There's plenty of room for accountants to innovate in ways that don't involve IT, says metaconsultant Ed Kless, senior director of partner development and strategy at Sage, the host of the Sage Advice podcast, and co-host of "The Soul of Enterprise" radio show.
Transcription:
Dan Hood (00:04):
So welcome to a special edition of On the Air with Accounting Today. I'm editor-in-chief Dan Hood. We're here live at the Firm Growth Forum in San Diego, and we're talking with Ed Kless, who's been one of our speakers and a panelist all through the day. I should say Ed is a metaconsultant or the metaconsultant ...
Ed Kless (00:17):
I might be the only one. I don't know. True.
Dan Hood (00:19):
Well, as far as we know you are, as far as I know, and there can be only one, I assume,
Ed Kless (00:23):
But I should trademark it, I suppose.
Dan Hood (00:24):
Well, in that point, you really could be. Or if you're not the only one, you could at least charge all the others. Exactly. There you go. This is the thinking here, but you're also the host of the Sage Thought Leadership Podcast, as well as the co-host of the, and I always get this wrong, "The Soul of enterprise. I just want to call it "The Spirit of Enterprise," but it's "The Soul of Enterprise." Well,
Ed Kless (00:40):
"The Spirit of Enterprise" is the name of the book that we Oh, alright. Which is why you may get that, but now
Dan Hood (00:45):
There you go. Hence my confusion. Yes. Well, there's a lot of other reasons for my confusion. Anyways, the important point is you've been here with us all day and you've been talking a lot about a of different subjects, but one of the ones that I want to talk about that you've been focusing on is the idea that technology is only a small part of innovation, really innovation as a whole. But that particular point really interested me, and maybe you could talk a little bit about that. Yeah. People associate innovation with technology, the things built in somebody's garage, that kind of stuff. But it's not the only way to innovate.
Ed Kless (01:12):
No. And it makes total sense. Mean, we have seen just this absolute explosion, technological innovation over the last, whatever you want to call it, 100 years, 150 years, 200 year, whatever. It's often been associated with technology. So it's perfectly natural that people would associate that. But I think there's a danger in that because that makes people think, okay, in the only way for me to be innovative is to come up with some great piece of technology, the latest iPhone, whatever, device, chat, G B T, whatever. It's got to be technological related. And it doesn't, innovation is a very specific thing that happens in an organization because it's, as Peter Drucker said, it's only one of two things that's really, business is supposed to be about right. Business is about marketing and innovation. The rest is all cost. And how do we innovate? Innovate. And when I say innovate it, I use this Matt Ridley's definition. He's the science writer for a Reason magazine. And also there's, I think he's a member of, believe it or not, the House of Lords,
Dan Hood (02:11):
Which is
Ed Kless (02:12):
Really kind interesting. Yeah. Gives him some
Dan Hood (02:13):
Credibility,
Ed Kless (02:14):
Gives him some credibility. But he says that innovation is when ideas have sex, and it's not biological, but if you really think about it, it is oftentimes about two disparate things coming together and forming something new that didn't exist before,
Dan Hood (02:29):
Sharing different parts of this and things.
Ed Kless (02:31):
Correct. So the DNA from these two different ideas comes together and forms this new idea. And that can be simple innovation.
Dan Hood (02:38):
And again, none of that requires technology, right? Nope. No ideas have No, they don't have circuit boards. They can be whatever you want.
Ed Kless (02:44):
No, and in fact, my session today where we were talking about this concept, I end it by saying, here's how you can begin to innovate right now in your firm. Start to change some of the terms, the terminology you use inside your organization.
Dan Hood (02:58):
I want to talk more about the language aspect of things. But before we do that, because there's two ways we can go that, right? Talking about accounting firms, bringing the innovation aspect to accounting firms. We'll get to the language thing in a second. Sure. But let's start with accounting firms and innovation. Obviously you're saying you don't need to build a new accounting software. You don't need to build a new general ledger software, whatever. But you can innovate crazy union accounting firm. Maybe we can talk about some of the ways they could do that. Yeah.
