The barriers to innovation

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By now you know how much I love the four fundamental tenets that are critical to defining a Radical firm. I have consistently said that adopting these tenets and radicalizing them — cloud/technology, social/communication, pricing/value and process/experience — changed our firm at its core. Many Radical CPAs have copied this New Firm model or some variation.

But I’m here to tell you that it has a limited shelf life.

The four tenets gave us a strong foundation. We became disruptors; we turned the profession on its head. We transformed our firms both culturally and financially.

But now we’re going 2.0. We’re going next level. Are you ready?

This next phase goes 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 mimicking, not so great at innovating. However, taking someone else’s idea and applying it to your circumstance is not a solution for the long term. Therefore, I believe we need to radicalize practice management with accounting, tax and audit as ingredients. What’s holding us back?

Jumping the hurdles

You can suck the life out of anything innovative more quickly than you allow it to spring to life. In accounting firms, innovation isn’t usually in our nature. Barriers to innovation and inspiration are everywhere and can creep up on you, even when you think your firm is “innovative.” Here’s a starting list of these barriers and how they can impact your firm:

  • Organizational. This includes upholding the status quo no matter what, a lack of strong infrastructure, a lack of insight and comparative data as to what other competitors are doing, and blind succession. This means following in a former leader’s footsteps, well, just because.
  • Regulatory. It probably won’t surprise you that ongoing regulatory updates are a huge obstacle to innovation. With most of our time being spent deciphering what’s new and what new updates to bring our customers, innovation takes a back seat. Outside demands and a compressed, stressful tax season also play a role in decreasing a firm’s innovation.
  • Market. If you follow the market, you won’t get anywhere. We need to be leaders in our industry and with our customers. If you look to see what your top three competitors are doing and they are all staying safe in their “old school” ways, then believe me, any innovation that may be possible is dying. The market isn’t moving fast enough, but that doesn’t mean you can’t be moving the needle yourself.
  • Financial. I know why many firms don’t see innovation — they are still billing by the hour! It’s profitable, I realize. But it’s not sustainable, I’m telling you. Billing by the hour is a short-term solution to a major practice management growth issue. You will not grow as fast or be as competitive as you want to be when you are still billing for every 15 minutes of your time.
  • Technological. Vendors have been doing a decent job keeping up with our needs. They could be doing better. Clunky technology and frustrated employees can be obstacles to innovation. But it can also inspire people to make things better. The cloud is still slow to catch on among CPAs, and that keeps our tools in the middle of the road.
  • Cultural. CPAs often promote themselves as something they’re not. Have you looked at the Web site of any accounting firm lately? The word innovative is everywhere. But are they truly? I seriously doubt it. CPAs look at the past very well. But when we talk about the future, it’s a different story. We know the typical personality features of a CPA — risk-averse, detailed and perfectionist to a fault. Innovation calls for mistakes. When you innovate and put yourself out there and start something new or do something differently, you will make mistakes. It comes with the territory. You must be able to pick yourself up, dust yourself off, and start over. Review points don’t grow innovators. With very little upfront training and lots of negative reinforcement, firms stifle innovation or even a little out-of-the-box risk-taking.

But enough about the barriers to innovation. I’m sure you are very familiar with those struggles. For new and more established firms, there is no reason your firm can’t produce the opportunity to innovate every day.

Agility over size

Our Radical movement started with small firms. We were nicknamed “the agile firms.” Why? Because we could move as the market moved. However, things have changed and bigger firms are getting nimbler. I don’t believe you must be small to be innovative in your firm anymore. It’s a mindset and a desire to be Radical. We have some powerful large Radical firms among us, proving that you don’t have to be small to be innovative.

Moving begins with thinking of yourself in a different way. Would you consider your firm agile? If you aren’t yet, how can you get there? It begins with recognizing the need.

We can apply the term “agility” when we release a “good” product based on our core services but continually improve on it. We define it as a good product of our services because it inherently follows all regulatory rules and standards. We still uphold our ethics and all the other values of a being a CPA. The only thing that really changes is how fast we can reiterate new ideas.

If we take this mindset, we can continuously improve. If we continuously improve, we will always be relevant and we’ll always have new opportunities for innovation.

I have more to say on agility and why it’s important for a firm to adopt this approach into their practice management. But first things first, it’s important for leaders to recognize the need for agility in all areas of their firm. What are some ways you can be more agile in your firm? Start small and remember — consistent, tiny steps can take you a long distance.

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