Digital Transformation in Accounting: Overcoming the dependence on traditional assets
By Jenna Myers
The rate of innovation and technological disruption is unlikely to slow down anytime soon. The ability to keep pace with this barrage of changes has become an organizational game of survival of the fittest, forcing many to choose between adapting who they are and preserving the foundation they’ve built. The accounting profession is one built on legacy assets, working both to its advantage and disadvantage in this time of mass disruption. The inherent value added by accounting firms has long been derived from the technical skills they leverage, resulting in a base of loyal clients. Problematically, new technologies have introduced new capabilities to the profession and to clients, rendering obsolete the legacy assets upon which a historical advantage has been built. Due to the magnitude of digital disruption, technical accounting knowledge is no longer a source of differentiated value. New technology has the potential to commoditize core services and reduce compliance-based costs, requiring a radical transformation of the role of accounting firms. Digital’s promise of optimized business processes and competitive advantage is undoubtedly appealing, but many firms have failed to realize this value. A digital transformation encompasses far more than an investment in the latest technology to market, but this way of thinking seems to characterize the approach most often taken. Going digital involves an end-to-end transformation of the core business to develop the capabilities necessary for leveraging new technology. Although this is no secret, many accounting firms still struggle to produce the internal changes necessary to advance their digital transformation efforts externally. The question is, why? As the future of the accounting profession hinges on the ability of firms to successfully embrace the benefits of new technology, it is important to understand what steps must be taken to successfully transform from the inside out. By examining the 5 reasons why organizational change programs most often fail, we can identify key strategies for effectively managing a digital transformation in accounting.
Lack of Vision and Shared Sense of Purpose that People Can Associate With
The rapid infiltration of technology within the accounting industry has triggered a sense of urgency as competition increases. As an industry that has long operated with a “this is the way things have always been done” mindset, accounting firms face both cultural and technical barriers to digital transformation. The disruption to the industry not only requires a need for digital enablement, but a complete cultural shift, forcing firms to reevaluate their identities entirely. By focusing only on changing business models and investing in technology, assuming that people and culture will follow, transformation efforts will fail. Before deciding on a solution for an ill-defined problem, leadership needs to create a shared sense of purpose that will resonate with employees. Aside from the business benefits, how will a digital transformation help employees improve client relationships, leverage existing skills, and develop new value-adding ones? By discussing and articulating the value of digitally transforming with those responsible for changing, an infrastructure to support new technologies and ways of working can be established. Only once this shared sense of purpose has been created through engagement and collaboration, can investments in digital be made.
Principals Have Not Been Effectively Enabled and Activated to Champion the Change
Simply investing in and implementing new digital technologies does not qualify as a digital transformation. For most firms, a digital transformation will entail radical changes to ways of working that their employees will often struggle with. If direct supervisors are not visibly leading by example and championing the change, the potential for digital to be adopted will drastically decline. Any previous alignment on a shared sense of purpose will quickly be lost if behavior change does not follow post-implementation. By understanding that any organizational-level transformation will involve small failures, setbacks should be accepted and used to reinforce the direction of the initiative. Instead of using these instances as evidence of why investing in digital was a mistake, own them graciously and use them as learning opportunities to educate employees. The success of a firm’s digital transformation will depend on its ability to fail fast, and learn even faster.
Focus on “How-To” Rather Than “Want-To”
A digital transformation results in a radical shift from compliance-based work to advisory services, reshaping the core operating function of the firm entirely. The introduction of new technology and the need for new value-added services requires significant changes to ways of working for employees. By focusing training efforts on how to change instead of why, employees will display resistance and refuse to adopt new tools and processes. Employees need to be put at the forefront of any digital transformation effort, as they are the ones experiencing changes at the greatest scale. Given today’s turbulent economic climate, the “why” driving change stems from the tremendous impact firms can make in supporting clients’ businesses. By utilizing new technology and taking on more advisory roles, firms are afforded the capacity to safeguard client interests in even the toughest of times.
Lack of Skills Development Training that Caters to the Workforce
As digital tools continue to streamline technical capabilities, the need for accountants to maintain relevance through the development of new skills will only continue to grow. Unfortunately, this phase of digital transformation initiatives is often bypassed amidst the chaos of implementing new technology, leaving employees devoid of the key skills for success. These success factors are necessary for meeting the new demands of clients that have resulted from new technology. Investing in new technology is not the solution, but merely a launching pad for realizing new opportunities. Accountants are expected to shift into the roles of data analysts and business consultants, so the mechanisms to prepare for this change must be put in place. Leadership needs to assess their current workforce to understand where skill gaps need to be filled and how to do so given existing learning capabilities. Digital transformation should empower employees to take advantage of new learning opportunities and to break out of age old structures. By strategically planning the employee change experience, leaders will see a greater return on their investment. It’s a win-win.
Your People Are Not Change-Ready
Because accounting is a traditional profession founded on long-established systems and processes, change can be a hard pill to swallow. The value of accounting remains unchallenged, but to stay relevant, there are unavoidable updates to be made. It’s easy to get overwhelmed by the multitude of areas that could be improved, so best to start with the most important one. Before taking on an organization-wide digital transformation, ask yourself - how change-ready is your organization? Digitally transforming is crucial to survival in the face of constant disruption, but this is just one of many monumental changes to come. A change-ready organization is equipped with the skills and capabilities necessary for evolving with its environment, so disruption can be foreseen - not fatal.
Jenna Myers is a Consultant at nepf, LLC and focuses on helping organizations transform.