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A Glimpse at The Firm of The Future

April 14th, 2015

I was talking to a previous Results Accountants’ Systems team member yesterday about how technology has caught up with the ideas I had talked and written about extensively back in the last century. He reminded me of a paper I wrote called “I had a Dream” that from memory was circulated internally at RAS in which I outlined what I saw as the evolutionary changes that were playing out in our profession. These ideas were detailed in a presentation I did for the Kentucky Society of CPAs in June 2000. 

I dragged the paper out of my archives this morning and thought to myself “this is worth sharing as a blog post.” The Greek Philospher, Heraclitus, said “the only thing that is constant is change” and while he’s right in the sense that all evolution is about change it is not right to conclude that the rate of change is constant. When different elements of the ecosystem are able to mesh coherently we see a rapid and often, huge, change unfold before us but that is for discussion in another post.

I think we are at the cusp of that right now with the so-called cloud. But I also think that the promise of the cloud will not be realized if it is simply viewed as another productivity tool. In those circumstances it will just drive margins down even further as all technology advances have done in the past.

Click here to download my 2000 paper titled The Impact of Technology on The Structure of the Accounting Profession and What the Firm of The Future Will Look Like.  In the meantime, here are a couple of salient points from my article that I think need to be remembered as we rush towards the adoption of cloud technologies:

People need people.  We are social animals and we will always want to confide in and seek the opinion of each other.  No matter how sophisticated technology becomes, this need will always be present.

Someone is still going to have to help us map out business strategy and define the parameters for its execution.  This will involve helping clients set goals and keeping them focused on those goals.  It will be a mentoring and coaching function as well as a seriously valuable interpretive function through which, to paraphrase Peter Drucker, information will be endowed with relevance and purpose for without that it is merely data.

Most SME owners exhibit six fundamental characteristics:

  1. They do not have a vision of what their business can, and does, stand for. They do not truly understand their governing commercial purpose and they have a very unclear definition of which customer segment(s) they can create value for.  They tend to be willing to be all things to all people, with the inevitable consequence that they fail to meet the needs of anyone very well, and they are unable to define a service model that will WOW the customers who are potentially the most valuable to them.  They exhibit all the problems associated with legacy systems, legacy mindset and legacy assets that I referred to at the beginning of this paper and consequentially, they are ill-prepared to accommodate change.
  2. They are shocking at setting goals. Without goals, there is virtually nothing to aim for or to monitor progress against – there is no basis on which to manage, other than in the form of reactive crisis control.  In these circumstances, the business lacks performance benchmarks and floats like a rudderless ship in an ocean of mediocrity. Business performance has virtually nothing to do with having a bad strategy, but everything to do with poor execution and a lack of goal-oriented activity.
  3. They lack discipline and tend to allow themselves to be drawn into dealing with short-term problems and issues by treating the symptoms, rather than addressing the root causes. This also keeps them focused on the short term, rather than the long term.
  4. They are cost-focused, rather than value-driven. This draws them towards a tendency to buy the cheapest inputs, to minimize expenditure on training and other business building investments, and to adopt marketing and pricing strategies that drive margins down in the (usually mistaken) belief that their customers are also narrowly cost-focused.
  5. They are appalling managers of their own time and usually find it easier to “do it themselves”, rather than investing time systematizing business processes and then delegating responsibility to trained team members.
  6. They are very parochial and myopic in their view of the world and the changes that are taking place around them. They firmly believe that the problems they face are unique to them or their industry, and that they are doing as best as can be done given the circumstances.  Because of this, they are unable (or unwilling) to adapt to change.

The firm of the future will help its selected business clients deal head on with these six generic issues.  It will do that with a big dose of personal professional intervention, through the extensive use of technology and through its affiliation with a powerful knowledge network.  The essence of the firm of the future will be the alignment of technology and its core client relationship strength.  Refer to Figure 1 – note back in 2000 no one talked about the “cloud,” it was referred to under the heading of application service provider (ASP).

 

Firm_of_Future_figure

The firm of the future will inject itself into, and be an essential element of, its selected clients’ value chain.  By that I mean it will be an indispensable part of the business and its value creation process. It will attend to the contextual matters that its business clients need to deal with so that they can focus their energy and competencies on the core value-creating activities they must excel at.  SMEs that do not embrace technology and integrate it into the very fabric of their business will find it hard to survive.

And it goes on and concludes with the 6 critical questions that every accounting firm needs to be asking right now and, I might add, so should their clients …..  click Kentucky Paper 2000 to read it all.

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