An “exponential organization,” as defined by Salim Ismail in his book “Exponential Organizations,” is an organization whose impact (or output) is disproportionally large — at least 10X larger — compared to its peers because it leverages new organizational techniques in five key areas: leadership, talent, growth, process and technology.
Becoming an exponential organization is available to all accounting firms. Size doesn’t matter as much as the mindset of the firm’s leaders and their commitment to business transformation. However, the firm’s size may impact strategy because transformation and innovation typically occur at the edge of a department or service line.
Business tax is an area firms should consider as the best opportunity to increase client value exponentially. It requires a holistic versus a service-line approach. The model and peer experience prove the potential of packaging and pricing transactional, compliance, advisory and consulting services into a monthly subscription.
The following reactions are typical: skepticism, defensiveness, curiosity, fear, excitement, courageousness and commitment. Modeling and utilizing existing firm metrics will demonstrate the economic benefits and increase team members’ courage and confidence. Here are some of the benefits:
- Increased client value and improved experience;
- Improved access and utilization of client data;
- Reliable data to prepare returns and plan;
- Reduced time during busy season;
- Improved work-life integration;
- Reduced risk and increased margins;
- Improved cash flow; and,
- Increased firm value.
- The big questions for most firms are:
- Do we have the necessary mindsets?
- Do we have the capacity?
- Do we have the capability?
The following will provide more information on why this is happening and steps to get started.
Business transformation
Roadmap software provider ProductPlan defines business transformation as “an umbrella term for making fundamental changes in how a business or organization runs. This includes personnel, processes and technology. These transformations help organizations compete more effectively, become more efficient, or make a wholesale strategic pivot.”
So why is this happening now? According to Ray Kurzweil, creator of the Law of Accelerating Returns, people tend to underestimate the power of future technology because we take a linear view of technological processes rather than an exponential view. In other words, we’re thinking in terms of today’s rate of progress. But ten years from now, technology won’t be accelerating at the same rate it is today. We’re currently doubling the rate of progress every decade so that we will see a century of progress (at today’s rate) in 25 years.
A quick start guide
In his book, Ismail provides several ideas for becoming an exponential organization. Complete 10 of the actions in the book, and your firm will be exponential. But just four will get you started on the right path. Here is my pick for five actions your firm can start today:
1. Leverage outsourcing to increase capacity and capabilities. Many firms focus on capacity, but we need to focus on capabilities and capacity to transform. How can you build a team of external “employees” that can increase both? Develop your outsourcing strategy and start building those relationships.
2. Leverage virtual tools. In the past two years, the accounting profession underwent a major transformation to virtual work — a transformation that many leaders in the profession didn’t think was possible. Now it has opened tremendous opportunities to work with clients anytime, anywhere while dramatically reducing the time and expense of travel. Tools like Zoom, Miro and Microsoft Teams should be in your toolbox.
3. Lead with advisory and consulting. Your focus must change from transactional and compliance services to advisory and consulting. This is an “and” proposition because transactional and compliance work aren’t going away. In fact, they become more valuable when appropriately priced and packaged with advisory and consulting services.
4. Get in the cloud. The cloud is the only viable option for working in today’s accounting profession, yet many firms operate in a hybrid environment. I refer to the hybrid world as “the fog,” because it requires more resources for keeping the lights on, leaving fewer resources available for innovation. Much of the fog is the responsibility of the core application vendors who were slow to move to the cloud because they had a captive audience. Client accounting and advisory services are totally cloud based.
5. Leverage digital workflows. Paper and journal entries break systems and impair data analytics. Digital processes and automation are more readily scalable.
Your timeline for becoming an exponential organization depends on your mindset, the size of your organization, and how quickly you want to move. The right tools and people are out there, so don’t be surprised if mindset is your biggest challenge. Accountability is the fastest way to improve your results, so take the following five actions right away:
1. Start thinking 10X and focus on adding value and improving the client experience.
2. Update your vision and game plan.
3. Communicate your vision and game plan to the entire firm and your clients.
4. Determine “who” will lead this effort, and assign the necessary team members and required resources.
5. Utilize external resources and accountability to accelerate and scale the process.
Steps one through three will build consensus, improve mindsets, and allow you to better communicate value internally and externally. Think — plan — grow!
