To embrace change simply isn’t enough in today’s disruptive environment.
Change means to continue doing the same thing while only introducing some degree of variation. This is often referred to as directional innovation. If you put a group of like-minded thinkers in a room, you will get incremental improvement.
The key 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. Inside-out change, proactive change and opportunity-driven change is where growth comes from, both personal and organizational. This requires intersectional innovation, where multiple disciplines and diversity come together to think differently about the problem. In fact, they may even forget about today’s problem and focus on future challenges. To many in the accounting profession, this may seem too radical, and with the recent demand and rapid increase in partner income, the question becomes, “Why should I change?”
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 try to explain why it is much different today than it was 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 (from April 1965) is probably the best-known example regarding the price and performance of processing power. In 1965 processing power doubled every year; today it doubles every 18 to 24 months.
Most of us have been trained to think in a linear and local fashion, rather than exponentially and globally. Today, we are being forced to change our thinking about age-old challenges in the accounting profession (talent, workflow 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. To demonstrate this law in another way (financial), how much money would you have after a month (31 days) if you started with a penny and doubled it every day? At the end of two weeks you would have $81.92 and at the end of 31 days, $10,737,418.24. Most people can’t comprehend this without actually doing the math, and even then it is difficult to comprehend.
WHY IT MATTERS
The important point of exponential growth is that there are three primary digital accelerators currently converging: processing power, bandwidth and storage. Bandwidth and storage are increasing at an even greater rate then 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; it was a 5Mb drive the size of two refrigerators, and it leased for approximately $250,000 a month. In 1979, Seagate released a 5Mb drive for $1,500. Today, 1-terabyte drives can be purchased for under $60 (the Samsung T1 SSD, the size of a thick credit card, is less than $450). These examples demonstrate that the curve is going vertical and no longer in a slow-growing, horizontal slope, meaning we need to think differently about the challenges we have today and into the future.
Every CPA firm leader says that talent is their No. 1 challenge. They especially don’t have the talent to take over (buy out) the partners who are at retirement age and rapidly grow the firm. Thus, we see an incredible amount of merger activity. I ask, “Is talent the real problem or are there other considerations we should be focusing on?” Talent has been the problem for decades, but perhaps the real problems are lack of a shared vision, lack of integrated and standardized systems, poor internal communications and processes, and a need to focus toward advisory, rather than after-the-fact compliance services that are becoming increasingly commoditized.
Where will you and the profession be in 10 years? According to The Economist in 2013, there was a 94 percent probability that accounting and audit jobs as we know them today will be lost due to disruptive technology over the next 20 years. The February 2016 edition of 24/7 Wall St. references the Bureau of Labor Statistics as making a similar prediction that jobs in bookkeeping, accounting and auditing will decrease by at least 8.4 percent by 2024. We are already seeing the early stages, with new technology that eliminates data entry and reconciliations. Block chain and other technologies on the horizon have the potential to eliminate many of the security and privacy issues, as well as eliminate most of the time spent today in reconciliation and data entry.
Are we as a profession going to miss this opportunity and lose relevance, or are we going to 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 anytime. Work is what you do, not where you go. Relevance means CPAs should move up the value chain, focusing on knowledge and wisdom.
My suggestion is 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 a technology outsourced model. This strategy in the short term may drive more to the partners’ income, yet in the long-term firms need internal technology expertise that can lead and nurture innovation. Again, I believe it is an “and” proposition. Outsource some of the infrastructure and support, but retain IT visionaries and leaders who understand both the future of the profession and technology.
Technology is becoming an increasing 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 will happen or not, it points out the need for a comprehensive firm technology strategy. In order to do this, firms must think differently. By thinking differently, they will see the need for a firm technology capability model/assessment.
Much of the IT focus in the past 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. As we move to the cloud, integration is easier, there is less friction among applications and the focus should go beyond just the front office. The strategy should consider the client and employee experiences, as well as support and the use of business partners/sourcing.
In a future article, I will share a Capability Model that will improve your IT vision as well as document the nine areas of importance. The model is relevant to firms and clients of all sizes. You simply adjust the model to your vision and strategic plan. Without an integrated strategy, it will be difficult for firms to remain successful and future-ready.
There are eight mindsets that will help your firm transform, remain successful, and be future-ready. The mindsets are:
1. A bigger future — you must focus on the future and believe that it will be greater than the past.
2. 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.
3. Willing to change — your ability to embrace change and learn faster than your competition is vital.
4. Improve processes — eliminate steps that don’t add value (the Lean Six Sigma approach).
5. Lifelong learning — training and learning are a two-way street. You must be willing to learn as well as teach others.
6. Growth — the only alternative is growth, if you wish to attract and retain the brightest talent.
7. Connected — trust is what holds the Internet-connected economy together. You create digital trust the same way as any other kind of trust.
8. 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!
L. Gary Boomer, CPA, CITP, CGMA, is CEO of Boomer Consulting Inc.