How to prepare a business for digital disruption

Digital disruption is the shaking up of the way we work, facilitated by technology. Successful business leaders will start shaking their own businesses, identifying where they can diversify, and engage with clients. By Steve Karro 

Whether we like it or not, the wave of digital disruption has engulfed us. Organisations that failed to adapt and harness the power of technology face a difficult future. On the other hand, those that adapted quickly by making informed decisions on the right technology for their organisations have ridden the wave of success by creating positive differentiation. 

However, adopting digitally disruptive technologies and processes is not as simple as implementing a technology. It should be a calculated move after careful and detailed analysis of a firm’s risk appetite and its capacity for continual change. So we need to ask, is digital disruption good or bad? How does it impact the accounting industry? And, more importantly, how do we prepare ourselves to ride this wave? 

Digital Disruption 101 

According to James McQuivey, vice president and principal analyst at Forrester, digital disruption is about building better products and processes, creating stronger relationships with customers, and bringing it all to market faster. He defines digital disruption as a process where you disrupt your own processes and products to create a better customer experience at home and at work. 

The most obvious example is that of Apple under the visionary leadership of Steve Jobs, who took a mobile phone and turned it into an extension of our arms. The iPhone and iPad revolutionised the mobile device market, freeing us from the confines of the four walls of our workplace and turning us into a workforce that never stops. 

The accounting industry is neither immune to digital disruption nor incapable of it. This phenomenon is not reserved for IT, electronics and the telecommunications industry, but for anyone who wants to break away from a competitor saturation point and create a significant differentiation. 

Preparing for digital disruption 

In the words of John F Kennedy, “change is the law of life and those who look only to the past or the present are certain to miss the future”. 

Cloud technology, broadband and smartphones are revolutionary forces that have blurred the geographical boundaries between Australia and the emerging economies. Easy and increased access to low cost yet skilled labour overseas has disrupted traditional models, resulting in outsourcing of labour-intensive tasks and driving up competition within the professional services industry. 

However, just like every other cloud, cloud technology also has a silver lining. Adoption of a suitable and carefully planned disruptive technology provides significant and lucrative opportunities for accounting firms to: 

  1. Leverage established, strong, trusted relationships to get closer to their clients and deliver services and solutions in real time 
  2. Deliver measurable benefits in terms of time and cost savings
  3. Increase job satisfaction and work-life balance (although the last benefit is dependent on the firm’s culture) 
  4. Offer differentiation and diversification of services at a much lower cost 
  5. Provide greater value to their clients than ever before 
  6. Improve the quality and speed of professional advice by having quicker access to research and improved collaboration 
  7. Stay relevant to the new visual and connected generations who are soon to become the decision makers. 

Connecting the digital dots 

When making decisions on technology adoption, there is an opportunity to look beyond solutions that simply automate mundane, repetitive tasks such as recording bank transactions, for those that actually contribute to an enhanced client experience. After all, in this day and age, your reputation is only as good your clients’ tweets. Digital disruption impacts the accounting profession at all levels, however it has the greatest returns when it directly affects the role of the professionals and not just the support staff. 

Here is an example. If you automate just 50 per cent of the work of one of your support staff, your cost savings may be well over $29,000 a year at a conservative estimate, without taking any growth of your business into account. 

Compare this to the potential returns when the same time saving is applied to an accounting professional. A disruptive technology such as visualisation that enhances the effectiveness of an accounting professional and results in 50 per cent time saving translates into monetary saving of at least $40,000 a year on salary. Critically, it also increases the average chargeable salary from $67,000 to exceed $100,000 because of the extra value it enables the accountant to offer. This is the point at which profitability and success from the chosen technological solution really counts for the ‘whole of firm’. 

Building the agile organisation 

Technology and disruption is not only about improving your people but also about improving or removing processes. 

With 2014 being labelled as the ‘Digital 2014’, most SMBs are preparing to face a ‘doomsday or differentiate for success’ scenario. Digital disruption is not everyone’s cup of tea though. It can only work successfully in an agile organisation that is ready for ongoing change. Implementing digital technology is also not about replacing your workforce, but enabling them to progress faster, develop a diversified skill set and add to your profits by helping you grow faster than ever before. 

In the age of the customer, the balance of power has shifted to the technology savvy and increasingly connected clients. In order to prepare for digital disruption, the accounting industry needs to be one step ahead of clients. In some cases, you can also create a need for a service that your customers did not know could ever exist. Just like Henry Ford said: “If I had asked my customers what they wanted, they would have said ‘faster horses’”. So challenge your own processes. 

Here are few things you can do to ensure you are agile and prepared for the Digital 2014: 

  1. Always calculate return on technology decisions. If the provider of technology can’t tell you what your expected return should be, then look elsewhere or work it out yourself.
  2. Don’t let competitors govern your direction with technology. Find what’s right for you.
  3. Don’t wait for software and technology providers to find you. Hunt for those that are relevant and offer the greatest value for you and your client.
  4. Make software providers accountable for training and support to ensure you get the best use of the solution you implement. 
  5. Size doesn’t matter. Fight your own fight and don’t base your future on your competition.
  6. Become forward thinking and learn from the successes and failures of those around you. 
  7. Inform your clients on your technology choices and why your business has made decisions. Explain the benefits they will experience. 
  8. Consider your client at all times. Technology is not for you to make your life easier or to automate you as a professional. Technology must be for the ultimate benefit of your client. 

You win some, you lose some 

When it comes to being disruptive, size doesn’t matter. The classic example today is Xero, a technology most accounting professionals must be familiar with. Credit Suisse has recently tipped Xero, founded by the serial entrepreneur Rod Drury, as the ‘Apple of accounting’ that has taken on established giants like Intuit, Sage, MYOB and Reckon. The Sydney Morning Herald in November 2013 reported Xero shares to have surged by 425 per cent in just a year with it being tipped to grow to a $10bn Nasdaq stock within five years, which is almost three times its present growth. How did Xero do this? By a simple solution that others had not thought of offering – a low priced subscription accounting software using cloud computing that allowed accountants to utilise cost effective products that met all their needs. 

On the flip side of this success story is Kodak, which saw its demise after reigning in the film photography industry for a 110 years. Why? Because it ignored digital disruption hoping that it would go away. The interesting fact is that Kodak invented the first patent for a digital camera and disrupted its own business, however they failed to bring it to market because they did not want to give up the lucrative film market with over 70 per cent gross margins. Kodak – who created the term ‘Kodak moment’ and had a name synonymous with photography – lost its ground to new entrants such as Sony, Apple and Nokia. These forward-thinking competitors decided to play in the visual image space resulting in Kodak eventually filing for Chapter 11 bankruptcy in early 2012. Was Kodak future phobic? Yes, and not only future phobic, but also dismissive of the changes around them, refusing to question the world they lived in. 

So what can we learn from these companies: 

  1. Disrupt yourself 
  2. Step outside of your world, and question it 
  3. Eliminate future phobia 
  4. Diversify and differentiate 
  5. Eliminate fear. 

STEVE KARRO is the client solutions manager at Encompass Corporation. Visit there website here: encompasscorporation.com

Article last updated 11 March 2014