Fuller Insights

Adapt or die. Or, as Darwin famously didn’t phrase it [1]:

“It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able to adapt to and to adjust best to the changing environment in which it finds itself.”

A quick find-and-replace of “species” with “business” provides a concise strategic playbook for almost any business. Easier said than done you say? Correct. Many traditional businesses labour under the weight of legacy systems and processes that are in urgent need of an update in response to a changing environment. Within professional services firms, innovation and digital transformation are further complicated by their unique business culture and legal structure.

What does innovation mean?

Innovation has certainly earned its buzzword status and receives a lot of attention in business media.

Merriam-Webster defines innovation as:

1: a new idea, method, or device
2: the introduction of something new

Innovation implies newness and newness implies change and investment. It is therefore natural and prudent for business leaders to understand the forces driving innovation and how to respond within their own organizations. In many industries, including professional services, technology advances and mature SaaS products have led to the emergence of unique and disruptive business models. However, for most businesses, innovation is best expressed as continuous improvement in the name of competitiveness, business continuity and resiliency.

Innovation needs a vision

Innovation requires a clearly defined framework that articulates the reason to innovate. Business leaders need to breathe life into this vision by fostering:

• Overall buy-in and commitment to the vision and strategy, particularly from senior leadership.
• A genuine commitment to invest both time and dollars, with a longer-term view on the return on investment.
• A culture that is open to change and somewhat curious. Unlike the proverbial cat, in business, curiosity fuels innovation.
• A committed and disciplined approach to the change management that digital transformation requires.

Hurdles for professional services firms

The culture and legal structure of many professional services [2] firms often do not provide fertile ground for innovation to germinate.

Cultural drag

Certain cultural traits within professional services firms impose a drag on innovation (think about the myriad of jokes about accountants and lawyers). While not an exhaustive list, the following are familiar cultural traits of professional services firms that run counter to the spirit of innovation:

The nature of professionals – Professionals, by nature, tend to be risk averse. It is this superpower that makes them good advisors to their clients on managing or minimizing business risk. On the flip side, professional services organizations tend to be change resistant.

Professionals are not trained in innovation or technology – This lack makes the language of innovation and technology seem foreign within a professional services firm. Moreover, traditional professional training models are grounded in precedent and habituation. The mantra “see one, do one, teach one,” encourages maintaining the operational status quo with only very gradual innovation, as needed. If you live by the adage “don’t fix what ain’t broke,” it is fair to assume you’ll only fix what you absolutely recognize as broken.

The billable hour – This operating model is deeply embedded in the DNA of professional services. It is not only the lifeblood of operations but also the basis on which professional performance is measured and rewarded. While it has served the industry well for decades, it does not tend to promote innovation. The model optimizes for revenue, not efficiency. In fact, innovative efficiencies that reduce billable hours will get little love from professionals looking to maximize billable hours.

Legal structure drag

Legal structure matters. Many professional services firms are structured as partnerships. Partnerships often exhibit and reward several management and operating practices and behaviours that do not prioritize innovation.

Everyone is a boss – Partners are the equivalent of the C-Suite in a corporate structure and, in some firms, effectively act as a collection of CEOs. These management structures tend to lead to cumbersome decision-making processes with resolution mechanisms that give greater weight to partnership democracy than to a unified vision and strategy.

It’s my practice – The reference professionals make to “my practice” or “book of business” points to an endemic tension between the partner’s personal brand and clients, and the firm’s brand and clients. Compensation models often reward partners based on book of business performance over other firm objectives.

Reactive management – Partners are passionate about their professional work and generally prioritize client service ahead of firm operations. For the professional firm suffering from the shoemaker’s-son-goes-barefoot syndrome, organizational change is often driven by necessity (read: pain points to be solved) rather than a longer term strategy. Without a clear vision, there is less appetite for innovation once a pain point is removed.

Keep your hands out of my pocket – Investment comes directly out of partners’ pockets. The decision to reinvest distributions into the partnership is ultimately the choice of each partner. Differing ages and income levels of partners can lead to varied appetites for investment.

What do we think at Fuller Digital?

We’ve embarked on our own digital journey and have assisted our professional services clients with their digital transformation. Along the way, we’ve observed that successful digital transformation is directly correlated to an organization’s ability to absorb change. Know your culture! You can nurture a culture of innovation, but you cannot innovate beyond your cultural maturity.

Digital transformation is the most vocal expression of current business innovation. Within professional services firms, senior leadership must fully understand and respect the culture and structure of the firm and yet be willing to prod and challenge partners to create new spaces for innovation. For innovation to thrive, permission to innovate and the reasons for innovating must be constantly reinforced and understood.

Fuller Digital Maturity Index

Fuller Digital helps small and mid-sized businesses transition from thinking about digital to being digital. Our Digital Maturity Index measures a business’ digital maturity based on six key drivers – vision, strategy, culture, technology, operations and measurement. The first three elements address the strategic aspects of its digital health while the latter three focus on tactical and operational functions.

There are no magic bullets for undergoing a digital transformation. It just needs a willingness to sincerely square up to the challenges, ask the hard questions and do the work. Together.

 

About Fuller Digital

Fuller Digital helps businesses design, navigate and travel the journey from thinking about digital to being digital. We are part of Fuller Landau LLP, an accounting, tax and advisory firm with a team of over 125 people. Our clients are leaders of private businesses, high net worth families and the advisors who serve them. Work together with people excited by your goals and eager to address your unique business needs. You’ll get straightforward advice and proactive solutions from a team whose professional commitment is also personal.

About the authors

Ohran Gobrin CPA, CA, CBV, is the COO and Valuations Partner of Fuller Landau and leader of our Fuller Digital team. He can be reached at 416-645-6521 or ogobrin@fullerllp.com.

Dave Aeri is the CTO/CIO of Fuller Digital and head of technology at Fuller Landau. He can be reached at 416-645-6533 or daeri@fullerllp.com.

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[ps2id id=’ref-1′ target=”/] [1] This quote was first misattributed to Charles Darwin in a speech delivered in 1963 by a Louisiana State University business professor, Leon C. Megginson at the convention of the Southwestern Social Science Association. (https://quoteinvestigator.com/2014/05/04/adapt/).

[ps2id id=’ref-2′ target=”/] [2] While we use “professional services” in its broadest sense, many of the observations will be particularly recognizable in the accounting and legal professions.