such research generates differs
fundamentally from the normative (prescriptive) managerial literature that currently
constitutes the bulk of the BM canon, with its added value residing in the challenge it presents
to the latter literature, as opposed to simply contributing a complementary literature.
Many definitions of what a BM is, or does, have been advanced over time. One of the
consequences of embracing a performative agenda is that the familiar call for an agreed
definition will lead to discussions that can only take place on the most general terms. As
observed at the beginning of this section, a BM provides a detailed overview of how an
organisation either does or seeks to do business (successfully). It follows that, of necessity,
an infinite number of BMs is possible, the effectiveness of which is contingent upon a
multitude of factors. Nevertheless, in a seminal contribution to the BM literature, Gassmann
et al. (2014) argue that there are 55 generic BMs that managers might wish to explore when
developing their own specific BM. In their practitioner-oriented study, Gassmann et al.
(2014) challenge managers to reflect upon their own thinking and intentions, in much the
same way that Kaplan and Norton (1992, 1996) intended when they introduced their
Balanced Scorecard (BS) concept. In both cases, the respective concepts provide a means to
recognise what questions might be asked when searching for a BM or BS – a basic toolkit
rather than simply a tried-and-tested cookbook for managerial action.
Osterwalder and Pigneur’s (2010) Business Model Generation text continues as the most
influential contribution to the extant BM literature. It builds upon Osterwalder’s earlier
doctoral research reported in his BM ontology paper (Osterwalder, 2004), being in turn
JAOC followed by Value Proposition Design, published in 2014, and co-written with Pigneur,
20,1 Bernada and Smith. Central to Osterwalder and his colleagues’ thinking is the concept of the
value proposition, which Osterwalder and Pigneur define as:
[T]he bundle of products and services that create value for a specific Customer Segment
(Osterwalder and Pigneur, 2010, p. 22).

8 They continue by observing that the value proposition(s) on offer is the reason why customers
choose to patronise one business over another (competitor) business. The value proposition
concept can be recognised in the context of competing differentiated products, as in the case of
small executive saloons. The marque selected is perceived to produce the greatest emotional
value for an individual customer at the time of purchase. If it is true that a BM visualises how a
company has elected to secure a sustained competitive advantage, being focused on the
successful delivery of value to the customer, a value proposition will also indicate why customer
engagement occurs. For Osterwalder and Pigneur, it is the successful delivery of a continuous
stream of attractive value propositions that provides the principal challenge to businesses.
The value proposition forms the central building block within the business model canvas
(BMC), which Osterwalder and Pigneur describe as:
[A] tool [that] resembles a painter’s canvas – performated [sic] with nine blocks – which allows
you to paint pictures of new or existing business models [. . .] [. . .] a hands-on tool that fosters
understanding, discussion, creativity, and analysis (Osterwalder and Pigneur, 2010, p. 42).
If a value proposition identifies how a business might be attractive or appealing to customers, the
BMC provides the route map to actually creating and delivering the customer value embedded in
the proposition or offering. The BMC is a generic higher-order tool that incorporates eight
additional building blocks (as in Figure 1). Three building blocks are principally concerned with
the fabrication of the value proposition: key activities; key resources; and key partners. This
grouping is reminiscent of the resource-based view (RBV) within strategic management theory
(Wernerfelt, 1984; Barney, 1991; Hamel and Prahalad, 1993; Rumelt, 1994). The second group of
three building blocks is more concerned with value delivery: customer relationships; customer
segments; and channels or customer touch points. While the former grouping refers to internal
phenomena, the latter has an external focus. The remaining pair of building blocks are financial
in nature – the cost structure building block is internally focused while the revenue stream
building block has an external focus. As a practical tool(kit), managers interact with the BMC, in
concrete form, populating the building block spaces with the relevant details regarding a
business’s preparedness to develop (or refashion) specific value propositions. In practice, this
interaction is envisaged to assume the form of a lengthy iterative process, which incorporates
contributions from the wide range of functions within the business.
Subsequent to the dissemination of the BMC, several alternative canvases have been
developed. Mauyra (2010) identified a canvas specifically intended for use in start-up businesses,
known as the Lean Canvas. Lehmuskoski (2013) designed an alternative canvas – known as the
Petri/FTE Canvas – in 2013, again specifically for start-up businesses. This canvas incorporates
a greater number of spaces, allowing for more focus on both customers and financial
considerations (petrilehmuscoski.wordpress.com). In 2016, Osterwalder and Blank introduced a
Mission Model Canvas designed for use in government agencies where budgets are usually fixed
(Osterwalder and Blank, 2016). The canvas concept continues to evidence further development,
including in the context of digital platforms in two-sided markets (Taipale-Eravala et al., 2020).
