Uncategorized – Ric Payne's Blog: The Consulting Accountant

Unlocking the Power of Communication

In an increasingly interconnected world, effective communication is more important than ever. Yet, despite the many ways we can communicate, for many people—including myself—a significant gap remains between merely hearing what someone says and truly understanding them.

You’ll be a better leader if you subscribe to these tenets of intellectual honesty

I once read, and copied, a statement about intellectual honesty I thought was excellent and worth sharing. It was issued by a university (I think Harvard) as a condition when registering for a course I did that. I have lost the original source so if you recognize the wording please let me know. This is the document, slightly edited by me to put it into the context of organizational leadership.

A Goal is Not a Strategy

It is quite common to see statements like:

“Our strategy is to become the preeminent firm in our community.”

“Our strategy is to disrupt our industry.”

“Our strategy is to disintermediate the industry’s supply chain.”

A sole business owner, might say “my strategy is to make a living doing the best I can.”

Accounting Practices Have the Character of Natural Monopolies Which is a Potential Source of their Demise

One of the most important contemporary scholars in the strategy domain is Canadian-American Roger Martin. He has published extensively over many years and is, in my view, one of the very few, very important, writers on the process of strategy creation and execution. He, correctly in my view, presents strategy as an ongoing process of directing a business towards its the aspirational objective(s) of management. His book, co-authored by AG Lafley (ex-CEO of Procter & Gamble), Playing to Winn: How Strategy Really Works is a must read for anyone serious about building a winning business (or any other entity.)

Martin recently responded to a Twitter post in which the poster (Richard Hulse) expressed disappointment that there was not more reaction to his question on how strategy applies to natural monopolies as much as it does for “normal” businesses in competitive markets.

The question is a very important one and was brilliantly answered by Roger. His response gave me pause to realize that many businesses that have a loyal customer base due, in the main, to convenience and/or high switching costs enjoy a kind of natural monopoly.

As a consultant working in the public accounting domain, and I see many firms seeking to grow by acquisition and marketing rather than by innovating in ways to improve the value they deliver to their clients. They get away with this because their clients have high perceived switching costs not because they are delighted with the value received from the relationship.

These firms intuitively, or intentionally, ignore their existing clients (as Martin says, “get horribly out of shape and bloated” while seeking to win more business through price & promise marketing (or worse, through acquisition of an equally bad firm) which inevitably attracts poor quality clients and stretches their capacity utilization beyond its effective operating limit; which incidentally, is why they are so enamored with “tools” to improve efficiency. Interestingly, the disastrous effect of the pursuit of efficiency is yet another of Martin’s brilliant insights. This in turn lowers the value they deliver to all their clients including their good ones. Ultimately they stagger in mediocrity, are acquired, or disintegrate simply because they never played to win.

What Sam Walton can teach you about creating and growing a successful business

After a presentation I did on business strategy at Lake Tahoe’s Resort at Squaw Creek (now called Everline Resort & Spa) in the early ’90s, one of the delegates asked me if I had read Sam Walton’s autobiography titled *Made in America: My Story*. He said, “It’s a remarkable story. You should read it. You’ll notice Sam intuitively understood what strategic thinking is all about. I think you’ll enjoy it.”

AI and the Future of Advisory

Under the direction of Accounting Today, the 3.5 Version of ChatGPT sat the CPA Exam and failed, rather badly it turns out! However, as Rick Richardson notes in a recent (Sept 28, 2023) article in CPA Trendlines “The most recent Version 4.0 [of ChatGPT] averaged 85.1 out of 100 and successfully completed all four sections of the exam, in contrast to the prior Version 3.5’s average score of 53.1. The chatbot received an 87.5 in the part that rated highest, auditing and attestation (AUD).”

This is a very interesting development for several reasons.

The Way a P&L is Formatted Drives its Value as a Management Tool

I recently had cause to check out a bank website that was promoting lending services for small businesses. It is probably a great lending institution but its attempt to explain a P&L statement is patently wrong …. In my view.

Ten Typical Characteristics of Intelligent People

Here are 10 characteristics that will help you figure out who are the smart people.

The Relationship between Price, Cost, and Value

“Unfortunately, markets have been more volatile recently, which makes it more expensive for us to buy and sell currencies — so we need to raise our fees to cover those costs.”

Understanding the challenge is the challenge

Challenges in business and life typically manifest in the form of a symptom of a deeper cause. For example how often do you see someone say “businesses fail because of cash flow issues.” When this is identified as the problem it’s logical to see the solution simply in terms of injecting more cash.