At a glance
The accounting industry has felt the increasing tremors of disruption since the arrival of cloud-based accounting a decade ago. As routine compliance work becomes more of a commodity – a product that clients can access through automated services rather than a trip to their friendly accountant – many practitioners are considering ways to provide greater value to their clients. For many, this means shifting the focus on their offering. It’s a case of disrupt or be disrupted.
In the disruption economy, the most successful companies are those that view business through the lens of the customer. Innovative companies are exploiting this shift, challenging the status quo and restructuring traditional industries through the use of technology.
It’s called digital disruption, although technology itself is the enabler rather than the driver. Disruptive companies zero in on a customer need and use technology to remove superfluous steps, costs and time.
Uber, the app-based hire-car sharing service, is an example. It received US$258 million from Google Ventures in 2013 and is disrupting the taxi industry through means of collaborative consumption.
Digital technology has changed established ways of interacting and doing business. It has replicated some of the functions of accountants, offering speedier and cheaper solutions. Research by accounting software provider CCH shows that two-thirds of the small to medium enterprises (SMEs) it surveyed would consider replacing some of the services their accountant performs with cloud-based software. Half said they would consider looking for a new accountant if their existing one did not embrace a cloud solution.
Almost one in four accountants currently use a cloud platform, according to the CCH research, and 60 per cent of accountants who are not currently using a cloud-based system say they are likely to adopt one in the next two to three years.
Mark Holton, director of Smithink2020, an accounting consultancy and business coaching firm, says that while cloud technology creates greater efficiency, the key to remaining relevant for clients is to shake up your service offering.
“I’ve been saying for the best part of 10 years that we need to change the way we do business and we need to offer services to clients that they truly value. One of the challenges when it comes to compliance is that we’re offering services that clients don’t have to have. When it comes to advisory work, we’re offering services that they don’t necessarily need to have, but they should have. For some firms, it’s pretty hard to sell that want-based decision. But I don’t think the majority of good firms have a choice and I think they’re starting to put infrastructure and support staff in place to make it work.”
"A five-minute phone call a few times a quarter is not a big deal and the client really appreciates it."
Disruption can blindside entire industries – when was the last time you shared a Kodak moment with a film camera? (Kodak is the classic example of a “disrupted” major business which lost market leadership when digital cameras totally disrupted film camera sales). Understanding the drivers of disruption and the technology that enables them can help businesses future-proof their offering.
Futurist Rachel Botsman has developed a framework to identify where disruption is likely to occur and identifies five key drivers.
The first is “waste”, where there is unlocked value in an underused asset. Airbnb successfully exploited this by creating an online marketplace for wasted capacity in spaces, such as holiday homes and shared rooms.
The second driver is “redundancy” – layers of superfluous roles and processes. Botsman cites Netherlands-based Vandebron, a company that identified an opportunity, bypassing utilities firms by connecting small-scale energy producers with customers who want renewable energy.
“The third driver is “complexity”, when there are ways to simplify complex and frustrating customer experiences,” says Botsman. Disruptive companies in this space include peer-to-peer platforms such as TransferWise and CurrencyFair, which have stepped in to simplify customer experiences by removing the complexity of currency exchanges.
“Limited access” is the fourth driver of disruption, according to Botsman, when products and services are out of reach for many or don’t require full ownership. The BMW Drive program is an example, enabling shared access to luxury goods.
The fifth and final driver of disruption is “broken trust”. When trust in large institutions, such as banks, has faltered, companies like peer-to-peer Lending Club and Zopa have stepped in to challenge the traditional personal loan.
“You can see how the drivers apply to the accounting industry and make it prone to disruption,” says Botsman. “On the one end of the accounting spectrum we will have commoditisation of services that can be offered through tools and platforms such as Xero, and on the other end we will see hyper-specialisation. It’s the middle market that is most vulnerable.”
