Disrupt yourself

The annals of business are full of stories of companies and industries that have been disrupted or disintermediated or even downright destroyed by changes beyond their control, but there is a definite paucity of stories of businesses disrupting themselves on purpose — which makes the increasing calls for the accounting profession to do exactly that seem riskier than they may, in fact, be.

The argument for self-disruption is fairly simple: Massive technological, demographic, social and business-related changes are about to wash over the profession (along with just about every other sector of the economy), and for accountants to leapfrog the wave seems preferable to picking themselves up and adapting after the deluge passes.


No time like the present

While many thought leaders and organizations across public accounting are calling for it to disrupt itself, it is safe to say that the American Institute of CPAs is leading the charge, preparing the groundwork in terms of envisioning new models and tools, and in convincing accountants to make the necessary leaps.

One common argument is that there is simply no time like the present: “We’re never going to see a pace of change that’s slower than what we’re seeing now,” AICPA president and CEO Barry Melancon told accountants at the institute’s Engage Conference in Las Vegas in mid-June.

Melancon regularly suggests in speeches and public appearances that the profession will see more change in the next five years than it has in the last 50 — then wryly admits that all that change will actually be compressed into two years, but he says five so as not to frighten people.

There is still, however, a chance to get ahead of the game. He regularly mentions the fate of Kodak: Contrary to what many think, the film giant was not blindsided by the digital camera revolution. In fact, it had a plan to get into the field itself — but its plan aimed to shift the business over 10 years, and the market shifted much more quickly than that, stranding the company between products and business models.

So accounting can’t afford to get its timing wrong, but fortunately, the things that will disrupt accounting are still far enough out on the horizon — even if it is a fairly short horizon — for the profession to take control of them. Automation, robotic process automation and artificial intelligence are still in their early days, and accountants can still harness their power to drive new business offerings, rather than being disintermediated by them. Blockchain, which has the greatest potential for disruption, is still in its infancy, its disruptive power largely theoretical. “We as a profession can’t wait for regulation to disrupt us, we need to disrupt ourselves,” warned AICPA executive vice president Mark Koziel in another session at Engage.

The core of the argument, then, is this: Change is coming, and sooner than most think; since accounting is going to change, won’t it be better if the profession itself decides when, and how much?

“As we look 10 years out, our profession is going to look very different, both for our companies and our firms,” said AICPA chairman and BKD COO Eric Hansen at Engage. “There is no ‘Easy’ button here.”

That reshaping of the profession can’t be wished away, and accountants can’t hunker down and hope to outlast it. “Many are saying, ‘Can’t these changes wait five or 10 years until I’m out?’” consultant Jennifer Wilson of ConvergenceCoaching told the attendees at the BDO Alliance’s annual conference in early May. “Well – no.”

AICPA chair Eric Hansen addresses the 2018 Engage event
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What’s changing?

The factors that are reshaping accounting run the gamut from the changing career paths and work preferences of millennials, to the massive retirements of the baby boomers, and changes in client expectations — but it is technology that is going to have the biggest impact by far.

“Technology is going to take us out of our comfort zone and pull us into new areas,” Koziel said. To start, emerging tools like robotic process automation and artificial intelligence are rapidly commoditizing a lot of basic services. “Data processing and bookkeeping have a higher percentage chance of being automated, versus managing others and applying expertise — and that’s what CPAs do: We apply expertise. That’s less likely to be automated.”

While basic compliance services are in danger of being automated or commoditized, the higher-end applications of AI and tools like blockchain have the potential to have an even bigger effect. “Once AI, blockchain, and so on become accepted, they will completely redefine what we think a professional accountant is,” Melancon told the annual meeting of the BDO Alliance in May.

And that brings us to the question of what self-disruption would actually look like. The visions vary depending on the focus of the visionary, but they generally all include some or all of the following:

  • Embracing technology much more closely, and using it not just to make current services more efficient, but to create new and different offerings.
  • Modernizing and refocusing traditional services.
  • Moving away from historically focused compliance services to forward-looking, higher-value-added advisory services — often in entirely new areas.
  • Adopting value or advanced pricing.
  • Restructuring accounting firms along new lines.
  • Pursuing different educational models.
  • Potentially changing the profession’s self-definition.

“We’re going to take our expertise and interact with our clients in new and different ways,” Koziel said at Engage. For instance, he suggested that tax practices should focus less on return preparation and more on planning — including financial planning and wealth management. Similarly, basic bookkeeping and accounting practices should morph into client accounting services practices, where technology enables the accountant to focus more on CFO-type services.

The audit is particularly ripe for reinvention, the AICPA believes, and it is taking serious steps in that direction. “We need to make significant efforts to transform audit — we’re calling on the top 80 firms to come together with their best minds to do that,” Melancon told the BDO Alliance meeting. “We are not talking about looking at the existing audit and making it better — incremental change,” he said. “Instead, how do we imagine what the audit should look like in a world that’s changing the way ours is?”

Technology-enabled service lines will lead, in many cases, to new and different firm structures. “When you look at firms, they’re being run the same way they were 20, 30 years ago,” said Koziel. “The pyramid model’s going to change. Our model has been to hire as many people as we can up front, and those left standing in a few years we’ll promote to partner.”

Automation and outsourcing will replace a lot of the entry-level work, leading to fewer young employees and more mid-level staff.

If firms and their services are going to be radically different, isn’t it reasonable to assume the skills they require will differ?

“Do we need to create an alternative pathway to CPA?” asked Melancon. “Maybe it’s not essential that a future CPA candidate demonstrate knowledge of how to do a compilation. As we develop new services around, say, blockchain, don’t we need a different set of skills, combined with a baseline knowledge of accounting?”

New skill sets and new exam requirements point to a new kind of CPA, which might mean redefining the profession.“We shouldn’t think about the people in our profession as being GAAP and GAAS and tax experts,” Melancon said. “That’s going to change in the future.”

The new definition will focus on combining traditional technical knowledge with business expertise, analytical skills and technological savvy to provide solutions to client problems — whatever they may be.


Why it makes sense

At its most extreme, the call for self-disruption could be a generation-long effort that transforms the profession root and branch. And even the less extreme versions seem likely to involve significant investments of time, resources and emotional energy — so many are wondering why they should start pursuing it now.

The best answer is that it’s always easier to change from a position of strength. As Melancon explained, Kodak had the resources, expertise and market muscle to dominate the next phase in its field — it just got the timing wrong. Accountants have a strong professional reputation, great brand recognition as trusted advisors, and have barely begun to feel the pinch from commoditization and technological change. There’s plenty of work to do, and revenues are strong.

That strong position, however, may militate against the very change it could empower: When things are going well, people are less likely to see a need for significant upheaval.

The second answer is that the upside is vast — with higher revenues from upgraded services, and unexpected revenues from entirely new ones, to say nothing of more satisfied clients, and more exciting, relevant careers.

“The opportunities for our profession are truly limitless, but only if we are bold enough to change, bold enough to move forward,” Melancon warned. “The profession can’t say, ‘We’re fine.’ If everything else in the world is changing, we need to change too.”

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