Noting the limited attention that accounting research had afforded the BM concept to
that time, Nielsen and Roslender (2015) identify the strategy map, the intellectual capital
statement and economic value added as generic BM approaches already present in the
 Strategic
management
accounting

Figure 1.
The business model
canvas
Source: Adapted from Osterwalder and Pigneur, 2010, p. 44

accounting literature although not widely recognised as such. Each in its own way offers a
means for senior managers to consider how they might create value for and deliver value to
customers in tandem with financial value to shareholders. Nielsen and Roslender further
observe that these approaches are more widely associated with managerial accounting than
with financial accounting and reporting. As the title of their paper intimates, however, they
are principally interested in identifying how BM thinking might inform the reconfiguration
of corporate reporting. They make only passing mention of the IIRC’s IR initiative, which
was still a novel development at the time of their research, acknowledging that IR
incorporates a focus on the BM concept although intimating some scepticism as to how it
might evolve. Subsequently, Roslender and Nielsen (2021) contribute to the critique of the IR
initiative, arguing that the BM concept continues to be unexploited within IR, despite its
evident centrality to IR as a basis for future corporate reporting. The January 2021 relaunch
of the IR approach fails to address this situation. It affirms the primacy of the interests of the
providers of financial capital, while continuing to omit any reference to the value capture
concept (IIRC, 2021). They conclude that there is a strong case for regarding the IIRC’s
approach to corporate reporting to be a case of “old wine in new bottles” (Roslender and
Nielsen, 2021).
As the BM literature has grown, it has become more varied and now incorporates many
foci. Nielsen et al. (2018b) provides a recent overview of the relevant research literature (see also
Amit and Zott, 2021). A key concept that has been present within that literature is that of the
value driver, identified by Amit and Zott (2001) as those factors, including resources,
capabilities and business relations, which contribute to the creation of value and differentiate a
business from its competitors (see also Zott et al., 2011). Like the term value creation, value
JAOC driver is also widely evident in the accounting and finance literature. In the context of the BM,
20,1 however, neither term refers principally to financial value. Recalling the earlier discussion of
the creation of value for and delivery to customers, understood as the key challenge facing
businesses seeking to create and sustain a competitive advantage over businesses offering
what might be adjudged similar value propositions, it is necessary that the requisite value
drivers are recognised and understood, are in place and used to their best advantage. It is the
10 combined outcome of the operation of a specific set of value drivers that constitutes successful
value propositions, providing the basis for understanding the why question mentioned above –
why customers choose one value proposition, and thereby one business, over another.
It would be wrong to claim that the BM concept is wholly absent from the narrative of
business and finance, although there is little evidence that most accounting and finance
practitioners have much understanding of the concept’s potential. It is also noteworthy that the
emergence of the BM concept is contemporaneous with a loss of momentum in technical SMA
research. In our view, the former provides important insights that contribute to the
rejuvenation of the latter, particularly the centrality accorded customers and the identification
of what is required if creating value for and delivering value to them via attractive value
propositions in the pursuit of sustained competitive advantage is to be successful. In this
regard, both concepts incorporate a major focus on forms of value other than those of a
financial nature. Crucially, both acknowledge that this generic process requires extensive, deep-
rooted cooperation across the range of business and management functions. It is for these
reasons that the BM concept is thought to offer a possible means for revivifying a progressive
SMA concept.

