I’ve spent a lot of time lately talking about how the cloud will fundamentally alter your relationship with your customers.
“Great,” is the typical response, “But what does that actually look like in real life?”
So – I did a webinar, recently, targeted to accounting firms. The goal was to fast-forward a few years. To talk about how three trends that are reshaping the way we interact with our customers will play out within the accounting industry specifically (and, more generally, across most professional services industries).
I liked the basics, and we’ll do more specifics over the next few months, but you can already see these trends alive and kicking in the market for professional services today. To understand them, we took a detailed look at three basic forces at work in this new cloud-based services economy:
- The Network Effect
- The Demand Economy
These are all interesting forces on their own, but their interaction – specifically how they are amplifying each other and re-shaping the market for professional services, is significant.
The Network Effect
This isn’t my phrase, it’s Bob Metcalfe’s (the guy who was instrumental in devising the protocol that the internet runs on). After much consideration and study of telephone networks, Metcalfe figured out that broad ranging networks that incorporate smaller networks can be extremely valuable to business. And that value is actually derived through developing the connections that can be created between people or devices. Ultimately, Metcalfe determined that the value of a network is worth the square of its connecting points – a number that, as contact points increase, grows exponentially.
So why do we care? We care because that same law, it turns out, can be applied to the value of your network. To the value of the network of people (and devices and applications) that your firm “connects” with. The more deeply your people (AND your data) are connected within the uber-network of the web, the more potential value you’ll see showing up on your virtual doorstep.
I argue that this rule ALONE is reason enough to shift all of your systems to the web. I see it all the time — firms that used to keep their data “locked up” in proprietary or on-premise applications are suddenly able to make faster and more informed decisions because BigTime does nothing more complicated than FREE UP their data! Suddenly, managers can connect that data (eg – who’s responsible for what/when; how much time is it supposed to take; how much time did it ACTUALLY take; etc) to a host of web-based BI and reporting tools. As a result, decisions take a quantum leap in terms of speed and accuracy.
But, the other two trends in the market amplify the network effect. In fact, they seem to be working together to deposit new revenue on your doorstep. Keep this idea in your pocket. We’ll look at that trend a few paragraphs from now.
The Demand Economy
Compare the number of times you’ve downloaded and “tried” an app on your phone to the number of times you’ve called the app manufacturer in order to get a demo first (describe what you’re looking for, ask the sales guy to verify your needs, get a quote, send a PO).
My guess is your answer is 100:0. That phenomena is at the core of the Demand Economy. This is not new to software. Think of some more traditional examples in which transactions are completed with minimal points of contact. The process of browsing in a bookstore, or pumping self-serve gas illuminate the point well.
In a bookstore (brick or online), if you don’t have a specific title in mind, you wander the aisles until — for whatever reason, something catches your eye. It would be very rare for you to be approached by a sales agent offering help.
The same can be said about self-serve fuel. When we pump our own gas, our interactions with a sales clerk are extremely limited, maybe even non-existent.
Looking for something more tech-focused? How about the ATM machine? At the time they were introduced, nobody thought that they would replace traditional bank tellers. In fact, they were just there to cover “non-banking hours.” But over time? They’ve gradually morphed into our primary banking interaction.
The value of the convenience of being able to bank anywhere and at any time rendered the traditional teller obsolete.
While the real world has provided a steady stream of these interactions, the internet has fundamentally changed the way we act as consumers. Not only have we come to expect this sort of low-touch purchasing experience, we crave it. We start every product search on Google. We solicit input from services like Yelp or Reddit or a thousand other recommendation sites. We click the “try now” button and get completely configured without ever talking to a sales person, even on systems which would have required a detailed RFP 5 or 10 years ago!
This type of low-touch interaction has permeated nearly all of our web activity. And, the web has infiltrated nearly every buying decision a consumer faces today. Ergo – even the accounting industry is being shoved toward low-touch “demand-centric” buying.
Just like the ATM’s of the physical world, these self-service purchases let us get what we want, probably even more, and on our terms, independently.
So, what does low-touch look like in the accounting industry today?
First, thanks to the Network Effect, it’s no longer an issue of your people working face-to-face with a customer. Today, your organization is represented by all of the applications that you bring to the table, including social media. That means, the more apps people and devices you have tied to your firm’s “network,” the higher the probability of potential clients finding you.
Value-based pricing is a direct response to that trend. Consumers need a clear way to purchase the thing they want (eg – the product they “value”) at a price they don’t need you to sit down with them and explain. Value pricing represents your firm’s quest to commoditize/simplify the things that you do and to present them to consumers clearly. They are services with a clear beginning and a clear end, and they are designed in such a way as to minimize inaccurate expectations. That’s a great independent goal, but the side benefit is that a consumer can now “sign up” for that value-based model without talking to you (via social media, review sites, third party sites and more).