Ed Kless (03:20):
Well, because if you really think about it, innovative accounting will get you torn in prison.
Dan Hood (03:24):
I was going to say creative accounting's a bad thing. So we can get past that. That's
Ed Kless (03:28):
A language issue. It's a language issue, right? Innovative accounting, see and run. Yes. Okay, let's see the Fed, but let's not go down.
Dan Hood (03:35):
Nobody see that. It's terrible.
Ed Kless (03:36):
Yeah. So I think we have to be careful about that. And even innovation to a certain extent, creativity around things. We don't want, say the mechanics of our airplanes to think extraordinarily creatively. I think I'll just try anti-clockwise this one time and see what happens. We need these nuts. That would be a bad thing. So we don't want that. But we can innovate around different things. So such as the way your customer uses your process, the way that you go to market. The last section that I talk about is just innovating around nothing, which is means marketing. There's a famous story, and you can look this up, that Rory Sutherland, who's the vice-chair of Ogilvy and Mather in the uk, he was part of a team that innovated around a cereal in Canada that's called Shreds. It's a whole grain cereal. Looks kind of like our checks and old brand, but it's only a available in Canada, New Zealand, and the uk, as he says, it's K craft's way of rewarding loyalty to the crown,
Dan Hood (04:45):
The serial of the wealth.
Ed Kless (04:47):
Yeah, the serial. But it's boring. It's whole grain cereal. And that your grandmother ate, they came up with this idea, a marketing campaign to come up with Diamond Shreds. They literally rotated it, right? 45 degrees on the package and said New Diamond Shreddies. But this was backed with a whole marketing campaign where they did taste tests and they have videos of people. Which one did you like better? Well, the square one was clear. This is the same product. But here's the thing.
Dan Hood (05:25):
This one tastes like diamonds. Yeah,
Ed Kless (05:27):
But here's the thing. They increase their sales year over year by almost 400%. Wow. They did not change the product Right at all. So you can innovate around marketing because they literally, and by the way, when I say you'll appreciate this as a word guy, when I say literally, I actually mean literally. That's not literally. Yeah. Because most people, not metaphorically, because most people say literally, and they mean figuratively. My head literally exploded. Right? I'm like, no, it didn't because you wouldn't be here.
Dan Hood (05:54):
Well, sadly though, that is now, it's now become an accepted use. I understand that innovation.
Ed Kless (05:59):
But here's the problem. Now we need a new word for literally. Yes, we do.
Dan Hood (06:02):
Yes. Unfortunately. I'm afraid it might be actually. Which is not
Ed Kless (06:05):
A good choice. Yes. Not a good choice. Anyway, we'll come up with something. Anyway. We'll come. So they literally changed the positioning in two ways. One, the position on the box, but they also changed the position of the brand from a stayed boring whole grain to, we have a sense of humor about ourself.
Dan Hood (06:22):
And when you see the occasional accounting firm do that. Yes. I always think of MGO in California describes as not just boring accounts, I think was their tag, which is
Ed Kless (06:32):
Jody, who's here at the conference and his Hawaiian shirts. So the, they're changing his position for people. And that's what marketing positioning is. It's changing the way that the outside market L looks at you and your brand.
Dan Hood (06:47):
Excellent. Let me drive dive a little bit deeper. Cause I think there's, and I don't want to get your sense of, is this innovation or not? As you look at things like your internal processes, literally things like workflow, how people don't do it with, or hopefully they don't do it with paper anymore, but how you used to traffic returns around an office, for instance. I know
Ed Kless (07:02):
Nobody does that. Yeah, no, I mean, I certainly think that's an innovation, but one of the things that I like to talk about on that is don't innovate for your process and make it more difficult on your customers. Because so many firms will just take their existing process and make it technological, right? But is there a way that you can do it so that it's easier for the customer? Here's a great example, and I'll take some of the blame to this. Working for Sage for 20 years. When we first came out with e-commerce solutions, if you wanted to put in buy something from us on an e-commerce site, what's the first thing you had to do? You had to enter your customer information. You had to give your name, address, phone number, birth weight of your child. I mean, it was like all of this crazy stuff. But here, here, and then once you put your customer name in, then you could put stuff in your shopping cart, right? Because why was that? Well, because the backend process required, I have to have a customer before I can create an order, right? But what did every single one of us do? Daniel, when we came to a website where the first thing they asked us for was for personal information. We went to a
Dan Hood (08:06):
Different website. I'll tell you what I did, right?