4. Customers, value propositions and accounting

Although customers have been a focus for SMA from its inception, it is principally in Roslender
and Hart’s later work that they are identified as its most important focus. In general, however,
both SMA and a focus on customers have constituted a relatively minor element within the
broader new management accounting portfolio during the past four decades. This is the case
despite the established role the customer profitability analysis (CPA) plays within businesses
(Howell and Soucy,1990; Foster et al., 1996; Roslender and Hart, 2002a, 2003), a technique some
would claim dates back much earlier (Schiff and Mellman, 1962). The principal beneficiaries of
CPA are not customers as the motivation for such exercises, as with the generality of activity-
based accounting, originates with businesses themselves. This does not mean that customers
have received no benefits from the application of CPA, although the mention of “profitability”
tells its own story. In Section 2, Bromwich and Bhimani’s insights on SMA were identified as
being informed by the concurrent advocacy of target costing/cost management, which also
acknowledges the significance of customers. As the target costing literature has subsequently
evolved since the 1990s, less attention has been afforded to customers with its advocates opting
to focus on accounting and engineering technicalities. Two of target costing’s core concepts,
“upstream costing” and “value engineering”, highlight target costing’s subsequent principal
emphases. The same observations apply to strategic cost management, itself a third early
foundation of the new management accounting (Shank, 1989, 2007; Shank and Govindarajan,
1993; Langfield-Smith, 2008). It also relegates customers to a secondary focus, its core value
chain analysis technique serving the interests of those who endeavour to add value to a much
greater extent than those who may be seeking it, i.e. customers.
Roslender and Hart’s advocacy for a customer focused SMA approach has consistently
rejected any temptation to determine the financial value of customers, a position they also
adopted in relation to brands (Roslender and Hart, 2006). “Counting” customers and
customer attributes was recognised as a preferable alternative to attempts at financial
valuation, having also long been discussed within the marketing management literature. Strategic
Many of the metrics and indicators developed for this purpose are similar in nature and management
emphases to their non-financial counterparts within the new management accounting. As
accounting
observed in Section 2, regardless of the insights that a set of customer (or brand) metrics and
indicators might deliver, for the most part they do not stray far from the fundamental
accounting and reporting framework. Roslender and Hart’s call for the development of
customer self-accounts, in which customers reflect upon their involvement with a business, 11
including both positive and negative observations, was suggested as a promising step
forward (Roslender and Hart, 2010). These accounts were to be delivered via social media
and similar communications technologies and curated by customer-facing accounting and
reporting specialists who would also be responsible for incorporating a range of self-
accounts within a much-expanded annual report package.
What the latter approach offers is a means of avoiding further accounting for (or
“counting”) customers. It does so by shifting to a form of accounting with customers. Such a
shift has been advocated increasingly over the past decade or so in the context of dialogic
accounting ((Brown and Dillard, 2013, 2015; Dillard and Brown, 2014; see also Brown, 2009).
Within dialogic accounting, it is acknowledged that it is no longer desirable to perceive of
accounting and reporting practices, particularly those associated with financial accounting and
reporting, as being solely intended for use by shareholders and their close network of associates
including advisers, lenders and analysts. Including information in the annual report that
emanates from customers themselves would, like the concept of dialogic accounting, signal a
major reformulation of the objectives of financial accounting and reporting. The same
observation is also applicable in the case of including information that emanates from
employees, and thereby a major step forward in meeting the long-recognised challenge of
accounting for people (Roslender et al., 2015; Flamholtz et al., 2020; Bessieux-Ollier et al., 2022).
Changes of this nature constitute an important advance within the accounting jurisdiction and,
therefore, likely to meet resistance from many within the profession.
As appealing as accounting with customers might be, a third generic approach to taking
customers into account is now identified, accounting to customers, i.e. communicating to
customers acknowledged as important stakeholders within the business, alongside
shareholders or management. Accounting to customers might be considered as more akin as
an exercise in social accounting, understood as accounting to society, which has as its
founding objective the provision of information to those who inhabit society on matters
regarded as being of interest to them.
To begin to explore the formulation of an accounting to customers approach necessitates a
return to the distinction between financial value and customer value highlighted in the
previous section. The concept of financial value is very familiar to those within the accounting
and finance discipline, being the form of value that shareholders, whether actual or prospective,
seek from the capital investments they make. Increased financial value is the result of
successful business performance over time, the value captured by the business, to be either
distributed to shareholders or accumulated in the market value of a business’s stock. During
the past 40 years, the financial value concept has also become increasingly evident in the
narrative that surrounds a more broadly based financial sector. As also previously observed, a
further instance of financial value creation and delivery has become more prevalent in the
context of providing “value for money” to customers through the mechanism of relatively
inexpensive products and services, or value propositions, available from many sources in the
marketplace. These value propositions are subscribed principally because they satisfy the
needs of customers in a financially efficient manner, i.e. at a relatively low price.
