Let’s explore what could be slowing down innovation and progress in accounting software. (Said none ever - until now!)
Humans are habitual creatures and as such we find change harder than maintaining the status quo. We are inertia producing machines. If you look around you, what you are doing right now, what you are about to do, what you did on the weekend, this is often driven by habits or societal norms that you play along with.
Even basic actions like eating, you often eat the same thing out of convenience because it’s easier and one less decision to make in a world of never ending choice and decision fatigue. This isn’t a bad thing however it’s important to note that we are constantly creating inertia and the accounting software world is no different.
In an amusingly titled article ”Users don’t hate change. They hate you.” Christina Wodtke talks about change and that if we hated change, Silicon Valley and all it’s successes wouldn’t exist. Most of what comes from “The Valley” is change, either change by variance to something existing or change via something entirely new. My favourite quote from that article is:
Users don’t hate change. Users hate change that doesn’t make their life better, but makes them have to relearn everything they knew.
While running Product at Saasu I often thought about this quote. The new feature we were building, was it making users lives easier? Did it change existing user behaviour? Did the updating of a feature warrant the change? The hardest decision to get the team all across was whether we should implement a user facing change as a step towards the greater goal and if that was something we were willing to wear temporary pain for.
I believe altering user behaviour plays a large role in why Windows 8 was such a controversial change and why Windows 10 brings back a lot of pre-Windows 8 logic. For example users had the start menu in the Desktop environment since Windows 95, 17 years of inertia building is always going to be hard to break. And if you do break it there better be a 10x easier way of doing things that is intuitive for the end user.
Two examples of inertia building tools we use as humans are muscle memory and recognition vs. recall. I call them inertia building tools however you could easily also look at these as efficiency build.
Muscle memory is why you often can’t remember your PIN unless you are in front of the ATM or your password unless you are in front of a keyboard. Your memory is tied to your brain moving muscles, or imagining the movement of muscles. Remove the keyboard and bam, suddenly you have password forgetfulness.
Recognition vs. recall is the logic that it is far easier to recognise something than recall something. This explains why so many apps in similar categories end up with the same icons. A speech bubble icon? Messaging app. A tick icon? To-do app. A music note or play icon? Music or video app.
Change the icon of your app to something else, even just change the colour and you are going to throw people from recognition to recall mode. What’s the app called? Is this the app I use to tick off a task? Is this the app I use to track my run or bike ride?
What does this have to do with accounting software? Well it is software like any other, users develop recognition patterns and muscle memory. Move a menu item and if not communicated properly your customer support queue will light up. Even if you do communicate it, there will still be people who know about the change and complain. Not just to complain but because you did a bad thing. You were responsible for breaking part of the human efficiency system. Muscle memory has to be relearned and recognition now leads to an answer that isn’t correct any more. We don’t like our systems of human efficiency to be challenged.
But is it really users not wanting accounting software to change or is there something else going on that creates inertia and slows innovation in the accounting software world?
What plays a large role in slowing down innovation and change in accounting software is what I call Manufactured Inertia.
Inertia we know to be the term that explains in a physics sense that if “x” is going in a certain direction, it won’t change direction unless sufficient force is applied to it to force a change in direction. “X” has inertia. Accounting software has been going in a certain direction for a long time and a large reason it has been going in that direction is accountants, the users that traditionally were the primary users.
“Captain obvious over here” I hear you think. “It’s accounting software, of course accountants are the primary users and they will play a role in directing where it goes”. Great we agree then. Except, we just got finished talking about how humans don’t like change. So leaving the people who currently use the software to “play a role in where accounting software is going” will result in “hey you, don’t be breaking my human efficiency system”. More on that in a moment.
Let me put a different lens on this. For a moment look at accountants from an accounting software company perspective: accountants are their main sales and distribution channel.
Cue gasps. Enter Manufactured Inertia.
If you ran a company and 30%+ (as high as 60/70%) of your sales/customers came from a certain distribution channel, would you protect that channel? Double digit percentages of accounting software is distributed via the accounting partner channel, by distributed I mean many accounting software companies have a “sales” force in the form of accounting professionals that they don’t have to pay but bring them up to 60–70% of their sales.
inset an image here showing the cycle of manufactured inertia… or maybe just a merry go around — everyone laughing while the music plays and everything keeps spinning in a circle.
It makes sense right, it’s an efficient approach. Going out to each and every small business is hard, even then large numbers of those business owners are going to say “talk to my accountant” anyway. Get one accountant onboard and you could land hundreds, even thousands of customers as a result.
Looping back to “hey you, don’t be breaking my human efficiency systems or else”, what happens if you are the software company and want to change the workflow of accountants or, even worse you want to build a feature that augments part of what accounting professionals currently do? i.e. replace part of the work they currently do a bill clients for.
“Danger Will Robinson, danger.”
