Digital disruption (DD) is affecting all industries and I don’t believe there are any spared the, sometimes, catastrophic outcomes of the robotic invasion. One just needs to recall Kodak, the music industry and currently, the taxi industry to understand how innovation and the development of technology is impacting the way we do business.
In these times of increasing pace and complexity of business, where AI is continually encroaching on current business practices, and some team members feel their ‘head is on the chopping block, trust is put under pressure.
Artificial Intelligence (AI) and the use of robots is “changing our world”, so how you adapt and plan for the use of the technology in your business will determine the level of success you will achieve. As accountants of the future, you will need to embrace AI in all aspects of your business and partner with others that provide the data, that these machines produce, giving enhanced information to make better informed decisions.
In 2015, Oxford University and Deloitte studied the impact AI and Robotics could have on jobs over the next couple of decades. The BBC used the data to build a clever online calculator where you enter in your job title to find out how your job will be impacted. That calculator revealed that 95% of accountants will likely face some threat from advanced technology.
So, what does AI provide us? AI automates the repetitive tasks to free us up to provide more value-added services to our clients. The data can be easily transferred from one program to another at the press of a button, leaving more time for other tactical tasks. AI builds databases that store enormous quantities of data for analysis that we can then draw upon to provide meaningful reports for our clients.
IBM Watson is an example of a cognitive computing platform where data is gathered from structured (20%) and unstructured (80%) sources, produced primarily from human to human communications. It learns, adapts and keeps getting smarter. It analyses the data and provides information for us to make better and more calculated decisions.
Blockchain or cognitive platforms, are going to have a huge impact on the way accountants work, as well as the economy generally. Taking the term “single ledger” to the next level!
What Does it Mean for the Accounting Profession
It doesn’t mean we will be out of a job. It means our job description is changing. Some of the skills we needed in the past will no longer be relevant tomorrow. As a profession, we need to ensure that we have a clear understanding of what will be required of the future accountant. The training of our future graduates and our teams in the evolution to the new world of finance will be paramount to the successful uptake of the transition. It is important to understand what new skills will be required to be relevant to business and to deliver more value.
As the efficiency and speed of cloud accounting and the data recognition of these programs improves, more time will be available to accountants for interpretation of the information, which adds more value to the business owner. The increased flow of information will assist in developing better strategy to enhance and grow businesses. This is where our new skills lie.
The data entry accountant (or bookkeeper) may become extinct. However new roles are emerging, some not even thought of yet, around the understanding of the data and how to interpret it for those in business. Business development and consulting skills will be need to be developed and today’s leaders will need to include the younger generation in their business decision making process, to provide them with the experience they will need to be better advisors.
NOW is the time to act to begin the transformation in the way you conduct your business. AI enhances what we do to provide greater information to make better more informed decisions. It can provide far greater efficiencies in our processes that can lead to increased margin and improved profitability. We need to be sufficiently agile to redefine our business model to include AI in the way we do things. Seek out new technological opportunities that compliment your business. Explore the idea of where your business may be in 10 years’ time, having embraced AI, and strategize what needs to happen to get you there.
Sydney-based Deloitte partner Greg Haskins said “The longer we take, the more we will be left behind. Progressive finance leaders are prepared to experiment, so that the culture of a new way of working becomes the new normal.”
Bots can’t take over the humanness of relationships, the experiences we encounter and judgement that is required in many circumstances. They can only mimic human activity from the information that they have collected. Allow them to do the donkey work and improve the quality of your work.
The robots may be coming, but for accountants, this shift may present more of an opportunity than a threat.
In this Digital Age with the need for agility & flexibility it is vital that the Leaders learn to use their emotional intelligence to improve their companies. Emotional Intelligence, or EQ, is an important quality of a Digital Leader especially in the development in fostering community and teamwork, a criterion of being an effective Digital Leader. So, what is EQ?
In the world of psychology, there is lively debate about how the brain works but Daniel Goleman, a world-renowned behavioural scientist said that “the part of the brain which supports emotional and social intelligence is the last circuitry of the brain to become anatomically mature and because of neuroplasticity, the brain shapes itself according to repeated experience”.
What is ’emotional intelligence’?
In the 1990’s, psychologist Daniel Goleman coined five main components of emotional intelligence that affect leadership:
Self-aware leaders have a clear picture of their strengths and weaknesses. This skill also allows them to be aware of how they’re perceived by others. Having this knowledge, better equips them to respond in a way that delivers the results they need.
Self-regulation allows leaders to control their emotions when making decisions or responding to certain situations. Leaders with self-regulation rarely verbally attack others; make rash decisions or compromise core values.
