Creating a Competitive Advantage Through Innovation
By Joseph A. Tarasco
Firms continue to experience significant competition in traditional commodity-driven services; yet, few are attacking the marketplace with the new and innovative services necessary to survive. In fact, many accounting firms have been providing the same services to the same geographic areas for years— resulting in very little growth. As competition intensifies, traditional compliance services are quickly commoditizing, causing firms to primarily compete on fees. This is taking its toll on profitability and, therefore, forcing firms to come up with new survival strategies such as joining forces with other firms (e.g., through an mergers and acquisitions [M&A]). Because traditional local practices are then forced to compete with much larger firms, many need to rethink their service model and how they position themselves in the marketplace.
Service Offering Strategies
One way for a firm to stand out from the competition is to develop solutions-oriented specialty services in growing niches and become noted experts in those niches. Another way for firms to stand out is to bundle existing services and market them under one label (i.e., family office practice, litigation support, or personal financial business management), or promote bundled solutions to clients rather than present clients with a long list of individual services.
Here are some examples of new and innovative services that firms can provide to their clients:
- LGBT services. These services are for same-sex marriage couples in the areas of tax compliance or financial estate planning, customized to deal with complex state-by-state laws. Currently, 25 states allow same-sex couples to file a joint state income tax return and this number is growing. These services are excellent examples of bundling new services with a firm’s existing technical expertise and addressing the needs of a new and growing marketplace.
- Divorce advisory services. These services include having a certified divorce financial analyst on staff to assist in pre-divorce planning, needs analysis, and goal-setting planning and implementation. According to Jennifer Baker, Psy. D., of the Forest Institute of Professional Psychology, 50% of first marriages, 67% of second marriages, and 74% of third marriages end in divorce. Divorce attorneys can be a significant referral source for these clients.
- Risk advisory services. These services provide information technology assurance and compliance services in areas, including Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls and a Service Organization, Service Organization Control (SOC) audits, and HIPPA/HITECH compliance.
- Medical marijuana business owner services. These services address a newly created marketplace with new issues and problems (e.g., best practices for proper compliance in areas of taxation and financial regulations for city, county, state, and federal government). They include consulting on entity selection issues depending on state law and interpretation and IRS Code Section 280E (i.e., expenditures in connection with the sale of federal illegal drugs).
- Economic claims and disaster recovery services. These services target individuals and businesses, including monitoring and oversight services to governmental entities and agencies that are required to show accountability for relief or compensation funds provided by the federal government or the private sector.
- Outsourced corporate development services. These services range from researching and identifying M&A transactions for clients to closing the acquisition.
- Comprehensive workforce management services. These services include employee assessments, human resources management, benefits, and insurance.
Suggestions for Gathering Innovative Ideas
Where does innovation come from? Innovation starts with ideas from partners, staff, clients, or referral sources (e.g., attorneys, bankers, or insurance professionals). Taking these ideas from planning to implementation requires several steps, including: research; design; marketing; and delivering the final product.
Suggested ways for gathering new and innovative service ideas include the following:
- Review competitors’ brochures describing their services and specializations;
- Discuss with bankers and attorneys which special services they believe are needed by businesses in your area;
- Review business newsletters, trade periodicals, and chambers of commerce publications for business growth trends and industry problems;
- Solicit ideas from clients and non-clients through surveys or focused meetings;
- Engage an outside marketing consultant to perform a market research study; and
- Request that partners and staff provide suggestions and perform research.
When firms offer new services to clients, they increase their exposure to a broader base of prospective clients and referrals, which can expand their network, thus leading to additional growth in traditional service areas. One way for a firm to expand its services is to merge with or acquire a company to combine/replace products to answer the needs in the marketplace.
There is a fundamental shift in the playing field as marketplace needs and demands change and consolidation reshapes the landscape. It is time to play the game to win. Develop a contemporary marketing strategy that targets segments in the marketplace that are underserved, but require value-added services.
While the mainstream accounting firms may be slow to adapt, there are firms around the country aggressively carving out opportunities for new kinds of engagements that the marketplace is ready to embrace. In focusing on nontraditional examples, this article does not set out to diminish the need and importance of traditional services, but rather to add to firm’s service offerings and to complement and enhance existing services.
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