Innovation for CPAs and Other Professionals Requires New Thinking

Innovation for Accountants and other Professional Services Firms

If you’re like me and clicked on “Who will be the Edison of accounting innovation” in Accounting Today, there’s a good chance you missed the most transformative idea. Author Daniel Hood buried it in a single sentence in a middle paragraph.

Hood’s article notes “[Accounting] is one of the few professions where having the word ‘creative’ attached to your products is a bad thing, where SALY is a sought-after situation.” His prescription is to think up new products and services because “the audit, the financial statement and the tax return remain much the same as when they were first introduced.”

While Deloitte’s new blockchain laboratory and KPMG’s work with IBM’s Watson on cognitive computers will have big impacts on accounting, true innovation is less about new products than about creating new value for clients.

Value From Innovation

To clients, value takes the form of either efficiency or effectiveness. Efficiency is doing something better than the client can — e.g. close the books in one day rather than seven. Effectiveness is doing something the client can’t do for themselves — e.g. share wisdom and insights gained from work spanning many clients and situations.

Experts deliver products and answer questions. Advisors provide insight and guidance.

Most accountants–along with fellow professionals like lawyers and consultants–think of themselves as experts selling access to specific skills and experience. Their websites broadcast expertise by describing their practice in terms of bullet points and credentials. Expertise is a fancy way to demonstrate you’re competent. While competence is a prerequisite, it’s not a compelling reason to hire your firm. There are lots of competent options.

A Compelling Choice for Clients

Becoming a compelling choice in a sea of competent competitors requires innovative thinking for most professionals. The innovation isn’t a cleanly packaged new offering as imagined by Daniel Hood, but rather adopting your client’s perspective. Easy to say, but hard to do. That’s why it amounts to innovative thinking.

Consider two views of the standard audit. You can focus on making the obligatory audit process a pleasant one. Alternatively, you can focus on the many ways audited financial statements enables the client’s business. Think way beyond the audit to shape how you communicate, deliver, hire, and bill. Seen from your clients’ perspective, that’s innovation.

Your client’s job is to make decisions and create business opportunities. How can your firm’s experience, perspective, and expertise boost the success of your client’s overall business? The real user of your audit isn’t your client; it’s the banker or investor looking to do business with your client. The audit becomes something you do, but your value as a trusted advisor in guiding your client is greater. Lots of CPAs can perform an audit, but when you’re an invaluable advisor, the relationship becomes something much more special.

This change of perspective counts as innovative thinking because it’s hard and firms don’t know where to start. I use in-depth interviews with a firm’s best clients to paint a vivid picture of why their best clients select them over other, other excellent, options. Hearing their clients in this way is a gateway to seeing their practice in a more valuable way.

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Increase Your Billings in 2017

Grow revenue by increasing your billings in 2017

Fall is when your clients areor should bethinking about next year. While they plan for the kind of 2017 they want to have, it’s time for you to lock in how you will be perceived and paid in 2017. Trusted advisors get called in more often, have higher billings rates, and grow with their clients. If you’re looking deepen and broaden your client relationships, I offer some tips below.

You can’t just say you’re a trusted advisor (plenty of people do that already). However, you might be more of one than you realize. The most enjoyable part of my role is shining light on activities firms “just do” out of habit or obligation, yet are highly valued by clients.

How a Cup of Coffee Can Increase Your Value

A cup of coffee can increase your valueTry this. Take a break from thinking about the tasks you perform. Grab a cup of coffee and for a few minutes ponder the broader impact of your work. Not what you do (tasks), but what it’s like to work with you and what your work enables the client to do (impact).

I did this with an attorney at a mid-sized firm who told me he was “just like lots of other lawyers.” A few minutes of gentle probing brought out stories of clients rescued from difficult situations, others steered away from bad choices, and a few that seek his counsel on issues far beyond his practice area. I bet his clients don’t describe him as “just like lots of other lawyers.”
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Bruce’s Guide to Navigating Marketing Terminology

Confusion with marketing terminology

As with many fields, Marketing has its own language. A firm’s Brand and Positioning are not specific to Marketing, so Marketing works best when embraced across the entire firm. Specialized lingo doesn’t help. Confusion fuels concerns by non-marketers that Marketing is mostly smoke and mirrors. Below is a list of common marketing terms and what they mean for typical professional services firms.

I’ve included links to some alternative definitions at the bottom.

Your BRAND is what other people say and how they feel about your firm. It’s intangible, so it can be hard to define in concrete terms. Other people define your brand; you cannot create or control your brand.