Motivation is passion that goes beyond the material of money and status. This is about being fundamentally driven by a purpose deeper than something that might not last. Self-motivated leaders consistently work towards their goal with a high standard for the work they produce.
Leaders lead people. Empathy is the ability to successfully manage a team of people by understanding their drivers and emotions. It’s through empathy, that a leader can help develop the people on their team, challenge them and give constructive feedback.
5. Social Skills
Social skills relate to conflict resolution, communication skills as well as forging strong relationships with others. Leaders with strong social skills are good at managing change and set an example to others with their behaviour.
Aside from these five core characteristics, there is also: charisma, confidence, the managing of relationships, and the regulating of one’s own expectations. These all fall under the banner of emotional intelligence. To be truly inspiring and memorable, a leader has to be able to display the following characteristics.
– The ability to control emotions that are inappropriate
– Being honest and trustworthy, and having Integrity
– The ability to be flexible in changing situations
– The drive to meet inner standards of excellence
– Being ready to act and seize opportunities
– The ability to see the positive in events
There is no right or wrong about emotions. It is how you manage your emotions when in a leadership position that is the key issue.
How do we move a mature business into the Digital Age of agility & flexibility?
In the current environment mature businesses face new and difficult challenges that require adaptability at the speed equal to the speed of technological advancement in its’ industry. To be successful, strategies need to be implemented with greater efficiency and effectiveness, that increases customer focus and responsiveness. It requires a Digital Leader.
What is an Agile Organisation?
An Agile Organisation is one that is quick in responding to changes in the marketplace or environment. … A highly Agile organisation reacts successfully to the emergence of new competitors, rapid advancements in technology and sudden shifts in overall market conditions.
Agility and related words in a 3d render collage background, including modernize, improve, innovate, change, grow, adapt and surviveIn the digital age, with global access, a leader cannot supervise and manage like before. With technology-mediated work increasing, there is greater need and expectation for leaders to provide purpose and structure to move forward despite the numerous challenges of working virtually. They need to look beyond technical tools and processes and embark on their own transformational journey to become a Digital Leader.
So, what makes an effective Digital Leader?
Digital leaders need to focus on constantly expanding their knowledge of emerging technologies and trends to prepare for the future. They must be open and eager learners, they need to keep up with and become part of the global revolution.
- Champion for change
Leaders need to be fearless in driving change, yet they must not lose sight of the driving force behind the change, focusing on the outcome of being more efficient and delivering higher quality work. They must walk the talk.
In a McKinsey debate, Nadir Mohamed, retired CEO of Rogers Communications, raises some of the challenges facing digital leaders:
“The challenge is how you get the organisation to embrace looming change…how do we set up capabilities to make change happen?” he says.
- Fostering community and team work
As business models evolve with technology, a more horizontal executive structure seems to be emerging. A few decades ago, leaders took on a more authoritarian role, and now need to focus on managing communities and fostering team work and a mindset of continuous improvement. Ensuring the vision and mission for the organisation is shared with the stakeholders to enable connectivity to the customers. Empowering the team to look for better ways of conducting business using technology and spotting opportunities. Finding the right team is crucial for leaders, according to Manfred Kets de Vries, professor at INSEAD.
“Hierarchy fails in the digital age because it’s slow and bureaucratic, whereas the new world is constantly changing and requires immediate responses” according to the World Economic Forum.
We must remember what it is to be human. While leaders need to immerse themselves in technology and change, they also must remember to stay available to team members. Face to face connectivity is an important aspect for engagement.
The Harvard Business Review points out that digital transformations will likely fail if team members are disengaged, and engaging teams, falls to the leader.
A Gallup study found that there are three key approaches to engaged teams:
1. Daily communication with managers
2. Leaders’ effort to get to know team members
3. Investment in personal development
While leaders of the digital age need to focus on extending knowledge and becoming more tech-savvy, they also need to embrace the more traditional human aspects of effective leadership: mastering the art of listening; understanding human behavior; and motivating, building and managing well-rounded teams.
Following on from last month, we are going to look at what is ‘value’ and how to transition to value pricing. Firstly, we need to remember that ‘value’ is from the perspective of the client, it’s their perception of value, what is it worth to them. It is external to the firm. So, what is value? How do you find out what a client values? And the answer is – ask them! Easy, isn’t it? But, so few professionals ask this question of their clients. It means different things to different people, hence the need to ask! Value may look like any of the following: peace of mind; being available; having a great network; great tax strategies; assisting in business growth strategies; mentor; coach; sounding board; problem solver; confidential ear; good friend; and the list continues. Once you have the knowledge of what you do to add value to a client, do more of it, package it up with your normal services.
