Accounting in the fourth industrial revolution
There seems to be much conversation recently around the notion that tax, bookkeeping and accounting jobs are going away over the next five to 10 years — eclipsed by the advancement of technology. Artificial intelligence, machine learning and blockchain are seen as emerging technologies that will lead to the automation and ultimate elimination of your job. While this may be a sensational narrative to raise uncertainty and fear, it's worth countering that the value of your work, your ideas and your contributions to the world are just as important in the future as they are today, if not more so.
We are currently living in an age referred to as the “fourth industrial revolution.” The first step in an industrial revolution is a disruptive technology. The second step is the refinement of that technology to increase its capabilities. The third step is mass adoption and differentiation.
Let’s say I was a tailor when all other tailors adopted the sewing machine and mass production — how am I going to differentiate myself? Before the first revolution, I used needle and thread to hand sew each stitch. It took me several hours to make each shirt, and I priced each one according to the number of shirts I could produce in a day and how good they turned out. Demands increased, but I couldn’t keep up or charge more because I had already reached the maximum price that people could afford or were willing to pay. In this scenario, the needle was the technology that enabled the creation, but the needle did not create; I did. This is an enduring concept through all advancements and technological progress.
How does tailoring relate to the tasks performed in the tax and accounting industry? Remember balancing your checkbook in that envelope the bank gives you? Remember ledger books? If you were around during this time, did you find yourself wishing for a better, faster, easier way? You might have, but you likely didn’t because it was simply the way it was done, and we didn’t know of any other way to do it. Most people responsible for performing these tasks prided themselves on their ability to crunch numbers in their heads. (Until the calculator was invented and that was no longer necessary.)
Now, back to this imaginary shirt-making business. At some point during this journey of sewing shirts by hand, along came the sewing machine. This allowed me to make twice as many shirts in a day, but so could everyone else, which drove the price down, so I had to make up for it in volume. This, in return, presented new challenges around how I was going to sell more shirts. I didn’t have time to figure out new strategies to reach more people, so customers become bored with the same shirts. I tried to create more options, but how could I now keep up with different designs and find more buyers?
There’s a notable difference here in what I need in terms of skills and knowledge. My skills and knowledge need to evolve. My motivations, mindset and attitude are the keys to a successful outcome for my little shirt business and ultimately my quality of life. First and foremost, I must maintain an open mindset toward the new technology, seeing it as a tool that augments my task. If I view new technology as a threat to my current way of sewing, then I have failed before I have even begun. It will undoubtedly force change to my selling environment by introducing new competition and requiring new approaches. But it is not impossible for me to learn how to navigate this new landscape. Moreover, I will learn much faster if my attitude is positive and forward-looking. If my prior motivation was to sell high-quality shirts, but that is no longer valued as much, then my new motivation is to sell high-quality shirts to as many people as possible and as quickly as possible.
The tax and accounting industry is no longer in the business of preparing more tax returns at a faster rate, since technology does this for us and it will continue to get better at it. In fact, it’s likely that how tax and accounting professionals serve their clients isn't really going to change. There will still be compliance work to do, but the paradigm flips in how we think about it. Once you adopt to that mindset, you can rebuild your business around it. At that point, you’re ready to build your skills differently.
The skills you build should be focused on communication and client relationship management, sales, managing different kind of talent in your firm, and most importantly, translating real-time data into insights while tapping into your vast experience working across many different kinds of businesses. This affords you the opportunity and unique capability of advising clients on their current and future financial health and growth.
The advancement of technology also commoditizes the given industry to which it’s applied. This lowers prices for consumers, since the suppliers create it faster and cheaper, which then frees the supplier to add more services or focus on a niche in the market. It’s no different for the tax and accounting industry. Technology simply allows you to produce these things faster and at greater scale so that you can focus on the next most important thing to serve your customers and clients: advice.
So when new intelligent technology comes along, will I still even be needed or relevant? Of course I will; it’s simply what I will focus on that will be different. I’ll be able to spend time feeding new technology my ideas, testing creative approaches that AI couldn’t know, and focus my energy on building relationships to increase my market penetration.
While there is a stark contrast in the skills required to sew compared to building relationships with potential customers, the need for me, as a person, remains. That’s because technology is an augmentation of me, my skills and my ability to advance. Not to mention, the time technology saves me will be time back in my pocket for relaxing, spending time with family or investing in my business. And this is what technology really affords us — options and the flexibility to choose how we spend our time and energy.