Other people define your brand; you cannot create or control your brand. #marketing #branding Click To Tweet

BRANDING is traditionally defined as the expression of your brand using various marketing tools: logo, color palette, web site, social media, etc. I avoid the term BRANDING because it suggests you control your brand. Agencies prefer the term BRANDING because it implies you can control your brand, often using Branding as a noun to refer to everything related to a firm’s brand and positioning.

BRAND EQUITY is the power of your brand to persuade people. “Companies can create brand equity for their products by making them memorable, easily recognizable and superior in quality and reliability.” (Investopedia)

POSITIONING is what you say to others about your firm. Positioning can influence your brand, but does not define it. Positioning has greater impact when consistent with your brand. When Positioning is inconsistent with your brand you come off as salesy and self-serving. Positioning is most valuable when it describes how your firm is better than other options, not merely different.

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Pressure on Fees and Profits Got You Down?

Profits

I’m hearing more tales of woe where fees and profits are getting squeezed. A lot of those feeling the squeeze are professional services firm leaders who historically charged above market rates.

When clients buy on price, they see a commodity. That should be a wake-up call.

Your firm may be better than competitors, but it’s getting hard to tell the work products apart. A lot—and I mean a lot—of legal, accounting, construction, engineering, and consulting tasks are de facto commodities or headed that way. LegalZoom isn’t going away, and yet I’m not calling you a commodity.

This creates a puzzling contradiction. Most firms have a cadre of fiercely loyal clients who don’t feel they’re buying a commodity. How can the root task be a commodity, but not the overall service? It’s a head-scratcher until you accept that the primary source of value is no longer the root task. Everyone is pretty good at those. The focus of your marketing should be on the real source of your firm’s value. Let’s call that your secret sauce.

There greater the level of technical expertise, the harder it is to recognize the secret sauce.

Let me help you unlock your secret sauce.

Escape the Trap

If the first question a prospect asks is, “What are your rates?” and you answer, you’ve fallen into a trap. Allowing prospects to filter by rates has you playing a commodity.

Getting out of this trap requires changing the conversation with prospects. This sounds like salesmanship, but Marketing actually plays a bigger and more important role. Marketing sets the table and defines the strategy using your secret sauce.

You become a valuable advisor to your clients by combining expertise with an understanding of their broader needs. It’s not What you do so much as How you do it that clients value. In all likelihood, you’re already doing this for your best clients. This is your secret sauce. It’s “secret” because you’re not aware of how much of your value is involved.

The point of this article is for you to get paid for it.

When clients buy on price, they see a commodity. Click To Tweet

Price in a Different Context

Eventually, you do have to talk about rates and fees. However, talking about price after the client decides you are their best option is a very different conversation. The client compares your cost against the expected value rather than against other providers. It goes without saying that inferior options are worth less.

The conversation won’t happen the way you want—it can’t happen—unless you come out of the gate demonstrating why you are a better choice. Yes, you have to be able to perform the root task, and be good at it. If you’re a CPA, you’d better be able to prepare tax returns or conduct an audit. These are table stakes: if you can’t do them, you’ll lose. But, doing these basic tasks “better” won’t win you the business.

Focus on the Only Vote that Counts

At the end of the day only one vote counts: the prospect’s. When they see options as equal, they shop on price. If you can’t articulate why you are a better choice, don’t expect your prospects to figure it out.

Building marketing around root tasks is a traditional approach that gets you paid like everyone else. Alternatively, you can build your marketing and business development around your secret sauce–why your best clients select your firm.

The real value of getting this right isn’t winning the business; it’s winning the business at rates and fees that reflect your true contribution to your client’s business. 

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Clients Need to Know Why Your Firm Is Better, Not Different

Marketing strategy brings the world into focus

The vibrant life of Summer may be in full swing, but some things never change. I’ve noticed many professionals at the top of their game either hold unrealistic expectations for marketing strategy, or see it as little more than smoke and mirrors, and marketing consultants as charlatans selling snake oil.

“Helping” professional services firms do marketing is all the rage. Most of the “advice” depends on selling shiny objects to non-marketer professionals searching for something that works. Listen and you’ll hear a broken record selling a one-size-fits-all solution wherever they go.

If it were that easy, marketing consultants would have a better reputation. But they don’t.

Ah, the Irony

Many of these marketers can do excellent work. The trouble is they focus on tactics without a strategic context. That’s fancy consultant-speak for saying they see marketing activities as an end in themselves rather than a means of furthering the purpose and objectives of the client’s firm. I don’t know whether they are rushing to “results,” or simply can’t see the bigger picture. They drive programs and activities rather than understanding the business goals of each firm needed to create enduring success.