You are most likely going to shy away from that. That 30%+ distribution channel is going to be of higher strategic value than a feature that could put that distribution channel at risk. So you don’t pursue a new innovation or you pursue a variation that is more friendly to that valuable accountant network. It’s not wrong from a software business perspective but can you now see the Manufacture Inertia?
It is a little more ingrained than that, for accounting software companies the accountant network also serves as a buffer. If your accountant set you up on a certain software product, there is a chance that you will go back to your accountant to ask questions about how something works. That is one less email in the software companies support queue. This adds up when you have thousands of accountants in your network setting up thousands of companies, instead of those companies all coming to your support queue.
I know as I used to do this when I ran my accountant practice. I’d setup a business on product “x” and to offer good service I clearly stated “ask any questions”. Business owners like this, it’s easier to talk to someone that knows the product as well as your business situation than to a level 1 support agent.
Even when a customer did contact the software provider, the software provider needs to be careful when they answer customer questions as some answers could be bordering on answering questions the accountant would like to get paid to answer. Don’t step on the toes of the accountant network!
I think this will change. The risk will tip in the other direction, not building that innovative feature that starts changes accounting will become the risk. Even if that includes endangering part of your distribution network. For that to happen though there has to be someone that paves the way. A company that either is willing to take the risk or is a new entrant that has the capital to muscle their way to that tipping point.
“But Matthew” I hear you say, “why should I believe you that change is inevitable?”. Don’t believe me, let’s call in the professionals.
The Machines are… coming?
In a 2013 paper released by Carl Frey and Michael Osborne from University of Oxford entitled “The Future of Employment: How Susceptible Are Jobs To Computerisation” 702 occupations are ranked in terms of being computerisable. Accounting related work doesn’t fare well. For each occupation a value between 0 and 1 is applied, 0 meaning the job is not computerisable and 1 meaning “this job is likely to be computerisable in the next two decades”.
- 0.98 Bookkeeping, Accounting, and Auditing Clerks
- 0.97 Payroll and Timekeeping Clerks
- 0.95 Bill and Account Collectors
- 0.94 Accountants and Auditors
Bookkeeping, Accounting and Auditing Clerks (ranked at 0.98) are defined as perfoming duties such as:
Compute, classify, and record numerical data to keep financial records complete. Perform any combination of routine calculating, posting, and verifying duties to obtain primary financial data for use in maintaining accounting records. May also check the accuracy of figures, calculations, and postings pertaining to business transactions recorded by other workers.
Accountants and Auditors (ranked at 0.94) are defined as performing duties such as:
Examine, analyze, and interpret accounting records to prepare financial statements, give advice, or audit and evaluate statements prepared by others. Install or advise on systems of recording costs or other financial and budgetary data.
There are jobs in the research paper that aren’t accounting but are related which we are already seeing being replaced by computers. e.g. “Data Entry Keyers” with a ranking of 0.99. Another way to interpret 0.99 is “we’re sure this will be computerised but, lets leave a 1% buffer to allow for the person in 20 years that still wants to hoard receipts in a shoe box”.
The Oxford professors are not alone.
CEDA (Committee for Economic Development of Australia) released a report in June 2015 entitled Australia’s future workforce?. Like
In the Foreword of the report Professor Stephen Martin the Chief Executive of CEDA states:
Technological change over the last two decades has been extremely fast and that is likely to continue. This will mean that a significant portion of Australian jobs that exist today will no longer exist in 20 years’ time.
In fact, modelling in this report has found that almost five million Australian jobs — around 40 per cent of the workforce — face the high probability of being replaced by computers in the next 10 to 15 years.
You can already see certain bits of technology working their way into our lives in ways you didn’t really think about 10 years ago. Lots of newer model cars have automatic braking functions, other cars will keep itself in its lane on a freeway, the cruise control function on other cars will slow down the car if someone merges in front of you and then resume speed once it clear to do so. All steps to the inevitable self driving cars.
To highlight the “no-one knows what 10 years from now looks like” here is an anecdotal story.
A older tradesman I was speaking to a few months ago found out I “work in IT” and decided to tell me about his amazement about what computers can do. In 2005 he was watching “one of those CSI shows” and the actors were using their fingers to interact with their computers, swipe things away, make images bigger etc. “Mate, you’re dreaming” he recalls saying. Barely 10 years later and here he was amazed he could use “this Viber program” on his Android device exclusively by touching a screen with his fingers. How times change.
He isn’t alone. Having worked with a myriad of customers across many industries and then being very heavily involved in understanding what is possible from a technology perspective a common thread I found was most people underestimate what a computer can do. Indeed I remember being told “the computer can do anything, it’s really a matter of how long you want to spend building a feature”.
So none know what 10 years from now will look like but like the 10 years that preceded there will be change. What will this change look like? What might the accounting software do more of? How might the role of the accountant change? What/who will play a role in influencing this change?
In upcoming posts we’ll explore and run through examples of what will play a role in changing the accounting and accounting software industry. Think governments, technologies, artificial intelligence and more.
I’ll try use more images, maybe even some GIFs.