Ed Kless (08:08):
So until somebody figured out, oh no, they can put stuff in their cart first, and then we can ask 'em the personal information, and we were all willing to do that.
Dan Hood (08:19):
And then, well, the interesting thing is, what then is you get lots of businesses complaining, whoa, we got all these abandoned carts. Nobody said, well, who cares? Who cares? The important point is, some of those abandoned cards aren't abandoned. People actually go through with it because
Ed Kless (08:31):
They at least were, they were abandoned cards and they weren't, no, I'm not even,
Dan Hood (08:34):
I'm never dealing with company. I'm never
Ed Kless (08:35):
Dealing with this company again. And see, that to me is innovating around customer process. So now we're changing it so that it's easier for the customer. And I'm telling you, I see this a lot. So many accounting firms are still innovating for themselves thinking, oh, this is going to make us more efficient. But yes. But is it making you more effective from the customer standpoint?
Dan Hood (08:54):
Right? They're forcing the client to adjust to whatever innovation they've put. I
Ed Kless (08:57):
Fired my accountant, I don't know, 17 years ago when I got the stupid tax planner, the 60 page tax planner, that if I could figure out how to fill all those pages out, I could do my own tax return, right? So in the name of them trying to be helpful, I fired them for it.
Dan Hood (09:14):
And they were stunned. I'm serious.
Ed Kless (09:16):
But cause they wanted me to follow their
Dan Hood (09:19):
Process
Ed Kless (09:20):
Instead of looking at it, how do I make this easier on my customer? Well,
Dan Hood (09:24):
That alone, just the idea of thinking, wait, maybe I should view it from the client's perspective, is an innovation of itself. Well, more of a revolution. I want to talk more about all these things. We're going to take a quick break. All right. So we're back and we're talking with Ed class of Sage and the Soul of Enterprise and the Sage Thought Leadership Podcast and a million other things. And we're talking about innovation and its role in accounting. And we touched briefly, and then I moved away from it. Cause I want to dive into the accounting aspect of things. We touched on the importance of language and the role it plays in innovation and in some cases hindering innovation. But then in other cases, I'm imagining sort of enabling it. Maybe we can dive into that a little
Ed Kless (09:59):
Bit. The language piece of it. So by the way, I have to give little homage to one of my heroes, a Warner Earhart. I don't know if you probably, so we're famous of EST training. Yes. Right. He's a weird dude.
Dan Hood (10:13):
Yes. Like weird. Yes. Weird. Profoundly
Ed Kless (10:15):
Weird. But one of the reasons, he's my hero for two reasons. One, he said this, and this is the all changes linguistic. If you want to change your culture, you need to change your language. But the other reason why is my hero is he also beat the IRS on a tax case to the tune of about $500,000.
Dan Hood (10:33):
That makes up for a lot of
Ed Kless (10:33):
Weirdness. That makes up for a lot of weirdness. I'm very, very happy. So he is my hero. So this all changes linguistic. And I think he's absolutely right about this. Once we begin to change the language that we use, we start to see shifts in the way that people behave. And look, one of the ones I'll talk about, and I, I've actually even gone through a recent tran transition on this myself. Everybody here to still says client, client, client, client. I was like, Nope, customer. And they're like, why? And so we go through the whole process. Client is a very patron, benefactor relationship. It goes back to ancient Rome where the lawyers in ancient Rome had clients. Client means one who leans, and the words incline, decline, recline, all come from that same Latin route. And it was this, the great unwashed, I need to prop them up and fix them. And that's the process that people go through when they have, oh, these clients, you hear like, oh look, but a customer is an Anglo-Saxon word. It means one whose custom it was. It's their custom to engage with you. When they came in to the town from the countryside, it was their custom to come into your store. And I think that's a better relationship. Even better now. And this gets to move to subscription pricing, which is, I'm very high on right now, is moving to the word member.
