“We are living in a rift between epochs.”
—Jane Gleeson-White
It was a rite of summer for thousands of baby boomers in post-war America: the annual family road trip. Due to a confluence of events—the expansion of the Interstate Highway system, coupled with a rapidly expanding middle class that could afford the Buicks and Chevys on which to travel it—summer saw multitudes of children piling into their parents' station wagons with Dad at the wheel and Mom riding shotgun as they set out on America's newly paved arteries to discover what our seemingly still-nascent country had to offer.
But those road trips are more than the fond Kodachrome memories of baby boomers. They are a result of what is now commonly referred to as “disruptive innovation,” a term coined in 1995 by MBA and Harvard Business School academic Clayton Christensen, but which has only just recently become part of business vernacular. In our road trip example, the disruption was the assembly line, a mode of production that had a profound impact on manufacturing, labor, education, land use, and almost every facet of American business and culture over the next century. Entire industries grew or disappeared based on their ability to successfully harness and leverage this one particular innovation that essentially shaped the United States into the world power that it became.
Today, some of those children, grown and in the second half of their careers, are America's small business owners. They're consultants, attorneys, doctors, retailers, craftsmen. Some of them are CPAs. Through hard work, late hours, and the right relationships, they—like generations of CPAs before them—climbed the corporate ladder, became partner, or launched their own firms, enjoying the benefits of firm ownership almost as much as they enjoyed tackling the challenges that came with it. They had “made it.”
Today, technology is again disrupting baby boomers' lives and livelihoods, posing a challenge unlike any other in the 118 years of the profession's existence. How are CPAs tackling this challenge? The qualities that for generations have been the hallmark of a successful CPA—skepticism; a reluctance to adopt or value anything that has not been tested and proven; following rules, processes, and checklists—are the same qualities preventing some of them from adapting to rapid changes today.
Lead, Follow, or Get Out of the Way
A 2013 CCH Leaders Now and Next Survey, “CPA Firms Succeeding in the New Economy,” revealed that “firms that effectively adapt to the new economy and are proactive in strategically adopting new technologies don't simply survive, they thrive.” The survey identified these thriving firms as “pioneers”; those ahead of the mainstream were categorized as “early adopters”; and, lastly, “mainstream/late adopters” were what their category implies. Across all surveyed categories, including firm performance, work environment, staff strategy and attributes, personalized relationships with clients, and sales and marketing activities, pioneer firms outperformed the early and mainstream/late adopters.
Pioneers devote the most resources to developing the next generation of firm leaders. They have formal recruitment, mentoring, and talent management programs, and an advisory board of next-generation firm leaders. They also use emerging technologies (e.g., mobile applications, cloud computing, social media) to attract new clients and recruit employees.
What Do They Want?
The next generation of young adults isn't rejecting the status quo; armed with relatively inexpensive, mobile technology, and an entrepreneurial spirit, they're recreating it. Rather than wait 10 years to be made partner (if they even want to become partner), they'll find a firm that rewards their ambition and smarts in half that time, and if not, they'll just start their own firm. Maybe a virtual one.
A job that millennials love most likely includes working for an organization that values collaboration and whose mission is meaningful to them. Millenials are “digital natives” who grew up using technology from an early age. Giving these young and ambitious recruits leadership opportunities may turn your “mainstream/late adopter” firm into a pioneering one.
Accounting's Uber?
As compliance work becomes more automated and less expensive, firms may start to see their clients accessing this type of service simply through an online application on their computers, tablets, or phones. Uber, a taxi service that has disrupted customer service, uses a mobile app to connects potential passengers with the closest drivers offering rides. No cash exchanges hands, and you can choose your driver after browsing their profile.
Even without an “Uber of accounting,” firms face the toughest competition in an area where they also see the most growth: advisory services. Successful firms are gobbling up smaller firms with specialized practices where firm owners know their clients' needs, but which don't require a CPA license to provide. CPAs may no longer just be a client's utility player, but may serve as business advisor, with an opportunity to play a starring role. The entrepreneurial CPA understands that now is the time to adapt or face obsolescence. Far from making the license irrelevant, disruption may yet present CPAs with the opportunities to continue serving as the most trusted financial professionals; it just requires you to put down the checklist and look up at the world around you. If you still fail to adapt, at least you'll know where your clients went.