JAOC In recent decades, a growing proportion of value propositions has not been sought
20,1 because of their value for money attribute. Their popularity is based on the intangible,
emotional, identity-affirming or similar attributes they possess for particular customer
segments within the marketplace. They instantiate what customers place value on in
specific value propositions. Within marketing management such value propositions are
described as exhibiting perceived value (Sanchez-Fernandez and Iniesta-Bonillo, 2007),
12 indicating that they are widely subscribed because of what customers are seeking and
which they believe will be delivered to them. What is on offer in the case of such value
proposition is customer value rather than financial value (for money). Their success is the
result of these value propositions meeting customer(s) value expectations.
A major characteristic of differentiated value propositions is that their appeal can be more
unpredictable than their value for money counterparts. Their success is heavily reliant on
continuously delivering on the expectations of customers. Should they fail to do so, customers are
often able to take their custom elsewhere in search of fulfilment. Equally, there is the ever-present
possibility of customers abandoning value propositions to which they have previously been loyal
following changes in individual personal circumstances, the most commonplace being a change
in financial situation. A further example of the precariousness associated with differentiated
value propositions is the phenomenon of fashion. Hitherto expectation delivering value
propositions can fall foul of changes in fashion very quickly, particularly in the case of those that
are not fully embedded in the marketplace and may be prone to as rapid a decline in fortunes as
had been evident as they previously became well-subscribed, e.g. Benetton. One category of
differentiated value propositions largely immune to the effects of fashion, are those designated
exclusive brands. Many if not most high-end exclusive brands have considerable longevity,
which attribute is generally a major contributor to their enduring appeal to their relevant
customer segment(s). A readily recognisable example of such a value proposition is Rolls-Royce
cars. Many more expensive cars are available in the marketplace, which attract considerable
prestige and which can be relied upon to deliver on the expectation of a spectacular driving
experience. For many purchasers acquiring a Rolls-Royce signals a lifelong commitment to a
concept as much as it does a means of personal transport. The Patek Phillipe watch company
suggests an even higher level of relationship in its assertion that someone who purchases one of
its watches never actually owns it but “merely looks after it for the next generation”.
The content of the previous paragraphs indicates that the expanded formulation of SMA
we have in mind characterises it as a different development to that previously commended.
Accounting for customers using principally non-financial metrics, some of which emanate
from marketing management, ultimately qualifies as a managerial accounting approach
albeit one that many would see as sitting at its periphery. Accounting with customers via
customer self-accounts held out the promise of enriching this information set while also
raising the prospect of including some customer-related material within the annual report
package. Accounting to customers as described here, shifts the emphasis firmly in the
direction of reporting to customers acknowledged to be a major stakeholder in the activities
of a business. If customers are recognised as being key stakeholders in a business, they can
legitimately be regarded as meriting being accounted or reported to alongside shareholders
and management, as well as employees and other stakeholders.

5. Possible content for accounting to customer communications

Customers seeking information from a business with which they are in a relationship would
initially be in search of insights that affirm the integrity of that relationship. Since the 1960s,
there has been a growing expectation that businesses behave in ethically sound ways,
thereby exhibiting a necessary corporate social responsibility. There are various aspects of
such behaviour being sought, with a commitment to acting in a sustainable manner Strategic
currently at the top of the agenda, or at least moving in that direction. In the wake of the management
Brundtland Commission’s report, Our Common Future (WCED, 1987), sustainability
concerns became more widely explored, publicised and debated, giving rise to the Triple
accounting
Bottom Line accounting and reporting framework in the mid-1990s and the foundation of
the Global Reporting Initiative several years later. It is within this evolving milieux that
environmental and sustainability accounting also gained considerable momentum and some
of the initial thinking on IR emerged. Two decades later worry about the long-term 13
prospects for the planet have become a major element of public discourse, as consequence of
which many more people are interested to know that the businesses with which they
associate are also doing the most they are able to reduce their damage to the environment
and mitigate the sustainability crisis. A more discerning media has also ensured that a
greater level of insight is available, incorporating a willingness to call out incidences in
“greenwashing” on a regular basis (Mahoney et al., 2013).