Dan Hood (11:48):
Ooh. Okay.
Ed Kless (11:49):
We don't have customers, we have members. And what I love is hearkening back. Do you remember the ads in the eighties with American Express membership has its privileges.
Dan Hood (11:57):
Yeah. Member sense. And they always famous people with, they were members sense
Ed Kless (11:59):
With membership. Right. And what you would say is they are a member. So imagine that you're now customers or clients are now members, and they don't have subscribe to services. They subscribe to privileges. Nice.
(12:12)
And I think just changing that language starts to change your mindset around how you go about serving people. Deirdre McCloskey, a famous economist and historian, says that she believes the industrial revolution was started when, not when we did the printing press. Not that when we understood how to do capital improvements and pile brick upon brick. But when we started to give honor to those who innovated, we started to honor the entrepreneur. And this happened in the late 17 hundreds and early 18 hundreds. And that's changed. The language has shifted around innovation being right. Oftentimes you were killed for innovative. Yeah.
Dan Hood (12:49):
No, people very carefully protected. You can't change that because we're doing this
Ed Kless (12:53):
Guilds and so on. Yeah. Guilds and stuff. But there's a, and McCloskey points this out in one of her books, there was a guy who basically came up with the formula for, I got Corelle. That's the dishes that don't break the that. Oh yeah, yeah.
Dan Hood (13:06):
Cor,
Ed Kless (13:07):
I forget the name of it. But basically, I mean, it's just adding some ingredient to pottery that it gives it that characteristic. I'm sure it's much more sophisticated, but this guy developed it back in ancient Rome. They killed him. Yeah. Because he was going to take the work away from all of these potters and stuff. It's like, yeah. So once we began to give honor to the entrepreneur and those who innovated, that's what she says. Caused the industrial revolution to happen. Interest. All right. Changes in language and rhetoric. Rhetoric. And that's why this is so important. So just small language shifts inside your organization. And we had one at Sage. It was the move from, we used to talk to each other as, I forget what the term was before. It wasn't staff team, it was probably team member. But we refer to each other as colleagues. Nice. Like that. And I love the word colleague. Yeah. This is my colleague. Because what I like about it is it's a very inclusive word across in the nice sense of inclusivity in not only am I colleagues with people that work for Sage, but I'm colleagues with people who in this room who don't work for Sage. Right. And it's a great way to think about it. Yeah.
Dan Hood (14:13):
I love that mean, this does not apply outside of them, but the Disney cast member idea is a great one. I don't think anybody else outside of that kind of business should apply it. But that it gives that sense of and and capital. We're all together.
Ed Kless (14:24):
Capital G Guest, everybody is a guest. They don't have customers. They have guests. You're on stage and offstage notice that they didn't have amusement parks, they had theme parks, they didn't have rides, they had attractions. Disney changed all of this language with very specific purposes in mind. Yep.
Dan Hood (14:40):
No, they've thinking about that in a way. I mean, that's one of those, I mean, I always be fascinated. I'm sure you probably know who came up with that. All Disney. I don't Was that wasn't Walt, wasn't it? A
Ed Kless (14:49):
Lot of it was Walt.
Dan Hood (14:50):
Was it with the language? A
Ed Kless (14:51):
Lot of it was Walt. And what I, Ron has Baker, my radio partner of the Soul of Enterprise with he, he's done, he's actually been to Disney University. Oh, right. And there's a lot of incredible history there. One of the great things that he took from Walt was, is that you could never say no to Walt. Right. In fact, you said, so this is a language thing, right? Yeah. So you can't say no because you had to say yes. If so, yes, we can do that, Walt, if we can solve this problem. Right.
