How to Redefine Your Firm's IT Strategy

The key is transformation, and transformation means doing something utterly and radically different. How accounting firms and small businesses view technology requires transformative thinking. It is no longer enough to think internal, local and linear. One must think outside the firm and profession – think exponential and globally. Exponential growth and innovation occur when multiple disciplines are brought together to brainstorm. This happened during the Renaissance, and is often referred to as the period between the Middle Ages and modern history. Frans Johansson wrote an excellent book, “The Medici Effect,” on intersectional versus directional innovation.

The second important point about today’s world is that there are three primary digital accelerators currently converging: processing power, bandwidth and storage. Couple this with the convergence of technology in multiple disciplines (networks & sensors, infinite computing, artificial intelligence, robotics, 3D printing, drones and genomics) that put us in a world of rapid change. Individual and organizational thinking needs to be based upon abundance, rather than a scarcity mentality. In other words, to transform the accounting profession, we must think differently and specifically when it comes to technology. Many have viewed technology as overhead in the past, rather than as a strategic asset. This thinking is a scarcity mentality and will only result in increased frustration and commoditization going forward. I often hear that clients aren’t asking for something different. Dan Burrus in Flash Foresight states, “The truth is that clients don’t know what they want because most don’t yet know what is possible. Give your clients the ability to do what they can’t currently do, but would want to if they only knew it was possible.

With this introduction, let’s look at a sample technology capability model that considers:

  • The client
  • Firm talent
  • The firm
  • Support
  • Business partners and vendors

Functions can be broken into the business channel, front office and back office for the typical CPA firm and/or small business. The big difference here is that most accounting firms focus on the front office and production, while clients consider their accounting as part of their back office needs (external CPA firm and internal accounting resources). By focusing on a capability model, firms can provide more services above the line (performance and strategic), rather than below the line (compliance & commoditized). Don’t misunderstand … I am saying compliance and performance and strategic services.

The nine key areas in a firm/business IT capability model are:

In the past, most firms have focused on client services, and their IT strategy was driven by tax and accounting software. The key software providers in most firms have been Wolters Kluwer, Thomson Reuters and Microsoft. Intuit and other vendors have played key roles in smaller practices and small businesses. Over the past 5-7 years, firms have attempted to automate other areas, such as HR, marketing, sales, firm operations (workflow and scheduling) and financial operations (billing, collecting and reporting). The primary challenge generally has been lack of integration and the amount of time needed to maintain the same data in duplicate applications. Many firms/small businesses have used Excel or spreadsheets to accomplish their needs, adding additional time to their processes. Most CPA firms have upwards of 100 software applications that their IT department is responsible for supporting. The other factor contributing to the problems is that many of the services areas (especially tax) have operated as a silo, and besides the fact that the applications have not integrated, neither have the processes, resulting in cycle times that are far too long and have too many loops in the workflow process.

By focusing on all nine areas, firms will get a more holistic (enterprise) approach, increased integration and improved workflow. Most importantly, firms will be focusing on value-added, rather than activity-based, processes.

There are 10 steps to our process of developing a Business IT Capability Model:

  1. Utilize your current firm vision and strategic plan as a starting point. If you don’t have a shared vision and plan, now is a good time to get started, as it is difficult to develop the IT Compatibility Model without a vision and plan. Start with the question, “Where do I/the firm want to be in 1-3-5-10 years?”
  2. Define “how” clients/customers do business with you now and into the future – the channels (e.g. in the office, online, phone, mobile apps, email, social media and communities).
  3. Identify your key operating areas. We have found that most firms have nine operating areas, as described above and shown in a graphic below. Clients may vary slightly, but probably not much, as all but the top 10 accounting firms in the US are considered a small business.
  4. Identify the primary functions under each of the operating areas. Some functions may go into multiple areas.
  5. Inventory your current software applications and assign them to each operating area.
  6. List the areas where you don’t have coverage, where the application coverage is not acceptable, and the areas you would like to improve.
  7. Utilize thought leaders and peers to assist in developing your technology ecosystem. Don’t be afraid to look to peers, clients and thought leaders.
  8. Execute the plan. This requires leadership and resources. Your technology ecosystem should become a strategic asset.
  9. Hold people accountable. Accountability is the quickest way to change results. Accountability starts at the top of the organization.
  10. Update the plan and capability model annually. With convergence and the law of accelerating returns, it is necessary to update and revise the plan on an annual basis.

The following capability model is for illustrative purposes.

The challenge is to take an enterprise versus siloed perspective. In a graphical format, it is much easier to see the different needs in each area, yet understand the importance of integration and real-time data. Most accounting applications have been focused on after-the-fact data and processes have generally included significant data entry and reconciliation. Today’s cloud based systems are much easier (less friction) to integrate. Linking of applications in the past has proven to be only a partial solution.

The role of IT leader has changed from emphasis on technical expertise to more of “orchestra leader” who can orchestrate the many vendors in the firm’s technology ecosystem. This also requires teambuilding, marketing and selling of new innovative ideas, calculating and identifying projects with a higher ROI, and project management as well as protecting those projects that are in the startup phase. The skill sets of your IT leader may have changed, but leadership is a constant component of success. Without it you will struggle to remain successful and future ready.

You should also note this model allows you to connect to internal as well as external resources. Take the time to list your requirements in each area as well as your current provider. I think you will not only see how difficult your current systems are to maintain, but how an enterprise approach can improve integration, improve value added processes and provide internal users and clients a better experience. In a future article we will address specific requirements and options as you build your future technology capabilities. Just remember, this journey is about progress and not perfection.