On the other side of the coin are costs, they are internal and you have more control of this aspect. So perhaps the process needs to consider Stephen R Covey’s mantra, “start with the end in mind”. Start with the profit you want, and work back to the sales figure. So, after considering the costs what does the turnover need to be? What is you pricing strategy? This will then determine the amount of value you need to offer your clients in your services to receive their purchase. It’s important to note, that hourly rates have nothing to do with value. Clients are focused on outputs not process. The key is to create higher value services and increase your average client fee.
Your clients buy your knowledge not your time. Think about that for a moment. If you sell your knowledge then what value do you place on your knowledge? What did it cost you to attain the knowledge? A university degree; postgraduate study; ongoing professional development and, let’s not forget, your experience. Knowledge comes at a cost. Clients buy your advice/knowledge and your experience. Your knowledge creates wealth for your clients and for yourselves. They come to you because you are good at what you do, you meet their needs and provide value to them.
When you begin your ‘value pricing’ journey it is important to include your team and develop their mindset to realize that they a knowledge advisors. Often a team member will not value their knowledge and take it for granted and, therefore, discount their services to the client. So, training in mindset as well as process, is key to transitioning the business to a more modern position.
Part of the transition process is to ensure you have a clear vision, defined purpose and good strategy. Knowing your purpose, why you are in business, and delivering a clear vision to the team are important factors in the transformation to a modern practice. Understanding your competitive advantage, which in the main will be based on the relationships you build with your clients, and being effective rather than efficient (with your clients), will deliver greater value and increase client satisfaction.
How do you introduce ‘fixed or value pricing’ in your practice?
Firstly, all new clients should be on this type of engagement. Create a thorough interview process and take time to understand the needs of the client. Capture their thoughts around the value they perceive in what you are offering. How can you solve their problems? As a side note, you should first determine if they are a fit with your firm, by having a clear understanding of your avatar. It’s important to have a new client process, and stick to it, as ill-fitted clients cost money.
Secondly, develop a ‘value added package’ for the new client encompassing as many services you offer in the package that will meet their needs, all the while building the value of your offering.
Thirdly, look in your database for ‘friendlies’, those clients that will allow you to experiment with them, and begin the journey of the transition to a fixed or value priced package. Ask them what aspects of your relationship and services are of value to them, and what aspects are not. The clients that see you as their ‘trusted advisor’ will ask more from you and be willing to pay you more, and loyal clients are less price sensitive. Bundle up the outputs of your services (remember clients buy outputs not process) and meet with them at least quarterly if not monthly. Note, that if you make a mistake with this type of client, they will be more forgiving, so that you can learn from your mistakes and improve the process.
It’s essential to ensure your engagement letters are clear, accurate and detail what happens “if…”. Say, for example, the client pays monthly, what will happen if they leave before that year’s compliance is completed?
Continually review the process, in all aspects: creation of the packages; delivery; documentation; and promotion. Keep on top of what works and what doesn’t, and continually improve.
Fourthly, communicate your services and packages with your clients via your website, newsletters, meetings, sessions and other correspondence. It’s important to have a client communications strategy and a champion to ensure the process is delivered on a timely basis. Find the best person in the firm to talk to the clients and discuss the fixed pricing options and to promote the value.
The words “value pricing” are banded about like a bouncing ball. As professional firms’ you are meant to be moving your pricing model to value based. Some could argue that the fees charged on billable hours is based on value, as the price paid by a client meets market forces – what a willing purchaser is prepared to pay for the service. But…..
….. As the debate around professional firm pricing leaks to the wider population, your clients become more aware of what ‘value’ may look like to them. Their understanding of the efficiency gains achieved by professional firms using technology, like the automation of the production process, is now something that they expect to be for their advantage. Many firms have passed on these efficiency gains to their clients, as they use billable hours to price. These gains should be kept for themselves to have the funds available for technology improvements and training. Hence the first step in the transition process – a modern mindset.
‘Commoditised compliance’ is another term being thrown around. This concept goes hand in hand with a ‘value pricing’ model, as the idea is to automate the compliance and increase value added services, such as advisory. You then bundle up the services to create a ‘value priced package’. As the cost of compliance reduces (through automation), this service becomes cheaper and people shop around for the lowest price. The ‘value priced packages’ become even more important to retain market share.
I often meet traditional professional firms that continue with what they have always done, as it is easier to retain their billable hour model, after all, it’s what they know. They will often tell me that they are still making money and are busy and they don’t see a change in their clients’ expectations. I am sure this is true for them, but I wonder if they are measuring their client loss rate and their average client fee? I suspect that they are losing more clients than they attain, and their average fee is dropping. They have become comfortable and set in their ways, however clients are seeking new ways of doing business. Their bottom line will be affected if these firms don’t address the ‘commoditised compliance’ issue.
