Innovation: It’s one of my favorite things. It can push CPA firms past the old school ways of thinking and outdated processes. It ensures we’re providing clients what they really want. Once CPAs adapt a truly innovative mindset, their whole approach to business and client relationships change.
Recently I spoke with Heath Alloway, director at
As we get ready to kick off a new year, and in the spirit of starting fresh, here are tips for how to innovate in your CPA firm.
What do CPAs think innovation is?
Innovation can be scary. It can mean different things to different people. The way that many CPAs view innovation, according to Alloway, often revolves around misconceptions. Clearing up what innovation is, and what it is not, is a good first step to creating that innovative mindset.
Alloway explained that innovation doesn’t have to be something new. It doesn’t need to be some new invention or process. It can be an incremental change. This is an easier pill to swallow, right? You can still innovate your CPA firm in small steps, over time.
Second, innovation in technology doesn’t actually have to involve tech. Yes, often a firm that is undergoing change is also reevaluating its tech stack. But that’s not always the case and that’s fine.
Third, and this one is big, is that innovation doesn’t have to come from the person in charge. More than likely, firm partners are the ones hindering innovation. They’re scared, don’t want to rock the boat, whatever the case may be. Innovation can start anywhere in the firm. In my experience, innovation usually happens from the bottom up, because those are the people closest to the problems.
Finally, innovation is not imitating what everyone else is doing. Alloway said if you’re looking at the competition and launching a new service line, you’ll never be innovative. You’re just copying others.
“Anyone in your firm can innovate at any time,” he said. "It’s more of being able to identify problems and then working to provide solutions to bring value.”
That’s what innovation is — it’s not a big, open-ended goal that always involves technology and originates in the corner office. Innovation is more nuanced and uniquely adapted for each CPA firm environment.
How can CPA firm leaders help to foster innovation?
I strongly believe if you’re doing best practices, you’re not innovative. What we’re looking for from innovation arenext practices. Radical firms that want to foster this sort of open-ended, solution-based environment can start by understanding that they don’t need a perfect plan.
This isn’t counterintuitive at all, by the way. Perfection is the enemy of completion, as the saying goes. As a CPA firm leader you can help jumpstart an innovative mindset when you provide clarity that you and your team don’t need the perfect plan.
Your plan “is going to evolve over time … that adaptive mindset and culture [are] the biggest takeaways,” said Alloway.
How do you know which ideas to act on?
Most innovation happens from the bottom up. The challenge for firm leaders once they make it known that they’re open to ideas is sorting out the so-called million-dollar ideas from the ones that maybe need a little more work. Alloway suggested creating a process around innovation. I love this because innovation and efficiency require effective processes.
There are three buckets he recommended:
- Generating and tapping into innovative ideas
- Deciding whether to act on ideas
- Taking an idea to market
The real task for the second bucket is figuring out whether to fail fast or move forward. This mentality suggests that there are no “bad” ideas, but the timing may not be right or the details need to be worked out.
Alloway shared three questions to ask when making this determination:
- Can it make money?
- Do our clients want it?
- Can we build it or purchase it?
Don’t make assumptions. Talk to your clients. Run the numbers.
How do you take an innovative idea to market?
Let’s say you have a virtual suggestion box and someone submitted a really great idea. It’s potentially profitable. You’re reasonably sure there’s a demand. You need to take the idea to market. Start by getting out of the “services” box and think like a product developer. Actually, create a prototype.
“This could be a sketch on a whiteboard. It could be putting [the prototype] on paper,” Alloway said.
Then, go to three or four of your top-level clients. Have a conversation and find out what they would want, need and use.
Don’t just focus internally and assume you know what clients would want. And don’t get hung up on trying to develop the perfect service or product offering. Take what you know, roll it out, test it, and learn as you go.
How do you build an innovative culture?
Saying that innovation is important and demonstrating that it’s important are two very different things. For the firms that want to grow, they need to challenge themselves a little. An innovative culture is one where everyone knows it’s okay to fail. Not all great ideas will work. And you will invest money on a project that doesn’t deliver. People need to know that you will spend time working on these innovative ideas, even if nothing happens. That’s okay. Give your people permission to fail. That’s first.
Second is to understand that for innovation to happen, the traditional billable hour model has to be modified. I’d say eliminate it totally, but for many firms that’s out of the question – at least at the beginning. What you don’t want is someone investing four or five hours per week or per month into developing an idea only to punish them for not hitting their utilization rates.
Third is to create a safe space for people to share ideas. This could be in team meetings or you can send out surveys. Ask staff to identify their greatest asset, challenge and opportunity. See what they come up with. In meetings, pose a problem and ask people to bring their best idea to the table. Vote on the top ideas and start developing those ones a little more. Either of these activities will help foster a sense that firm leadership wants to get better and hear from everyone.
As your CPA firm is building out or refining a plan for 2021, make sure innovation is at the center of it. There are many ways to grow, but only one that will ensure long-term, sustainable growth that puts clients and staff first. There is no better time to begin investing in innovation … and the future of your firm.