A second focus of concern for many customers, and thereby important for businesses to
provide information on, are their relationships with their workforces. As many customers will
have some experience of being employees themselves they are likely to be interested in how
businesses treat their own workforces. Although financial matters are invariably of interest to
most employees, security of employment arguably ranks as a workforce’s most important
consideration. Consequently, information on longevity of employment and details of employee
turnover may be welcomed. In the case of the latter also welcome will be insights on future
levels of employment and any proposed large-scale employee relocation, both complemented
by explanations of their necessity. Information on employee development initiatives would be
similarly welcome, particularly in those instances where they contribute to increasing the
opportunities of formerly disadvantaged sections of the workforce. Along with the growth of
information on environmental and sustainability matters, in recent times the extent, nature and
severity of what is now designated modern slavery has become a much more publicised issue.
In the case of what are referred to as differentiated value propositions (or premium brands),
concern about the continued payment of low wages or/and the prevalence of dangerous or
unsuitable workplace conditions has also grown in recent decades. Greed on the part of
businesses who continue such practices is unlikely to endear them to their customer base which
in principle is readily able to move their custom elsewhere.
Behaving as a good corporate citizen has become a major expectation of many customers
and thus an attribute that is desirable to create and in turn disclose to customers. Arguably
a key business behaviour relates to its tax affairs. Many businesses have previously gained
a reputation for arranging their tax affairs in highly advantageous ways and to have done
so legally. The same is also the case for high-profile individuals, including those within the
music, sport and broader entertainment industries. With the emergence of a press and media
aware that any kind of perceived inappropriate behaviour attracts the attention of many
people, it has become more of a risk to do so. In the same way, businesses are able to gain
favour by making relatively modest investments in local communities particularly in
emerging economies. Educational institutions and medical facilities together with improved
water supply and other infrastructure investments generally attract reputational benefits as
do so-called legacy projects. These and similar behaviours have the facility to enhance the
“feel good” factor that customers, together with employees, now expect to characterise their
continuing relationships with businesses.
The judicious use of customer metrics, as in accounting for customers, might also be
included among the information provided to customers. Some customers might seek an
indication of the standing of their present relationships with businesses. Market position
JAOC and market share, accompanied by a relevant commentary, would provide a platform on
20,1 which to build. Insights on the pattern of customer turnover and retention have the capacity
to convey the embeddedness that existing value propositions presently have in the
marketplace. In the case of branded value propositions, information on brand recognition
and brand awareness is potentially instructive in that it provides an indication of the scope
which exists for future growth and extension. Complementing such an information set,
14 insights on the reputation that a business has in its industry and broader marketplace may
be welcomed by customers, including those who are presently prospective and seek a
measure of assurance that they are entering into a healthy customer relationship.
In the previous section, the term customer value expectations was introduced to identify
what customers, actual or prospective, are seeking to have fulfilled in the context of their
relationship with a particular business. Unless it is possible to fulfil these expectations,
which may be many and varied, in addition to being subject to change over time, then a
business will find securing and retaining a competitive advantage difficult. The term
“staying close to the customer”, identified by Peters and Waterman (1982) as a key lesson to
be learned from successful businesses, drew attention to necessity of engaging with the
challenges of meeting customer value expectations. In accounting to customers
documenting what a business understands its customers’ value expectations to be is critical.
In so doing, it is answering the why question identified in section three. Several aspects of
such a documentation have already been discussed above. It is now appropriate to delve a
little deeper into what the marketing management literature refers to as the co-creation of
value phenomenon (Prahalad and Ramaswamy, 2000, 2004; Cova and Dalli, 2009; O’Hern
and Rindfleisch, 2013).
Initially it is necessary for a business to be familiar with the specific attributes of value
propositions that appeal to, and hopefully will continue to appeal to, their customer segments.
In recent times, the technologies embedded in value propositions such as mobile phones and
laptop computers have emerged as a key attraction for many customers. In the case of mobile
phones, several of the market leaders, including Apple and Samsung, have found themselves
able to retain their customers with new value propositions that often incorporate only
incremental technological advances, which rarely result in making existing value propositions
obsolete. Complementing this situation is the “must have” attribute associated with such value
propositions, one that is especially characteristic of younger customers, who in significant
numbers seem to be prepared to spend a relatively sizeable part of their disposable income to
satisfy this need. A second highly influential attribute of well-subscribed value propositions,
again for a relatively high financial outlay, is style, as found in clothing and footwear ranges.
