The increased talk about innovation in the accounting profession can become a reality, but not without a change in mindset. Leaders in all professions are finding innovation is harder than you think. Simply putting in an innovation wall doesn’t make you an innovative firm.
What I originally thought was innovation in the accounting profession turned out to be optimization. There is nothing wrong with optimization, but innovation is different and requires a much different mindset. Optimization tends to take what you have and improve incrementally. Innovation is exponential growth and improvement. When people stop and think about their past success and then vision into the future, their biggest obstacles are not resources but their own minds. Innovation does involve failure, and no one wants to fail.
Let’s quickly define the five critical steps needed to accelerate innovation in any business, including an accounting firm:
1. Define innovation and your objectives.
2. Determine who is responsible and in charge.
3. Promote the right culture.
4. Standardize and continually improve and automate processes.
5. Develop the right mindsets.
Innovation and objectives
I like to refer to this as thinking about your thinking, and it relates to our education. To innovate, you have to think exponentially. This isn’t easy for the accounting profession and many business leaders as they immediately jump to their favorite scorecard: profits. Profit is a result of visioning, planning and holding people accountable. While profit is a legitimate scorecard item, the following questions are leading indicators resulting in increased profits.
- What if we could eliminate steps in our processes that add no value?
- What if we automate our processes and gain capacity to provide higher-value services to our best clients?
- What if our culture focuses on leadership, talent, technology, processes and growth enabling us to innovate?
- What if our clients purchased 10X the services they are today?
- What if we gain capacity through continuous process improvement and automation and utilize those resources to add value to our best/target clients?
We highly recommend firms take the time to vision and define what they want to be, do, have, experience and create over the next three to five years.
Determine who is responsible
Typically, accounting firms talk about innovation at their annual partner meetings, but little happens because no one is responsible. They also have day jobs and typically focus on what drives their compensation plan.
Many larger firms are now hiring chief innovation officers whose job is multifaceted. Think idea creation, upskilling, supporting business unit initiatives, identifying new market spaces, acquiring and directing seed funding, and protecting promising new projects. Most of these individuals have a technology background and leadership skills and know how to work with the firm’s governance system.
It is not unusual for innovative ideas/projects to get challenged and undercut by departmental or service line leaders. Innovation disrupts people and jobs; therefore, firms need an innovation or project manager to scale and market new processes or services. This generally goes beyond the creator or inventor.
Smaller firms often have advantages in innovation if they have a leader with technology and innovative skills or a strong IT leader who can invest and protect the project through proof of concept and then implementation and scaling. Many firms also use task forces or committees to provide governance and execute their innovation process and plan.
The right culture
Most firms lack an innovative culture, and many firm leaders are trying to change their cultures to accelerate change and rapidly upskill employees. Cultural differences take on many characteristics, ranging from demographics to the geographic and political. Diversity and inclusion also promote innovation and new service lines. The key is leadership, vision and a plan to gain the buy-in of staff and clients. Messaging is extremely important, especially to those who are risk-averse and uncomfortable with change. This requires consistent and constant communication and training. Change is difficult, especially for those whose income continues to increase.
Let’s be real. Most innovation starts as a bad idea, at least to those it will disrupt. This is exactly why innovation requires an outside perspective to cross the line in most organizations. It also demonstrates the diverse roles that a chief innovation officer or person in charge of innovation must play in order to grow and sustain an innovative culture.
An innovation process
Yes, innovation is not just about technology, and firms need an innovation process to succeed. In summary form, here are the primary steps in the process:
- A future focus;
- Mindset management;
- Idea creation and analyzer;
- Filtering; and,
- Accountability.
At Boomer Consulting, we have designed numerous tools and shortcuts to enable organizations to reduce time, build consensus, and focus on their top projects and initiatives. This process also determines resource gaps (internal and sourced). Leadership, communication and accountability are key factors. The tendency is to focus on “how” rather than “who.” Firm leaders and entrepreneurs can greatly accelerate the innovation process by focusing on “who.”
The mindset
Mindset is the most difficult step and requires communication, training, counseling, and even potential terminations and retirements. I will share a few critical mindsets as outlined by Dan Sullivan, founder of The Strategic Coach. He categorizes mindsets as “scarcity” or “abundance.” These mindsets, along with 10X thinking, will unlock potential innovation in your firm or organization.
The major differences in focus and approach between the scarcity mindset and the abundance mindset are:
- Costs versus investments;
- Incremental versus exponential;
- Profession versus markets and networks; and,
- Employees versus unique ability teams.
Most business leaders agree that increased investment in upskilling talent and technology is needed to sustain success and future-readiness. Yet there are significant differences between optimization and transformation, which requires innovation. The accounting profession and some of its clients have been deeply engaged in optimization for 20 years. Optimization primarily occurs in four ways:
- Increased revenues from existing services;
- Reduced costs;
- Improved productivity without an increase in headcount; and,
- Enhanced client experiences.
Most firms have made relatively small investments compared to what will be required in the future.
Until recently, the market and technology allowed firms to optimize at a relatively slow pace. The convergence of multiple technologies and digitization of all processes speed the process up for firms and their clients. The pandemic accelerated the virtual world by several years. The technology was available before the pandemic, yet most didn’t leverage it until forced to change. Mindsets and processes held firms and their clients back. Optimization is no longer enough to remain competitive and relevant. Innovation involves:
- New services and revenue lines;
- Digitized services and products;
- New cloud-based technology platforms and ecosystems;
- The ability to manage digital assets; and,
- A new business model based upon value and subscription pricing.
The question most people ask is, “Who is leading innovation in the accounting profession?” This list is relatively short but growing as leadership prioritizes innovation to sustain success and remain relative. I am unaware of all firms focused on innovation, but some of the firms and companies committing resources to innovation are: Crowe, Marcum, Withum, Intuit, Rehmann, K-Coe Isom, Aprio, Armanino, Sikich, BKD, Clark Nuber, SC&H, Friedman, Baldwin, Abacus, Mercadien, BDO, DHG, Honkamp Krueger, Talley-Group 11 Advisors, and Hogan Taylor. I purposely included Intuit on this list because of the “Design for Delight’ process that they shared with many small firms and clients. I am also confident there are many more firms that should be on this list.
The great news for the accounting profession is that over the past 12 months, the market has grown exponentially with the advent of virtual services and widespread video conferencing. Metcalf’s Law or the network effect applies: The value of a telecommunications network is proportional to the square of the number of connected users of the system.
The number of nodes has grown exponentially. Don’t let this opportunity pass. CIOs, CIMOs and CEOs must nurture and protect innovative projects and initiatives. It requires balance and cash flow to keep a business vibrant and invest to remain relevant into the future.
Innovation is messy, and firms must realize there will be failures as well as successes. Separate the projects from the people to develop a culture of innovation. Involve multiple skills, diversity and perspectives into the innovation process. This approach is known as intersectional versus directional innovation. Think 10X, plan for significant change, and grow exponentially!
