I would argue (and often do) that to remain relevant, we need to evolve with the environment and cultural changes that surround us. Even when it’s painful; especially when it’s uncomfortable.
However, I now believe that our lack of changing and reacting to the world around us is no longer just impacting our business, but our customers’ business and regulatory compliance. It’s critical that we go down this path of our own radical transformation so that we can lead our customers.
But how? The ability to use technology is one thing, but the bigger issue that I don’t see being addressed is our own bias. We need to look at how our lens of the world comes into play, leaving us with blind spots that can be damaging.
Think about how we fail to ask the correct questions for our customers and, as a result, are missing regulatory compliance issues. It’s time to understand how we fail to recognize that our customers are working differently now and have made changes to their businesses and therefore have different regulatory compliance issues altogether.
Only after we have our own transformation will we truly understand what we need to deliver to our customers.
No one said that being the CPA and advisor of an Internet-and mobile-driven organization with multi-state and international workers was going to be easy.
WHERE DO WE BEGIN?
We start with defining transformation. And no, it’s not just implementing new cloud software.
Our friends at Wikipedia define digital transformation as the changes associated with the application of digital technology in all aspects of human society. Digital transformation may be thought of as the third stage of embracing digital technologies. First, there’s digital competence, then there’s digital literacy and, lastly, digital transformation.
It all makes sense, doesn’t it? But where are we today? We are at a crossroads of user experience, technology and business. Somehow they’re all connecting and we’re not exactly sure what to do.
When we use the word “transformation,” what do we really mean? In Scott Anthony’s February 2016 Harvard Business Review article, “What Do You Really Mean by Business ‘Transformation?’” he talks about three different categories of effort — operational (what you are currently doing better, faster or cheaper), core transformation (what you are doing in a fundamentally different way) and strategic (changing the essence of a company).
Anthony breaks it down: “The first is operational, or doing what you are currently doing, better, faster or cheaper. Many companies that are ‘going digital’ fit in this category — they are using new technologies to solve old problems.”
The above is adding new tech for accounting, like adopting cloud applications. But they haven’t changed any of their processes. So really, it’s just more expensive technology on a broken firm model. Sad to say, many CPAs are still here.
The next category of usage, according to Anthony, focuses on core transformation, which involves doing what you are currently doing in a fundamentally different way.
The above is what the Radical CPA’s “New Firm” model does. It explains how all the external change helps to redefine a new business model. I have consistently said that adopting the four fundamental tenets — getting radical with cloud/technology, social/communication, pricing/value and process/experience — changed our firm at its core. Many Radical CPAs have copied the New Firm model or others similar to it. But it has a limited shelf life.
The final usage, Anthony explains, and the one that has the most promise and peril, is strategic. This is transformation with a capital “T” because it involves changing the very essence of a company.
This is my challenge for you. The four tenets gave us a foundation. But now we’re going 2.0. We’re going next level. This is the next step beyond our business model innovation. This is about how we create and develop our practice structure. It’s going to get a little messy. And it means digging deep.
We know that CPA firms are great at copying what other firms have done. But admit it: Many firm leaders haven’t quite figured out how to make change part of their DNA. They’re great at copying, not so great at innovating. However, copying is not a solution for the long term. Therefore, I believe we need to radicalize practice management with accounting, tax and audit as ingredients.
Our future sales will not be anything like they are today. They have already moved from an hour to a result. We must step up and learn how to shift our firms to produce new products that are market-driven and future-ready.
We start with a desire to want to change.
Do you accept the challenge? Once you do, and only once you do, then we jump into innovation. And then we give innovation room to breathe. That means any micromanaging you like to do? Out the window.
Innovation is inspired by speed and experimentation. CPA firms rely on safe, tried-and-tested processes. The system is built to protect the status quo and reject anything that may disrupt those secure processes. So innovation is an oxymoron in a CPA firm.
Another reason CPA firms tend to reject innovation is because it often reduces billable hours. Innovation causes you to do things more quickly and more cheaply, which is less expensive for the customer, which, if you are using timesheets, means less profit for you.
Innovation can also potentially cannibalize your existing business. However, isn’t it better for you to cannibalize your existing business than for someone else to?
I see this happening every day as the midsized firms lose customers to small firms who utilize technology better. They are creating digital transformations for these new customers, and the customers are loving it. The relationship with the firm becomes immaterial as the innovation is more important to the customer. The results are more tangible.
So what are you supposed to do? Start.
The first thing? Adopt cloud software. It will give you capacity for more innovation.
Only then can we really start the transformation.