Armani, Versace, Louis Vuitton, Gucci and Hugo Boss are amongst the most popular brands,
all of which have their own defining style(s) which have an enduring appeal to different
customer segments. For customers attracted to particular styles, the value propositions on offer
are often viewed as the preferred choice when seeking additions to a personal wardrobe as a
consequence of them often fitting into an existing collection. Unlike mobile phones or laptops
many items are retained for a long period of time on the asserted grounds that style never
dates. A third attractive attribute is the perceived capacity a value proposition has to reflect a
customer’s own value constellation. Currently, the market for automobiles is in a long-term
transition to electric vehicles, with electric vehicles available from most of the major
manufacturers. New marques have joined Tesla in the marketplace, including Genesis, Rivian
and Polestar. Electric and hybrid vehicles are currently more expensive than their petrol and
diesel counterparts, so purchasing an electric vehicle at the present time may communicate a
commitment to contributing to efforts to address the climate crisis. Some customers have been
more attracted by the lower cost of running their vehicles, although this attribute has recently Strategic
been compromised by the spiralling cost of electricity. management
In accounting to their customers, it is matters of this sort that businesses should consider
focusing on as part of their efforts to strengthen existing and potential relationships with their
accounting
customers. By communicating this information these relationships will be strengthened as
customers recognise initiatives designed to reassure customers that businesses are conscious of
their broader responsibilities to society. At the same time, they will be able to convey their
understanding of the substance of their attraction to customers while continuously seeking to 15
enhance and enlarge their customer co-creation of value activities.

6. Concluding observations
From its inception, SMA has been a challenging concept, which for the greatest part has
been developed close to the periphery of managerial accounting. Its many resonances with
marketing management, including the focus on customers privileged in the later work of
Roslender and Hart, have compounded this situation. Electing to further promote the SMA/
customer nexus, as in the present paper, is recognised to be a precarious pathway to pursue,
one at odds with the present preference for performative studies, some of which identify
quite different formulations of SMA. Adding a further dimension to the SMA concept, in the
form of accounting to customers, and with it the necessity to commend a broad-ranging
reporting narrative informed by several elements of the evolving BM literature, is a bold but
promising practical proposal for management accountants to explore further.
Nielsen and Roslender’s (2015) observation that at the time of writing, the managerial
accounting literature incorporated a greater engagement with the BM concept than did the
financial accounting and reporting literature appears not to have been much built upon.
Although several years later, it is possible to identify an increased level of interest in BMs
within the context of financial accounting and reporting, this also continues to remain relatively
modest. One exception relates to the debate about the merits of IR, which, as discussed in
Section 3, affords both the BM and value creation important roles at the core of the IR
framework. To date researchers have yet to fully explore these roles, preferring to discuss the
significance of the extended set of capitals that serve as inputs (as well as outputs and
outcomes) to the value creation process. By doing so, they view the IIRC’s proposals largely
through a lens that ultimately accepts corporate reporting as rightfully privileging the needs of
shareholders as the providers of financial capital (Roslender and Nielsen, 2021).
At the same time, however, the IIRC also places emphasis on the necessity for future
corporate reporting to meet the needs of a growing number of stakeholders, observing that:
An integrated report benefits all stakeholders interested in an organization’s ability to create
value over time, including employees, customers, suppliers, business partners, local communities,
legislators, regulators and policy-makers. (IIRC, 2013, p. 4).
This recognition of customers as a legitimate stakeholder group coheres with the position
advanced in Section 4 above, while Section 5 has sought to identify the outlines of a relevant
customer information set, something the IIRC’s Framework documents fail to do (IIRC, 2013,
2021). The coming together of accounting’s two principal sub-disciplines in this way, and
enriched with some insights from the social accounting and reporting focus, further affirms
the promise that SMA’s advocates have asserted over the years, albeit in a form that has not
previously been anticipated and one which many management accountants may take some
time to appreciate.
A final observation invites further brief contemplation. In identifying the necessity for IR to
meet the information needs of a range of stakeholders, in addition to shareholders and their
JAOC business associates, the IIRC can be seen as accepting the case for a much-increased extent of
20,1 accountability by businesses. In a recent paper, Dillard and Vinnari (2019) make the case for
moving from accounting-based accountability to accountability-based accounting. The
identification of accounting to customers as a further dimension of the SMA concept might also
be understood as a means of promoting greater (customer) accountability, one that makes use
of a body of information that certainly departs from what many would recognise as accounting.
16
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Further reading
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Corresponding author
Robin Roslender can be contacted at: [email protected]

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