Well the first is billable hours. This is based on a model that is over 120 years old, created in the ‘second industrial revolution’. We are now in the ‘information revolution’ where information is at our fingertips and all things are being digitised! Automation is the name of the game! As professionals, we are normally laggards when it comes to innovation, but now is the time to move your business into this era.
The second is a ‘fixed pricing’ model, which is still based on the hours taken to complete the task. The estimated hours usually come from experience for that particular client (prior year) or a similar client’s work. I see this model as a transition to the third pricing model,‘value pricing’. It will take time to change the mindset of the directors, as well as the team, to move to value pricing. Most of us don’t like change and it is often harder for professionals. I often see in the ‘fixed fee model’ being used in firms, where there is a blend of hours taken as well as an uplift factor for the value for that package. This is at least a starting point.
Go with the flow.
So first, what do I mean by digital disruption? Well, it will affect different industries in diverse ways and the speed in which it will seem to take over the order of things, will depend on how ready you are.
So, let’s separate the two words digital and disruption and define them. Digital refers to the new digital technology or innovation that is emerging in your industry that will change the way you conduct business. Innovation is introduced into a business to improve the systems, processes, products, services and the delivery model. Digital technology is changing many business models and is likely to change yours.
Disruption is often seen as being a negative connotation on business, but it’s an opportunity for growth. The disruption is the impact the modern technology has on your business. It’s the disturbance to the current way you do business, so your mindset will influence how you embrace the new technology and how you prepare for it. It changes the basis on which we make sense of, give meaning too, and understand your business.
The Digital Disruption (DD) to your business is an unstoppable force, so it’s time to embrace it.
Here are some suggestions to assist as you undergo the change process:
1. Don’t fight the change process. Swim with the tide not against it.
2. Accept the notion that what got you here today will not necessarily see you through to tomorrow. Your mindset is the key to success in todays’ forever changing times. Developing your leadership skills and then the team to have the skills to adopt the new delivery model.
3. Seek out what’s new in your industry and determine which technology will fit your business and can be implemented quickly. Having a quick win will support in the development of the teams’ mindset around DD.
4. Look at your current business model. For an accounting firm, how traditional is the practice? What services do you offer and how do you price them? How do you deliver the services you offer your clients? What is your client communication strategy?
5. Then develop the new business model. How will technology change the products/services, pricing and delivery of those new services. What skills will you require of your team, how will they be working (systems and processes) and from where?
6. The technology will have a major impact on your value proposition so what will that look like? Understand your clients’ needs as they are also changing, ask them what they need from you. Meet with them more often and discuss their issues.
7. This is a transformational process delivering digital service or products, so it is important to map out your journey. Develop a business plan for the implementation of the new way of business. What opportunities can you see in some of the technology and how will it add to your value proposition? What systems could be automated or updated to speed up processes and increase efficiency.
8. Not only look at what’s current regarding the modern technologies, but what’s coming up. Be on top of the changes in your industry so that you can maintain your sustainable competitive advantage.
As it is June 30, there is no time like the present to start your digital transformation.
Remember what happened to Kodak. They avoided the digital disruption of their time and industry, despite creating the digital camera, and later filed for bankruptcy.
Don’t let this happen to you!
In today’s environment of greater competition, it becomes more important that you understand your Sustainable Competitive Advantage. What is it that makes your customers buy from you and not a competitor? What will be your success factor in this current market?
I find that most professional firms point of difference is their people and the way they deliver their services. So, it is important that you develop a culture in your business that represents the way you want to do business.
A crucial factor of culture development in a business is the Performance Management (PM) of its’ team. The process ensures that the employees get the direction, feedback and development they need to succeed in their roles. It also provides a platform to develop the culture and values of the business.
The aim of a successful Performance Management process is to:
- Align the contribution of the employees with the goals of the business;
- Provide clear direction of what is expected of them through detailed job descriptions that develop as an employee progresses through the business;
Build competencies by setting the standard for tasks and financial KPI’s for accountability;
- Outline the career development of the employee with necessary or desired training programs to continually improve their performance, increase their knowledge, skills and capabilities;
Provide a safe environment where regular discussions take place between the employee and their manager/supervisor about expectations, progress, outcomes and development needs;
Provide a formal process for feedback and recognition;
- Engage and empower employees to take responsibility for their own performance, development and career progression;
Performance management reviews should be conducted at least annually, however, in smaller teams this may be done quarterly or through a less informal process periodically. Setting the expectation of what you require from an employee is crucial to successful people management. Understanding their abilities, their strengths and weaknesses allows you to lead them in a way that will achieve maximum benefit and create an environment for success.