Dan Hood (15:27):
Sounds, and I'm trying to think, I feel like that's a Ritz Carlton thing as well. You never say no to a guest kind of thing. You always literally just may not be able to, it may not think they go to guess if, but they're like, you find a way to, you never deny a guest to think, well,
Ed Kless (15:39):
If Ritz Carlton has a policy, and I forget what the dollar amount is, and it's probably increased since I looked it up. But at one point, anybody at risk, Colton could spend up to $500 to solve a guest problem. Nice. Without authorization. Yeah. Yeah. So their TV's broken. Go buy a new TV and just like whatever you needed to do.
Dan Hood (15:58):
Very
Ed Kless (15:58):
Cool stuff. That's really neat.
Dan Hood (15:59):
Very cool stuff. I love the idea of, sorry, just before we leave the language thing, I love the idea of changing the member. I've always said weird issues about client and the client. The client relationship agent Rome was a permanent thing. That was the thing. It was a long lasting, you were client for a long time. Whereas a customer is one, often a transactional kind of thing. But I love member. I think member,
Ed Kless (16:16):
That was a great thing. Yeah. Member. Member is a really interesting one to go with. Yeah.
Dan Hood (16:19):
Excellent. We could talk for hours about this and we probably will. Maybe not on
Ed Kless (16:25):
The podcast. It's a great thing about the podcast though, is that you can cut it. Yes,
Dan Hood (16:28):
It's true. It's true. But I do want to go into just one last thing. If there was a thing you wanted to tell accountants, obviously I like the different changes in the way they bill things, the way they price things. That's an obvious area for them to innovate in language, obviously a great choice. Any other areas you would like to see them start innovating in? Or maybe an easy place to start innovating in?
Ed Kless (16:49):
Well, I think there's no, nothing easier than changing your language. So that I think that that would be a good place to start. But I would say this is that it is, what we're experiencing right now is business model change. And business model change requires us to look at things differently than we have in the past. Including those things which we measure those things that are important. Business models require those changes to happen. There's even a change if you move to subscription model in how you present your income statement and Right. And this freaks accountants out. But accountants who are on subscription models should not be using a gap income statement because the business model I is from the ground up changes all of those things that are in the background. And it's, Andrew Grove said that the change that changes don't come necessarily from new technology, but from new business models. Look at the destruction of the recording industry when changed the business model, which was no, the only way to get a song was to buy the CD with the 15 songs That sucked. And the one you wanted right to No, we'll say you just the one you want for a dollar
Dan Hood (18:00):
And they'll all, yeah, they'll all be 99 cents. It's not, yeah, no. And it is. Well, we go into that deeply. But yeah, we're on P3 players, plenty of MP3 players around before that. No one used them because you couldn't access the music the right
Ed Kless (18:12):
Way because Apple changed the business model. And by the way, their MP3 player, when it first came out, the iPod came out in October of 2001. Right. So take yourself through that. When did that happened? Yes. And they priced it at two and a half times the price of the nearest competitor from a hardware perspective. Right. Why? Because they knew they had the business model of iTunes behind it. Right.
Dan Hood (18:33):
There you go. Right. All right. Like I said, we could, could go on forever and ever and ever. But it's, we're going to cut it short and then we'll resume it at another time. Cause this is great stuff.
Ed Kless (18:41):
Let's ongoing conversation as always. Daniel, great to talk to you.
Dan Hood (18:43):
A pleasure to have you with us, Ed... Ed Kless of Sage, and many other things. Thanks for joining us and thank you all for listening. This podcast has been produced by Accounting Today with audio production by Kellie Malone. Rate and review us on your favorite podcast platform and see all of our content on accountingtoday.com. Thanks again to our guest Ed, and thank you all for listening.