Accountants are less adaptable than you think

Mark Lee, writing on AccountingWeb argues that:

I’m probably one of the UK’s most active accountants in social media, but I’m realistic. I don’t advocate that accountants in practice have to do the same – it’s not a crucial new marketing facility and sadly few accountants are gaining much benefit from it.

HMRC’s new powers were the subject of much consultation before they were enacted in 2007. But the practical realities are only now becoming apparent.

And although compulsory iXBRL corporate filings become a reality next April, many accountants have yet to plan for the changeover.

In each case various commentators have been urging accountants to change: to avoid missing out; to avoid getting caught out; or to avoid leaving things to the last minute.

This is nothing new. It was just the same before the changeover to Self Assessment in 1997 and the subsequent move to corporate Self Assessment. There are plenty of other such examples too.

I’ve no doubt that many accountants will negotiate these transitions and wish subsequently they had been better prepared. But such preparation would have distracted them from earning fees and there was no time…

I don’t see the need for massive changes. Some accountants who adapt first may gain a competitive advantage over the others, and some who refuse to adapt will eventually run out of clients and work. But it will be a gradual process. None of the catalysts for change demand revolution in the accountants’ offices or their marketing efforts.

I am sure that the many practices out there that are burdened will draw comfort from Mark’s familiar words. But standing back and having just emerged from a practice consultation on this and related topics I find Mark’s argument fundamentally flawed. First a step back in time.

Back in the day, our practice was one of the first to invest in what is now Viztopia. We were one of the early adopters of networking our computers, templating business documents using wordprocessor technology, providing newsletters, monthly WIP billing, standing order settlement and a whole host of other business led practices designed to improve efficiency and effectiveness. Those changes gave us a huge advantage over competitors at both operational and profit levels. That was over 20 years ago. Those advantages have long gone and when I hear that practices have just woken up to  some of them I worry about their long term viability. Modern technology and the adoption of sound business practices are essential for any business. To argue that accountants are some kind of a special breed is plain daft. It is the thinking of what I call the ‘entitlement’ economy.

In the XBRL example, Mark seems to assume that professionals only see it as a compliance issue. He completely forgets that XBRL represents a standard, something that firms can use as the basis for benchmarking. According to Twinfield, that’s already happening in the Netherlands. Is it any surprise then that one of Twinfield’s founders said to me he believes the UK profession is 3-5 years behind thinking in the Netherlands? It’s an inconvenient truth.

There can be many reasons why change is something that happens slowly. That is true for all businesses. Change is tough even among the most enthusiastic technology adopters and thinking organizations. Ask anyone attempting to introduce new ways of harnessing internally produced knowledge. The only exceptions I see are either those who are in severe pain or which represent green field sites. But that’s not the point.

Where Mark is misreading the market is in making a broad brush statement about a status quo that is changing at a much slower pace than he assumes. Using that as a buttress for this argument in the current economic climate is unrealistic and especially so if you are planning for a double dip. The problem is not change per se but the pace at which it is happening in the context of practices that are a mix of older and younger partners looking to a future that is far from certain. I’ve noted before that the newer firms, which are mostly small at this time, are building out something different to what I have seen in the past.

I can for example see the value in creating factory style operations. These are only possible by using technology as the starting point for creating a process driven infrastructure. If you accept that argument then it is easy to see how these styles of practice will have a different shape to the traditional partner business. They will be far less about relationship and far more about being the Kwik-Fit’s for the masses. And while I am guessing, I suspect that some of them at least will be far more profitable than what we generally see today. None of this was possible five years ago. Today, it is an eminently reasonable proposition.

Does that mean the traditional family business that dominates mid-market portfolios goes away? Of course not. But that segment is becoming much more competitive, requiring different ways of approaching essential compliance work. Those fresh approaches are needed in order to create breathing room in the fee structure to accommodate the more challenging and rewarding advisory work. Flat fees and more value are the order of the day. And to make it a bit more bleak, I believe the new environment is here to stay. The days of 10% year over year fee inflation are long gone.

So why the headline? For as long as commenters perpetuate the myth that you can take your time or fit in thinking about the future in spare moments, then more agile, business led competitors will come eat your lunch. How many (successful) companies do you know where the CEO is on the factory floor making widgets? How many (successful) companies do you know that do not have active marketing departments? If by saying that accountants are different he means that many partners are little more than highly paid worker bees then I suppose Mark is correct. That is not a recipe for long term success. Or for reaching retirement happy and contented with what one has achieved. If that is our lot then the profession has a sad and difficult future.

If you think I am blowing smoke then check this cautionary tale about Dassault losing out to Siemens. I always like to draw from the tech world as it is often the precursor to other things:

The day before Thanksgiving, Siemens PLM dropped a bombshell on the automotive vertical by announcing the winning of Daimler AG as its latest CAD customer right under the nose of its archrival Dassault, which has been the CAD provider for the giant German car maker for years.

Later that day Dassault, fresh off a public snubbing from one of its biggest customers, issued a press release basically suggesting that it didn’t know it was coming. “This decision came as a surprise to Dassault Systèmes as no CATIA V6 evaluation has been performed by Daimler A.G.’’

It wasn’t the first time this year that Siemens PLM was able to pull a rabbit out of its hat, stunning everyone in the close-knit world of selling highly specialized applications to just a handful of global automotive OEMs that in turn wield considerable influence over the IT decisions of their army of tier-1 and tier-2 suppliers.

For ‘close knit world’ and ‘highly specialized applications’ read ‘tax and audit’ to the diminishing number of businesses requiring that combination of services. In the business applications world, who would have thought three years ago that companies like KashFlow, FreeAgent, e-conomic, Xero, FreshBooks and the rest would exist let alone be growing at the rates they are? They are the face of change.

There is no such thing as immunity from change. Anyone who thinks otherwise is living in a dream world.

Endnote: there is a reason why the image I used for this post is on my wall in my home office. Go figure.