7 Obstacles to Innovation

Published on December 09, 2014 by Patrick Pruett. Contributing Members include

In 1975 Steve Sasson was an engineer with Kodak when he invented the first digital camera technology. Excited about his invention, Steve took it to management hoping they would be as enthusiastic as he was. Instead, in Steve’s words they responded with, “That’s cute. Now don’t show it to anyone.” Worried that such technology could hurt their massive investment in film based photography, Kodak did nothing with the invention.

Fast forward 12 years (1987) and digital technology began gaining some traction. Kodak’s clients wanted to know if it was something they needed to worry about as much of their investment was also tied into film based photography. At this point Kodak decided to commission a study to find out more about digital technology and the threat that potentially existed.

Through the study they uncovered some bad news and good news. The bad news was that digital technology certainly had the ability to replace film based photography. Not so great when everything in your business is geared toward film. The good news, on the other hand, was that Kodak had an estimated 10 years before the technology would be cheap and high enough quality to mass produce. In all likelihood if they had started at that point, there would have been time to be on the front end of the digital revolution.

Still, Kodak did nothing and in the mid 1990’s (close to the prediction from the study); digital camera technology took off and eventually did replace film. Two years ago Kodak filed for bankruptcy and the only thing left to sell were the patents (thousands of them) from technology they had developed over the years but done nothing with.

The Kodak story provides a number of lessons for businesses, including accounting firms. One of the lessons is that all products and services have a life cycle that looks something like this:

Innovation needs to take place at the top of the growth phase or the bottom of the maturity phase, otherwise the product or service and its associated revenue and profits, will eventually decline. Leaders who ignore this do so at their own peril.

Accounting firms can certainly attest to this cycle as over the years many of the services they once provided have been overtaken by technology. Those of you reading this article can likely point to a service your firm once delivered that has either been marginalized or is no longer offered. Much of the ‘number crunching’ for example that accountants used to do is now completed, faster and cheaper, with the help of technology. In time, further advances in technology and cheaper ways of doing things will likely erode other accounting services that are comfortably in growth phase today. This opens the door for accounting firms who choose to walk through, to provide new services that are of greater value to their clients.

Accounting firms should understand that the market will not reward those that choose to remain static. Business is fluid and the professional service provided to business owners should be able to adapt to fit the situation.

Innovation is typically thought of in the realm of manufacturing, healthcare, and other industries; however the key to success, even in a professional service firm, is being innovative with the services that are being delivered. If your clients or the market needs a particular service that you don’t provide, you should find a way to develop the resources internally or locate a resource externally in order to meet the market demand.  

Yet, even when the benefits are known, accounting firms still struggle with innovation, but why?

Below are 7 innovation obstacles that accounting firms face when try to provide a new service or deliver an old service in a new way.  


Often time’s leaders in an accounting firm become comfortable with their firm revenue and profitability. Thus there is no sense of urgency to change….if it’s not broken don’t fix it.


2.Market knowledge

I spoke with the leader of a firm a few months ago and he said his team is so busy getting work out the door they haven’t asked what the market needs and thus have no idea what types of services they should consider offering or developing.


3.Business model

Often a new service requires a change in business model yet firms insist on providing services in the same way they always have yet the market is saying I want to have it my way, customized for my business.


4.Brand confusion

If your firm rarely or never offers new services, the market may be confused when you do. However, consistency is the key here and the more often you pro-actively take new offerings to clients and prospects the more they come to expect it from you.


5. Dedication

Firms lack dedication when they are not investing the resources (e.g. time, people, and money) required for success. High quality firms are investing a percentage of revenue in R&D so they can maintain their winning ways.


6. Skills and resources

Lack of certain skills and resources will prevent a firm from offering something new.



Lack of process is another roadblock for firms that sometimes identify a new service yet have no idea how to go from the conceptual to making it real.

Generally speaking market forces will take care of obstacle #1; lack of motivation. Firms who offer the new services will take that piece of business. Maybe clients continue to use your firm for the other things you have always provided….maybe not. This is certainly a risky option to choose and does not take into account changes in the clients’ business or leadership, both of which can cause firms to lose clients they are not appropriately serving.

The other obstacles can be overcome through continuously raising the bar about what’s expected in the firm and being committed to delivering more value to clients. One of the most frustrating things for people running a company is when their accountant lacks the initiative to bring new ideas to them. At the top of the growth phase / bottom of the maturity phase, firms must find ways to innovate their services.