In 1975, Steve Sasson was an engineer with Kodak when he invented the first digital camera. Excited about his invention, Steve took it to management hoping they would be as enthusiastic as he was. Instead, in Steve’s words, they responded with, “That’s cute. Now don’t show it to anyone.” Worried that such technology could hurt their massive investment in film-based photography, Kodak did nothing with the invention.
Fast forward 12 years to 1987 and digital technology began gaining some traction. Kodak’s clients wanted to know if it was something they needed to worry about, as much of their investment was also tied into film-based photography. At this point, Kodak decided to commission a study to find out more about digital technology and the threat that potentially existed.
Through the study, they uncovered some bad news and some good news. The bad news was that digital technology certainly had the ability to replace film-based photography – not so great when everything in your business is geared toward film. The good news, on the other hand, was that Kodak had an estimated 10 years before the technology would be cheap enough and have the type of quality needed to mass produce. Likely, if they had started at that point, there would have been time to be on the front-end of the digital revolution.
Still, Kodak did nothing, and, in the mid 1990’s (close to the prediction from the study), digital camera technology took off and eventually did replace film. In 2012, Kodak filed for bankruptcy and the only thing left to sell were the patents (thousands of them) from technology they had developed over the years but also had been left to languish on the shelf of potential opportunities.
The Kodak story provides several lessons for businesses, including professional firms. One of the lessons is that all products and services have a life cycle that looks something like this:
Innovation needs to take place at the top of the growth phase or the bottom of the maturity phase, otherwise the product or service and its associated revenue and profits will eventually decline. Leaders who ignore this do so at their own peril.
I imagine that many of your firms can attest to this cycle, as over the years many of the services your firm once provided have been overtaken by technology. Those of you reading this article can also likely point to a service your firm once delivered that has either been marginalized or is no longer offered. Much of the ‘number crunching,’ for example, that accountants used to do is now completed, faster and cheaper, with the help of technology. In time, further advances in technology and cheaper ways of doing things will likely erode other accounting services that are comfortably in the growth phase today. This opens the door for accounting firms who choose to walk through, to provide new services that are of greater value to their clients.
Professional service firms should understand that the market will not reward those that choose to remain static. Business is fluid, and the professional service provided to business owners should be able to adapt to fit the situation.
Innovation is typically thought of in the realm of manufacturing, healthcare, and other industries; however, the key to success, even in a professional service firm, is being innovative with the services that are being delivered. If your clients or the market needs a service that you don’t provide, you should find a way to develop the resources internally or locate a resource externally in order to meet the market demand.
Yet, even when the benefits are known, firms still struggle with innovation. But why?
Below are 7 innovation obstacles that accounting firms face when trying to provide a new service or deliver an old service in a new way.
Often times, leaders in an accounting firm become comfortable with their firm revenue and profitability. Thus, there is no sense of urgency to change – the thought process is if it’s not broken, don’t fix it.
2. Market knowledge
I spoke with the leader of a firm, and he said his team is so busy getting work out the door they haven’t asked what the market needs and thus have no idea what types of services they should consider offering or developing.
3. Business model
Often a new service requires a change in business model, yet firms insist on providing services in the same way they always have – even if the market is saying, “I want to have it my way, customized for my business.”
4. Brand confusion
If your firm rarely or never offers new services, the market may be confused when you do. However, consistency is the key here; the more you pro-actively take new offerings to clients and prospects, the more they come to expect it from you.
Firms lack dedication when they are not investing in the resources (e.g. time, people, and money) required for success. High-quality firms invest a percentage of revenue in R&D so they can maintain their winning ways.
6. Skills and resources
Lack of certain skills and resources will prevent a firm from offering something new.
Lack of process is another roadblock for firms that sometimes identify a new service yet have no idea how to take it from a concept to reality.
Market forces will take care of Obstacle #1: lack of motivation. Firms who offer new services will take that piece of business. Maybe clients continue to use your firm for the other things you have always provided – maybe not. This is certainly a risky option to choose and does not consider changes in the clients’ business or leadership, both of which can cause firms to lose clients they are not appropriately serving.
The other obstacles can be overcome through continuously raising the bar about what’s expected in the firm and being committed to delivering more value to clients. One of the most frustrating things for people running a company is when their ‘trusted advisor’ lacks the initiative to bring new ideas to them. At the top of the growth phase / bottom of the maturity phase, firms must find ways to innovate their services.
If instilling a culture of accountability is a challenge in your firm, Contact Us for a complimentary phone consultation. The Rainmaker Companies can help you Grow Your Firm, Grow Your Practice, or Grow Your Self.