April 10 2019
There is a revolution underway in major accounting firms, at least for the ones who take up the challenge to meet the shifts occurring beneath their feet.
For decades, the profession has operated on a foundation of expanding billable hours for increasingly complex yet still largely compliance-focused work. And while compliance work will remain a mainstay, clients are demanding real advice and a change in how they’re served that matches the realities they feel — a search for how to leverage data as a competitive edge and a constant push to evolve as a firm’s services become obsolete or commoditized.
Yet despite clients’ direct requests for these shifts and the numerous surveys that highlight it across the industry, few firms have truly begun to meaningfully change their approach to meet the accelerating disruption that both technology and non-traditional competitors are bringing to the market. As many new, nontraditional and niche players push into the space, competition continues to increase. Consequently, firms that can’t provide differentiated value — beyond traditional compliance services — will see margins continue to slide and value-added advisory work harder to come by, with their clients going instead where they experience value, perhaps to niche and nontraditional players.
Leaders should see this as a unique opportunity to begin reinventing their firms and to capture this considerable value, which no firm has currently locked up. Even among major industry players there is significant convergence. “But wait,” they might say, “we just hired a data scientist. Our strategy explicitly calls for upskilling our people to be more consultative, and we are rolling out a new tax software suite.” Yes, but that is what you are discussing and doing internally, not what clients see and experience. To clients, there are very few differentiated choices, and the services offered by firms appear to be commoditized. Clients see most firms’ services, technologies and financial relationships as undifferentiated. To win where clients are demanding new and different, the first thing is to stop being the same.
Of course, most firms are trying hard to differentiate themselves from the pack. Undoubtedly most would say they always have been different. But where and how? Clients are shifting from asking for more value to demanding it. It would be a mistake, however, to consider the “demand for value” only a request for discounting. “To discount or not to discount?” takes up a disproportionate share of discussion within firms and is a race to the bottom, chasing ever more commoditized, low-margin work. Meeting these demands, though, will require leaders and firms to solve four critical, integrated and evasive challenges:
- Putting continual innovation at the center of strategy
- Transforming to an “advisory-first” firm leveraging AI and client data
- Reshaping the audit profession around technology
- Taking advantage of the global workforce and new ways of working