The Path Forward
Question: How Do You Identify Service Areas for New Firms?
There are a lot of really smart businesses and investors that chase technology. This includes things like robotics, AI, Web3, and cryptocurrency. There is money that can and will be made in these firms.
For the rest of us, we are still going to hire an accountant, financial planner, lawyer, and other professional service providers when the need and time come for us to do so. These professionals may augment and perfect their services with technology and, in some cases, the manner that the services are delivered may be completely replaced using technology. This allows us to unlock new opportunities in existing industries. We do not need to chase the newest technology.
There is a significant opportunity to bring existing industries up to date with current technologies and practices. We believe this needs to happen before widespread adoption of truly disruptive technologies is even possible. By and large, the compliance, tax, and legal industries are not even current on existing technologies right now.
We look for industries that have not adapted to or have failed to keep up with changes in current technology or business and other practices. We look for industries where our firms can better serve clients by doing so more efficiently and cost-effectively by adopting current technologies and practices. These are service areas where we can innovate core services, improve executional excellence in delivering these services, and deepening their customer experience capabilities to establish a strong leadership position in the industry.
Question: Why Focus on Innovation, But Not on Real Innovation?
Established firms that provide compliance, tax and legal services can and often do continue to operate using outdated technology and business practices.
This often results from (1) the complexity of the work they perform and barriers to entry for competitors and/or (2) restrictive regulatory or licensing requirements. Both of these result in whole industries that do not have to compete as businesses do in most other industries. These industries are inefficient.
Firms in this type of industry may benefit from things staying the same. The status quo can mean steady profits for these firms. This benefit comes at the cost of their clients.
We believe innovation that brings these industries up to existing standards is where we can add value to these industries and to the clients who need the services provided by these industries. This is the type of innovation that we focus on. It includes real digital transformation, automation of processes, building ecosystems around core services, and teasing out breakout opportunities for services that can function as narrowly-focused stand-alone businesses. This innovation comes from identifying and understanding the needs and wants of valued customers and developing the right value propositions to serve them.
Question: How Does Multi-Disciplinary Practice Fit Into This?
Modern technologies and business practices often cannot be implemented in these industries as they cross lines between different professional services.
The regulatory rules for the compliance, tax, and legal industries are complex. Each has its own patchwork of laws and regulations. These laws and regulations make it difficult for firms to provide cross-discipline services.
These regulatory rules are another reason why we believe that these industries are not ready and cannot adopt truly disruptive technology. One has to first evolve the existing business models to provide cross-discipline services that comply with existing rules. Only then can the industries catch up to current technologies and practices. And only after that can truly disruptive technologies be a real factor.
We are just now starting to see some of these business models being developed. We are also starting to see hints that these industries are ready to adopt current technologies and practices. Few players in these industries have taken this next step. This is our focus area and where we hope to add value.