There are many benefits to conducting a structured performance management program for all the stakeholders –the owners, the employees and the customers.
The benefits to the owners:
- Alignment of business goals
- Employee retention
- Improved team morale
- More engaged tea
- Minimize the skill gaps by improved training
- Reduced costs
- Accuracy in job performance
- Accountability and taking of ownership
- Improved communication
- Reduced risks
- Increased profit
The benefits to the client:
- Continuity of business relationships
- Increased quality performance of services
- Increased communication
The benefits to the employees:
- Improved team morale
- Improved job satisfaction
- Increased clarity of expectations
- Possible increase of financial rewards
- Increased communication
- Clarity of career path
- Skills development
- Increase in personal growth
As we enter the final months of this financial year, now is time to plan and establish your performance management process. Take the time to develop the process and include the aspects that you would like to improve in your business. Align team members’ objectives with your goals. Here are some questions that will assist you to be prepared.
- What are your PM related challenges?
- What are your PM objectives?
- What are the developmental needs of your team?
- Have you detailed job descriptions for each team member?
- Have you communicated the standard for performance expectation?
- Have you set the coming years budgets and KPIs?
- Have you developed a rewards and recognition process?
- How will you share the next 12 months’ goals for the business with the team?
- Have you developed and documented the steps required to conduct a PM review? What’s needed?
It’s now December –how did 2016 disappear into thin air? It only seems like last month we were developing our business plans for 2016 and now I am talking about the 2017 plan!
As accountants, and more importantly as business owners, we should be leading the charge with our clients, by having our own business plan and getting ready for the New Year.
The holiday period is a time to reflect on the year that has been, and decide what we want the New Year to bring. It’s important to work out what strategies worked this year and how far you have come towards your goals. Just having this focus on your business will provide clarity on what you want the coming year to provide. Always measure how far you have come and celebrate the wins, then realign the strategies and actions plans for the new business plan. The business plan is a powerful tool to keep a business on track and allow you to be better equipped to proactively make decisions to meet your goals.
As the “Trusted Advisor” for your clients you have a really unique view of their organization and are well equipped to assist them in developing their 2017 plan. You understand the figures, the pulse of business and how it ticks. You have the ability to prepare forecasts and budgets and neatly fold these tools into a business plan. The tools help you advise your client in preparing for future growth or downturn in their industry, provide insight into funding requirements, which leads to all the other areas of business e.g. human resources, marketing, stock control, procurement etc.
Your client just requires the structure and support to turn these strategies into a business plan – that’s where you come in! It’s important to think beyond the numbers and be a provider of advice and counsel that strengthens your role as your clients’ primary advisor.
The first step in an engagement is to schedule regular conversations, find out how they are going and what their top 3 issues are. These will give you the direction the plan should take. The communications will help you stay in the loop and, by using the business tools, have the ability to compare real time figures with budgets. Interpret the reports, help your client understand the results and to plan for the future. Discuss what’s working and what’s not, so that you can identify the changes and focus on the future by using the business plan as a roadmap.
Provide proactive advice.
When assisting your client in creating their business plan use the following helpful tips:
- Set the time-frame for the business plan – ten years, five years or one year.
- Objectively look at the business in terms of success and failure – where is the business NOW? Measure key factors so that you have a point of origin so that you can easily identify the changes that have been achieved over the coming year(s). Use your other business tools (budgets, forecasts, financials etc.) as they will help clarify this section.
- Then develop the goals and WHERE the owners see the business in the specified time period. Detail this picture so that the owners can get a real ‘feel’ of the future business and create the emotion to motivate them to engage with change.
- Set the key performance indicators so that they will recognize when they have achieved their goals. These are the measurements of success and do not always have to be financial.
- Determine the strategy that will start the change process, keeping the end goals in mind. Ask, what needs to happen for X to be achieved?
- Once the strategies are determined, work on the actual actions that will have to be implemented to achieve the strategy. The steps involved in moving forward.
- Set a time frame by which each action will need to be completed so that the next action step can commence.
- Assign each action to a person that will be responsible for implementing the strategy. This may encompass more than one person. Appointing a person also provides accountability for the plan.
- Assist your client in the implantation of the business plan. Have accountability meetings to see how they are going and where you can help. Check in at least quarterly if not monthly.
Now, as you have gone through the process to develop your business plan, you can now take your clients through the same process – easy isn’t it?
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