Embracing change isn’t enough in today’s disruptive environment. To change means to continue doing the same thing but introducing some variation. We often refer to this as directional innovation. You will get incremental improvement if you put a group of like-minded thinkers in a room.
The key is transformation.
What is transformation?
Transformation means doing something utterly and radically different.
Stepping outside of the box isn’t enough. We need to transform the box itself. Growth comes from Inside-out, proactive, and opportunity-driven change, both personally and organizationally. This requires intersectional innovation, where multiple disciplines and diversity come together to think differently about the problem. They may even forget about today’s problems and focus on future challenges.
Wayne Gretzky made a famous statement about skating to where the puck will be, not where it has been. To many accounting professionals, this may seem too radical, and with the recent demand and rapid increase in partner income, the question becomes, “Why should I change?”
Why transform?
This is a valid question, yet much like with a tsunami, waiting too long can mean disaster.
Many don’t see a sense of urgency, so let me explain why it is much different today than five to 10 years ago. The impact of technology (disruption) is much greater today than it was several years ago. This is due to what is known as the law of increasing returns. Moore’s Law (April 1965) is probably the best-known example regarding the price/performance of processing power. In 1965, processing power doubled yearly; today, it doubles every 18-24 months.
Most of us have been trained to think linearly and locally rather than exponentially and globally. Today, we are forced to change our thinking about age-old challenges in the accounting profession (talent, processes, technology and providing relevant real-time wisdom rather than just information). The microprocessor has been around for over 50 years, and when it doubles today, the increased capability is significant.
In financial terms, how much money would you have after a month (31 days) if you started with a penny and doubled it daily? At the end of two weeks, you would have $81.92, and at 31 days, $10,737,418.24. Most people can’t comprehend this without actually doing the math.
Identifying the digital accelerators
The critical point of exponential growth is that three primary digital accelerators are converging: processing power, bandwidth and storage.
Bandwidth and storage are increasing at an even greater rate than processing power. Full-motion video requires approximately 10 Mbps. Most people have this capacity on their cell phone or in their home. The first hard drive was developed by IBM in 1956 (5 Mb). It was the size of two refrigerators and leased for approximately $250,000/month. In 1979, Seagate released a 5 Mb drive for $1,500. Today, we can purchase one-terabyte drives for under $50. These examples demonstrate that the curve is going vertical and is no longer on a slow-growing horizontal slope, meaning we need to think differently about our challenges today and in the future.
Every CPA firm leader says talent is their number one challenge. They especially lack the talent to buy out partners at retirement age and rapidly grow the firm. Thus, we see an incredible amount of merger activity. Is talent the real problem, or are there other considerations we should focus on?
Talent has been the problem for decades, but perhaps the real issues are the lack of a shared vision, lack of integrated and standardized systems, poor internal communications and processes, and a need to focus on advisory rather than after-the-fact compliance services, which are becoming increasingly commoditized.
Where will you and the profession be in 10 years? The accounting and auditing jobs we know today will be lost due to disruptive technology over the next decade. We already see the early stages with new technology that eliminates data entry, coding and reconciliations.
Are we going to miss this opportunity and lose relevance? Or will we embrace the exponential and global movement? Some will probably choose to allow the gravity of the past to paralyze them, while others will become future-ready. I believe accountants and their firms should and can do both. It is not an either/or proposition. I believe it is an “and” proposition, providing the excitement and needed growth opportunities to attract excellence and leverage technology that allows you to work from anywhere and at any time. Work is what you do, not where you go. Relevance means CPAs should move up the value chain, focusing on knowledge and wisdom. Clients seek “signals,” not “noise,” when managing their businesses and lives.
I caution you to avoid ignoring the impact of technology and include technology in your vision and strategy. Firms need someone with technology and business savvy at the management table. Too many firms are moving to an outsourced technology model. In the short term, this strategy may increase the partners’ income, but in the long term, firms need internal technology expertise that can lead to and nurture innovation. Again, I believe it is an “and” proposition. Outsource some infrastructure and support but retain IT visionaries and leaders who understand the profession's future and technology.
Technology is a growing component of marketing and sales strategy. Some marketing gurus have predicted that the marketing technology budget will become the largest component of the entire firm’s technology budget. Whether this happens or not, it points out the need for a comprehensive technology strategy. To do this, firms must think differently. By thinking differently, they will see the need for a technology capability model/assessment.
Much of the IT focus has been on production in tax and audit-related services. Firm management has also been part of the equation. Yet, the applications generally have not been integrated or shared data easily. Integration is easier in the cloud, and there is less friction among applications. Consider the client and employee experiences and support and the use of business partners/sourcing. Without an integrated strategy, it will be difficult for firms to remain successful and future-ready.
Eight mindsets will help your firm transform and remain successful and future-ready. The mindsets are:
A bigger future – you must focus on the future and believe that it will be greater than the past.
Team player – the day of the rugged individual is over. Clients’ wants and needs require a team approach. The team can be composed of external as well as internal resources.
Willing to change – your ability to embrace change and learn faster than your competition is vital.
Improve processes – eliminate steps that don’t add value. (The Lean Six Sigma approach.)
Life-long learning – training and learning are a two-way street. You must be willing to learn as well as teach others.
Growth – the only alternative is growth if you wish to attract and retain the brightest talent.
Connected – Trust is what holds the internet-connected economy together. You create digital trust the same way you create any other kind of trust.
Accountable – you must be willing to hold yourself accountable if you wish to hold others accountable. Accountability is the fastest way to change results.
Think-Plan-Grow!
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