A case in point. A technical advisor I know raved about her firm’s new website and the web marketing consultant that put it together. 17 jargon-filled bullet points detailed the firm’s practice areas and expertise and highlighted the uniqueness of each professional.

Alas, nowhere among the color-balanced eye-candy did the site effectively convey the essential reasons why someone would hire this firm over several similar firms.

“A Switch Flipped”

A few weeks into our project, she excitedly announced how “a switch flipped” in her thinking. Suddenly, she saw marketing strategy through a very different lens. The Four Hard Truths came into focus.

Her firm's marketing strategy is now better marketing, not more marketing. Click To Tweet

The goal of her firm’s marketing strategy is no longer to highlight how different they are. She now sees marketing as a tool for helping potential clients see her firm as a better choice for her target clients’ specific needs. Consequently, her goal is now better marketing rather than more marketing. She can’t do that with page full of bullets.

Flipping Your Switch

If you don’t know why your clients think you are better, then that’s where you start. Your best clients DO think you’re better. Just don’t fool yourself into thinking they think you’re better for the same reasons you think you’re better. If you fall into that trap, you’ll join legions of professionals marketing to themselves.

The good news is your best clients want to help you. Even after the better part of a decade I never stop being amazed at how much my clients’ best clients want to help them succeed. Helping these Fans understand your secret sauce puts into their hands tools that turn them into much more powerful Advocates who actually drive business to you. For more on this effect, read  How to Architect Powerful Recommendations.

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A Contrarian View of Innovation

Innovation from unexpected sources

Here in Silicon Valley, it’s downright heretical to not think innovation and technology are intrinsically linked. But that’s simply not true. Don’t take it from me, this idea is core to works as diverse as those of Peter Drucker, the father of modern management, and Col. John Boyd, architect of the US’s stunningly effective “left hook” strategy during the first Gulf War and developer of the OODA Loop.

So what drives innovation if it’s not new technology? A deep understanding of the forces at work and their interactions. Technology is just one of many ways for improving processes to produce greater value.

Confidence drives intention

The most powerful innovation comes from intention. Intention comes from focus. Focus from confidence. Confidence comes from a deep understanding of how various forces or constituencies interact.

This brings me to a bit of Drucker wisdom I use in my day-to-day work with clients: “A business has only two functions: marketing and innovation.”

To not be innovative is to become undistinguished. That is, a commodity. Click To Tweet

To be innovative in the way Drucker describes, firms must know their purpose and how they bring value to customers and employees. The marketing half of the equation can be innovative in its own right. Great marketing is much more than pretty words that describe your work. Great marketing is a mindset focused on clearly distinguishing your firm as the best choice for a specific set of clients. Nearly always, the innovative aspect is not in describing what you do, but rather bringing to life the way in which you do it. Most professional services “marketing” is far too superficial to have the kind of impact that it could–and should.Understanding why your best clients think you are better than all other options allows you to put value as seen by your clients at the center of how you talk to your market. This is the nexus of marketing and innovation.

Avoiding the slippery slope to commoditization

extraordinaryPut another way, to not be innovative is to become undistinguished. That is, a commodity. Commodities may be acceptable choices, but they’re not the best choice. The best choice wins the best clients and projects while charging higher fees. It’s why a handful of firms thrive while everyone else survives.

If your clients mention your fees (don’t let terms like “value” fool you into thinking they aren’t talking about what you charge), your services are on the slippery slope to commoditization. You inadvertently grease the skids further by focusing on physical deliverables that are difficult to differentiate (contracts, financial plans, environmental reports, etc.) rather than the intangibles that actually set you apart in the eyes of your clients. This is crowded dead end as most of your competitors fall into the same trap. Innovation requires new thinking and acting.

Where your competitors see frustration, I see opportunities to build a better business.

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Examples of Real Differentiation with Impact, Not Platitudes

Differentiation makes you stand out

“Many companies get so distracted by their search for the wow factor that they take their eye off the ball,” writes Joe Calloway in his best-selling book, Becoming a Category of One . That “ball” is the foundational elements of your business that create your differentiation.

Calloway’s prescription is appealing, but ultimately falls short of the mark. The type of differentiation Calloway prescribes is too easily duplicated to provide lasting results. Calloway makes several important points…

“In the quest for some unique, jaw-dropping factor that will lift them above the competition… many sellers wind up overlooking the basics. Do what you do, extremely well, every single time, with every customer. Relentless, attention-getting, differentiating consistency of performance.”

“Companies that do what they do extremely well every time, with every customer, are exceptionally rare.”

