Reprinted with permission from Accounting Today.
Everybody’s talking about innovation these days. The “i” word may be over-used, but when it comes to growing your firm, I’m an unapologetic believer in the power of innovation. This is especially important for mature service lines.
Let’s start with a working definition. I love the one offered by Scott Anthony, author of The First Mile and other books on the subject. He suggests that innovation is something different that creates value.
Accounting firms are often advised to innovate by differentiating their services. After all, you can’t outgrow your competitors if you don’t have new, shiny stuff on the shelf! But try as they might, they continue to duplicate what other firms are doing which, according to Anthony’s definition, is not innovation. I witness it constantly at the market level, as industry and service line leaders struggle to grow by executing disconnected tactics, and merely aspiring to becoming famous.
Innovation at the market level involves meaningful collaboration between industry and service line leaders, and customizing services by industry/buyer group. But this requires a deep understanding of the buyer group, something most firm leaders are unwilling or unable to invest in.
Sure, doing something different that adds value makes sense, but you need a road map to get from here to there.
Which brings me to the question, “Why bother?” Sustainable firm growth depends upon a continuous innovation mindset. It’s not enough to come up with one great idea occasionally and call it a day. I advise firms to develop an innovation and commercialization method that builds this mindset.
Yes, you can!
Firm leaders often tell me they are unable to innovate because their firm focuses on compliance. Hogwash! For any firm, getting to the market with something new and valuable is a matter of focusing on the needs of specific buyer groups and customizing services to meet those needs.
Sometimes the value is created by combining ideas in a new and different way. An example is what Frans Johansen calls “the Medici effect.” He maintains that breakthroughs are often “intersectional” and occur when concepts from one field are brought into new, unfamiliar territory. We’ve all experienced this, for example when cross-functional colleagues collaborate to produce original ideas no one came up with on their own. Wherever these types of intersections occur in our firms, the method for creating a continuous innovation mindset is similar.
Where to start?
Start with organizing service line and industry leaders, and follow a proven path. Use revenue segmentation to assess the source of firm revenues by service line and industry. Then identify leaders who will lead the specific service lines and industries. Many firms get this far, then stop. The key to creating a process is in the steps that follow:
- Task the leaders with ownership of both financial health and strategic direction of their revenue segment. These two cornerstone roles require great clarity. Your leaders should not be confused or distracted regarding these two elements of their role and responsibility.
- Next, leaders must learn how to discover, validate and evolve their growth strategy. Most CPAs are unfamiliar with the three elements of growth. They are a specific combination (think combination lock) of service, buyer group and distribution channel. However, instead of discovering this straightforward formula, most leaders feel pressure to engage in non-productive activity like random acts of networking, and tactics looking for a strategy (with credit to Saul Reibstein, formerly of CBIZ, who could sum things up in a nutshell!).
Leaders and teams should continuously interview numerous people in their individual markets to gain clarity around the three strategy elements. Gathering market intelligence and determining buyers’ issues —from technology to economic conditions, competition and regulatory changes—is how strategy emerges and innovation happens. It’s that wonderful “aha!” moment when service and buyer-group-dots connect and your two leaders visualize an innovative and valuable service.
Market interviews reveal the “hot spots,” which is where innovation lives. There are countless innovation examples—from six sigma for government entities to 990 consulting for NFPs (Crowe owns the first-to-market for this one), benchmark reporting for law firms, customized financial statement packages for construction sureties, film tax credit consulting for state governments and attest services for title companies.
Commercializing the concept involves an early adopter program, which enables incremental investment (proof-of-concept in the corporate world), and provides additional market intelligence to inform a commercialization strategy.
Send in the clowns
What does innovation look like? Think about Cirque du Soleil, the popular entertainment mashup of dance, performance and music. While it retains a traditional circus feel, the experience is mature, refined and aimed at a more sophisticated audience.
Cirque literally reinvented the category and, according to one source, has reached a level of success in a couple of decades that it took The Greatest Show on Earth 100 years to achieve. From a highly commoditized market targeted at children, Cirque found a whole new buyer group—adults of means—and offered them a beautifully innovated product delivered through an innovative channel (adult destinations).
Once you master this method you’ll have what you need to become an innovation machine. You’ll do it successfully and efficiently, too, avoiding wasted time and resources, trial and error and questionable investments. Instead, you’ll apply proven principles to identify that sweet intersection of a ready market of buyers who need what you have to offer.