Previously I wrote about how change simply isn’t enough in today’s rapidly evolving accounting environment. To change means to continue doing the same things but introduce some degree of variation. Technology is disrupting (automating) and commoditizing many traditional services, and at the same time providing excellent opportunities to firms willing to transform their thinking and services.
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 are 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, you may even forget about today’s problems and focus on future challenges. Wayne Gretzky is known for his statement about skating to where the puck is going to be, not where it has been. 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 as with a tsunami, waiting too long can mean disaster.
How you think about the problem generally determines your solution or strategy. Perhaps accountants need to think about their process of thinking. Is their thinking outdated? How can they provide more value through their trusted client relationships? Talent competition, the need for efficient processes, and technology are forcing changes in the profession. In fact, they are forcing transformation in those firms that seek to sustain success and remain future-ready. Growth is on most firms’ strategic plans due to the importance of growth in retaining and attracting talent, plus sustaining profitability. Is your firm future-ready?
How firms got to now is not as important as how they will get to the future … the next one, three, five and 10 years. Growing or scaling a firm requires a different focus than maintaining it. According to Verne Harnish in Scaling Up: How a Few Companies Make It and the Rest Don’t, there are four primary issues:
- Execution; and,
It takes cash and people to grow a firm. The strategy and execution are also critical. Does your firm have a one-page strategic plan that is communicated to everyone? Do you have the leadership and talent to execute the plan? And finally, do you have the required cash or capital to make it happen? Characteristics of successful leaders are that they read and learn from others. According to Charlie “Tremendous” Jones, “The books you read and the people you meet will determine who you will be in five years.”
Harnish further defines the life cycle of companies from mice (startups — small) to gazelles (scale-ups) to elephants (large — don’t screw it up). Our focus is on “scale-ups,” which tend to be more mature and represent the top 3 to 5 percent of the profession. However, any size firm can adopt this growth strategy along with the required culture and habits. Steve Jobs was often quoted as saying, “I’m always amazed how overnight successes take a helluva long time.”
Some keys to “scaling up” are:
- Reduce management time. (Create a self-managed firm. This can be done with goal-setting and accountability.)
- Get on the same page. (This requires a culture of collaboration and not a group of rugged individuals sharing overhead.)
- Focus senior leaders on client-facing activities. (What do clients want and need beyond compliance services?)
The expected outcomes should be:
- Greatly improved cash flow;
- Greatly improved profitability;
- Increased valuation; and,
- Enjoyable culture.
The barriers to scaling up are leadership (the inability to grow or attract enough leaders), scalable infrastructure (IT platform and processes — the business capability model), and marketing and sales (the ability to acquire larger new clients and sell more services to existing clients). Your priorities should be clear and concise. Don’t be afraid to repeat your message consistently. Increasing the pulse of the firm (rhythm) is important. Think daily, weekly, monthly and quarterly progress.
Some accountants don’t see the urgency, as they are focused on accounting for the past. Are you going to let them determine your future? Getting your team on the same page is critical. Debate and differences of opinion are healthy, yet procrastination and avoidance of a decision can be deadly. Get your team moving and be willing to pivot along the journey.
Joseph Schumpeter, the influential 20th century Harvard economist, popularized the term “creative destruction” as part of the business cycle. Transformation takes you from the “old” to the “new” while enabling sustainability and future-readiness. The good news is you don’t have to give up the “old” to focus on the “new.” You just have to package, price, and use lean processes to move up the continuum of value. It requires different mindsets, toolsets and skill sets. Think, plan, grow! It’s a great day to be a CPA.