Value based pricing is the buy-now button of the accounting industry. It lets customers know the exact time and cost parameters of a project right upfront, and it lets them make a single decision: buy/don’t buy.
Of course, to do this accurately, firms need to have very clear data that tells them what projects cost to produce. And, the systems that manage that data need to be able to adapt quickly. Managers need real-time access, etc. So – the Network Effect makes demand-based buying possible. Not on the web with all of your internal systems? Then not only are you making it harder to manage your firm, you’re missing out on genuine revenue opportunities today.
Of course there is a lot more happening in today’s demand economy. Take a look at the webinar for a brief look at Fiverr.com (one of my favorite potential game-changers in the industry, and another example of how a network-savvy firm can piggyback on the Network Effect to generate real revenues in the years to come).
The final trend that we discussed in the webinar was Co-opetition, a hybridized combination of cooperation and competition. It refers to the benefits that might be derived when competing organizations pool elements of their resources for a mutual benefit (a term that originally grew out of Game Theory).
A good example of this is the licensing of interfaces by Apple to Microsoft in which Microsoft uses Apple’s technology to build devices that are designed to compete with Apple. At first blush this might seem odd but, under closer scrutiny, you can see that, by doing this, Apple gets paid for its research and development and Microsoft is able to enter new market segments.
So how does that play out in the accounting world? How does partnering with the competition help your firm grow? There are two ways: sharing customers and sharing workers.
Sharing customers used to be complicated. You’d have to introduce your contact to a competitor, and that would open you up to all sorts of problems. But what if you could share a customer’s data with someone (eg – someone specializing in sales tax rules for a given territory, or someone with specialized audit expertise), but you could control the deliverables yourself? Even better, what if you could share that limited information with a firm that specializes in those deliverables? A firm, for example, that had a strong value-based approach to “sales tax filings in Texas” or “DCAA Audit Prep.” The broader your network, the more likely you are to find that type of relationship. In addition, the more directly you embrace the Demand Market (eg – the more clearly defined your “buy button” is), the more likely that type of relationship is to seek out your firm.
How about virtual workers?
During the busiest times of the year, your associates are probably working to their fullest capacity. So what happens if your workload outstrips your capacity? When this happens, you’re confronted with the question of adding full time labor to solve short term issues.
If your firm is operating on the cloud, you’ll soon be able to have contract workers completing tasks remotely. But if all of your firm’s necessary systems aren’t on-line, you’ve created a series of personal interactions that must be fulfilled in order to bring those people on board.
In fact, firms are beginning to ask BigTime about how they can push excess work to other accounting firms that have free short-term capacity. In other words, “how can I just click this payroll project out to another firm on BigTime’s network and have them file the docs so I can review it?”
Granted, the notion of sharing virtual clients is closer to viability than virtual employees right now (in the long run, it will require less technology to bring on-line), but both are on the horizon.
One Specific Example: Lacerte & BigTime
BigTime currently handles work from thousands of accountants, which equates to usage data on hundreds of thousands of tax returns. Personal and corporate returns are being updated in real time, and are constantly shifting from one workflow status to the next (and, sometimes, backward again). All of that workflow data is flowing from Lacerte into BigTime and up to the cloud so that it can all be managed on BigTime’s workflow dashboards.
This year, for the first time, all of this has been done independent of Intuit’s servers. As a result, for the first time, BigTime has had an audit log.
In other words, our customers get to see where tax engagements were in the workflow when hours were logged against each of them. They get to see how long every return waited in a given stage with no work logged against it, and they get all that information for free — just because we linked their tax prep system to BigTime (their cloud-based workflow system).
More importantly, the logs tracked how long each return stayed in each status code. So, for the first time, a firm can look at its tax season and, basically, see a box score that shows how the entire firm performed as returns went through the process.
With this kind of data, firms can figure out where their money is made and lost and where calendar time might be made up and lost. So – they can make smarter decisions next tax season. Maybe returns sit in queue waiting for “partner review” for days or weeks — and maybe that backlog means partners have way too much to do “all at once” (and at the worst possible time). Given that information, firms can game out next season (what if we incentivise clients to get to that stage earlier? what if we pushed that stage later in the process? what if we could clear out the other things on a partner’s calendar for that 3-4 weeks so that they recapture “lost” time?).
That means — next tax season — the firm across the street could be smarter and more efficient than you are, even though both of you use the same set of tools (Lacerte and the customer’s tax data). While you’re counting CPE credits on both hands this summer, someone in your area is figuring out what it would take to offer a fixed-fee price on a corporate return, and you’re going to think “that’s crazy, how could they possibly know how long it would take.” Then – they’re going to figure out how to offer a guaranteed turnaround time. Then, once those things are in place, they’re going to innovate again. And again. And again. And they can make that happen because they had the tools in place THIS tax season to understand how to make that “buy button” work!
That firm should be your firm. It could be. You just need to get your systems on the cloud, ride these three trends and watch the market bend toward you.
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