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If You Want to Break From The Pack, Innovation is the Key

July 19th, 2014

As I prepare material for our up-coming Practice Innovation Workshops I’ve been doing a lot of research into the process of creative idea generation (specifically how to teach it and how to implement it) because at the end of the day that’s what ultimately gives business enterprises (and that includes accounting firms and their clients) a competitive edge.

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I came across an article in my research archives written by Linda Tischler back in 2001 in Fast Company called Seven Secrets to Good Brainstorming. The article, is based on the work of Tom Kelley the author of several books on creative innovation (search his name on Amazon) and the GM of Ideo, a creative design and innovation consulting company based in Silicon Valley. Before you conduct your next brainstorming session, read the article.

Tischler shared the following observation in the article:

According to The Economist‘s Innovation Survey, half of the U.S. economy’s current growth comes from companies that didn’t exist 10 years ago. Corporate titans have learned to fear the prodigy in his dorm room or the garage-based whiz kid who’s forging a bullet with their company’s name on it. “Innovate or die” is not an idle threat. It’s the harsh reality of the modern, fast-forward economy.

Although it was written nearly 15 years ago it is even more relevant today. I’m not sure I’d go so far as to say “death” is the inevitable outcome of a failure to innovate but the fact remains, mature industries (such as the accounting services industry) usually find themselves in a malaise once their “natural” growth slows down. At that time margins shrink because competition resembles a zero-sum game that’s usually based on price-and-promise marketing.

The vast majority of firms in these industries pursue a strategy of implementing incremental operational improvements (e.g. paperless offices, multiple monitors, social media marketing initiatives, alternative pricing methodologies, sales training programs, inshore and offshore outsourcing, and more recently, implementing cloud-based information storage, processing, and communication technologies etc.)

There’s no question that the pursuit of operational excellence is a necessary condition for survival in the “pack” by which I mean, to take up residence  comfortably positioned in or about the middle of the industry performance bell curve. However, that is a table stake only in the sense that if you don’t implement so-called “best practice” you don’t survive or if you do survive, you are a poor cousin in the industry (some people refer to this cohort as pretend players.)

The reason the pursuit of best-practice does not result in sustained competitive advantage is simple: it diffuses rapidly because the practices are transparent, relatively inexpensive and easily implementable in industries where there are few scale economies.

Those firms that want to break from the pack will not do it by being a bit better operationally.  The key to break-out performance is innovation in at least one, or a combination, of the 10 areas in which a business can create, deliver and capture value directly or indirectly for its present and future customers. That’s just another way of saying break-out performance always comes from business model innovation.

One of the most exciting innovations to present itself to the accounting services industry is cloud-base accounting systems. However, firms that see it a simply another way of doing what they have traditionally done for their clients will miss a great opportunity to create a totally different and immensely more valuable business model. This requires a totally different level of thinking which starts with the premise that this technology enables you to do things (i.e. create value streams) for your clients that has simply not been possible in the past and in order to capitalize on that opportunity you need to re-envision your business model.

If you’re interested in business model innovation you should immediately get a copy of Osterwalder and Pigneurs’ book Business Model Generation: A Handbook for Visionaries, Game Changes, and Challengers (we include that as part of our Practice Innovation Workshop) and you should also take advantage of the many YouTube videos that deal with the process. Click on this link for a 2:19 minute overview of business model generation and click this link for a longer presentation Osterwalder did at Google. As you think about the ideas Osterwalder is sharing also think what value these might be for your clients because “what’s good for the goose is good for the gander” – in applying these process to your own business you are gaining expertise on a highly marketable, extremely valuable, and easily differentiated service line. How sweet that duality is!

 

 

 

 

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