“The great challenge for any company of much size is to deliver quality and service consistently. And therein lies your potential differentiator – consistency.”

Finally, Calloway’s focus leads him astray.
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Stop Promoting Your Firm. Move to Differentiation.

woman promoting her business with megaphone
While I’m proud to be a consultant, I balk at being called a marketing consultant. For most people the label “marketing consultant” simply conjures up the wrong image. Far too much marketing is focused on shouting rather than thinking. It’s the difference between promotion and differentiation.

For many consultants, attorneys and other professionals, spending a few more dollars isn’t going to break the bank. What kills them is the emotional drain of “selling” all the time. That’s the cost they want to avoid. They’re lured into pouring more money into “marketing” because it’s–relatively speaking–painless. In the end, passive marketing in a relationship-centric business can’t deliver the desired results. The “marketing consultant” image I abhor tells them it’s a problem of execution, and doing still more will bring the results they seek.

It’s not a problem of execution

The problem lies with the very perception of marketing, not with the activities or quality of execution. Most marketing is little more than promotion. It’s shouting louder than the other guy, trying to be heard over competitors saying the same things. Promotional messages tend to be broad and non-specific (e.g. “We do more stuff” or “We are a better value” or “We have more experience”). Read more »

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The Surprising Contribution of Marketing to Firm Operations

Marketing's surprising contribution to operations

The actual reasons customers select a firm is the essence of what distinguishes that firm and makes it unique in the eyes of its best customers. A company’s operational and support functions–delivery, development, manufacturing, finance, HR, sales–each have a role in delivering an consistently excellent customer experience.

As with my popular post, Marketing’s Surprising Impact on HR, the point here is not that marketing offers a silver bullet. A well-founded marketing strategy is foundational to a great business, and makes important contributions far beyond the confines of the traditional “marketing” function.

Here are three quick examples of how marketing supports better operations:

1. Delight your customers by consistently delivering what they expect

This sounds rather simplistic, but my interviews with a firm’s customers always uncover value–often important value–that the firm wasn’t aware of. Not missing value, but rather value the firm delivers without being fully aware of I call this the firm’s “secret sauce” and generally involves the “how” more than the “what.” If something you do is an important part of why your firm gets selected, you want to ensure whatever it is get delivered to every customer every time.A firm's 'secret sauce' generally involves the 'how' more than the 'what.' Click To Tweet

2. Enlarge your company’s Business Development footprint

There’s endless talk about “everyone is a sales rep” and such. How well does that work out in practice? Typically, not so great. However, there are two proven ways to expand a company’s business development footprint, and neither requires sales training. (Familiarity with the sales process does add gas to the fire.)

  • Make sure everyone knows the company’s story of how it creates value. That is, why your best customers select your firm, and how your firm’s products or services impact the customer’s overall business, not just the immediate need it addresses.
  • Teach the difference between strategic and opportunistic business. You accept opportunistic business when it doesn’t interfere with strategic business. Most of us have stories from early in our careers when the boss said we should all be identifying sales opportunities. We dutifully make some introductions, only to have… nothing happen. After the process repeats a couple of times, people stop trying.

Now, consider an alternative scenario. If an employee uncovers a strategic opportunity, they have the knowledge and vocabulary to get the boss’s attention.

3. Optimize support resources by pushing decision making down

Whether it’s triaging resources at times of peak demand or going the extra mile in serving a strategic customer, well-placed discretion can have a giant impact on the customer experience.

Often, the required responses must be made in-the-moment, so they simply can’t be managed from above. With the two points in #2 above about expanding your business development footprint are in place, those in the trenches are well-equipped to make sure opportunistic customers get the best available service while the stops are always pulled out for strategic customers. Isn’t that how you want your employees to act?

If you’re a CEO or have broad responsibilities within your firm, be sure to check out Marketing’s Surprising Impact on HR.

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Building a Service Factory: Interview with Sean Murphy

Sean MurphyI had a chance to interview the always interesting Sean Murphy of SKMurphy on the concept of a “Service Factory.” We edited our conversation to 20 minutes. An edited transcript follows.

Bruce: Can you explain what you mean by the “factory in your service firm?”

Sean: To me, it’s the specialized set of tools that you bring to bear on a problem and typically this may be masked, at least in part, from the outside, even from your customers. In the theater it is the area behind the curtain or backstage.

Bruce: Say a little bit more about that in terms of are you talking about infrastructure? Are you talking about things that people are served with but they don’t really realize that it’s a special offering?

Sean: At a high level, it’s decomposing your business into what is in front of the customer and what else that you do that may not be in front of the customer.
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