Most CPAs are abundantly aware of the challenges facing the accounting profession today. You can’t attend a professional meeting without a discussion about increased regulations, attraction and retention of talent, succession, accountability, and the need for change in the business model. While the order of priority may vary from small to large firms, all of the above issues are impacting merger activity and demand for new services and, many would say, are disrupting our profession like they have never seen before. What is causing this disruption and how the profession takes advantage and turns the challenges into opportunities is certainly a matter of opinion.
These are difficult challenges, especially in a profession that has focused primarily on accuracy and hindsight. But the world is changing and clients are asking CPAs for services that are more advisory, services that focus more on insight and foresight. Hindsight, insight and foresight are all necessary for innovation. You probably have noticed that I have not yet mentioned technology. I have done this for two reasons. First, many of the merging firms don’t even consider technology until after the deals are consummated. Second, technology is the accelerator.
Rather than explain how the impact of technology has changed, let me introduce you to Peter Diamandis. Diamandis is the author of Abundance: The Future Is Better Than You Think and the recently introduced book Bold: How to Go Big, Create Wealth & Impact the World. He is also the founder of the XPrize and co-founder of Singularity University. He explains how any individual, now for the first time ever, has access to exponential technology, the minds and the capital required to take on any challenge. He differentiates incremental from exponential technology by defining exponential as any growth curve that has the ability to double every six to12 months.
Most CPAs will immediately respond that our profession hasn’t and isn’t growing exponentially. I would agree, but two important factors are happening that our profession should be aware of:
- Exponential growth in technology is occurring and impacting our profession both positively and negatively.
- Are we as a profession focusing on the highest-valued services or continuing to offer commoditized services regardless of the reasons?
Let me give you a few examples of the exponential growth technology that is available today and, when I ask if firms are using it, the answers I get as to why it won’t work in their firm. For example:
- E-signatures won’t work because many states still don’t accept electronic signatures.
- Electronic expense reporting via a mobile application isn’t used because the firm has an old time & billing system that doesn’t integrate with its general ledger system.
- And finally, electronic bill payment using an application like Bill.com wouldn’t really save them time and their back office personnel really don’t want to change.
You will see later in this article how deception generally leads to disruption, which often leads to little or no monetary value.
Diamandis further states that it is easy to underestimate the power of the exponential. Our brains are programmed to think in a linear fashion. He goes on to define six Ds, which I will only summarize via bullet points in this article. The first three are:
- Digitized (cumulative and captured by ones and zeros; available for searching and sharing).
- Deception (growth goes unnoticed because the doubling of small numbers is miniscule).
- Disruption (creates a new market or disrupts an existing market).
The last three are even more severe:
- Demonetization (the product or service has no monetary value).
- De-materialization (the goods and services vanish as they are replaced).
- Democratization (the costs drop so low that it becomes available and affordable to everyone).
One illustration that Diamandis used was Kodak and the impact of the smartphone, which now includes a digital and video camera and free access to apps that power video conferencing, games, music, a medical library, a digital watch and a video player. Skype demonetized the telephone industry. Napster demonetized the music industry and Craigslist demonetized classified advertising. The Economist in January 2014 gave accountants and auditors a 94 percent probability that their jobs would be lost within two decades — second highest on the list behind telemarketers.
A big question most investors and CPAs have had in the past is when to invest in the technology? Diamandis provides a simple answer to a complex question. He refers to Gartner’s Hype Cycle, and when technology leaves the hands of the geeks and gets in the hands of the entrepreneurs, the user interface improves for adoption. He gives the example of the Internet, which was born in 1975 as ARPANET, but didn’t get acceptance until 1993 when Marc Andreessen co-authored Mosaic.
Software has exploded since Apple’s creation of the App Store in July 2008. Microsoft and Google have followed suit. Currently, Intuit is the only major software vendor in the accounting market that has encouraged and developed an accounting ecosystem based upon Web-based applications. While most firms are risk-averse, they must be willing to take some risk and learn when it comes to technology. The biggest risk is doing nothing and staying the same.
Apps from the vendor app stores are inexpensive ways to test new technology. The key is a collaborative platform and ecosystem, economic models built upon value and a team approach that continually listens to the client’s wants and needs.
Diamandis advises organizations to either disrupt themselves or expect to be disrupted by someone else. For large firms, this can be done with a “skunk works” division that is encouraged to take higher risks with a 10X approach on return. His approach is to be accountable on all projects; if you fail — fail fast, fail forward, and expect to win. For smaller firms this may be built into the firm’s culture. The ultimate goal is to improve success and remain future-ready.
L. Gary Boomer, CPA.CITP, CGMA, is president of Boomer Consulting, in Manhattan, Kan.
