Convergent Evolution

I’m by no means the first to compare changes in markets and business models with natural selection and the evolution of life. Many, including myself, particularly in recent times, have (perhaps over) quoted Charles Darwin to describe and motivate audiences to react to the technology driven, disruption upon us:

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change”

As I witness and participate in the changes that are occurring, more and more I am reminded of my high school biology lessons.  One in particular stands out, and funnily enough it wasn’t “the birds and the bees”. It was the one about “sharks and dolphins” that I and continually reminded of.

Convergent Evolution is described by ScienceDaily.com as being:

“the process whereby organisms not closely related (not monophyletic), independently evolve similar traits as a result of having to adapt to similar environments.”

Sharks are fish. They have evolved over millions of years from other ancestral fish who were always water-bound.

Dolphins are mammals. They evolved over millions of years from land-bound quadrupeds, somewhere along the lineage, taking back to the ocean from whence they distantly evolved.

Biologically, sharks and dolphins are very far apart (in fact more distantly related than a crocodile is to a chicken!), they are NOT monophyletic. Yet over millions of years they have independently evolved similar traits (similar body shape, fins, tails, colouring etc) as a result of having to adapt to similar environments (life in the ocean).

So herein lies the crux of my hypothesis: a slew of different industries around the white-collar, B2B professional services sectors, each with their own historical barriers to entry, are independently evolving similar traits as a result of having to adapt to a similar environment. An environment of digital transformation. Each is seeing technology driving disruption to traditional business models, empowering end-consumers and changing the way services are delivered.

Accountants, Bookkeepers, IT Service Providers, Software Consultants, Business Coaches, Management Consultants, Insurance Brokers, even Banks – basically any service provider to SMBs, are faced with the prospect of rapidly evolving their business models or face the distinct possibility of being left behind, even extinction.

A key point, it is not merely individual service providers that are being disrupted, it is entire industries. What we are witnessing is the emergence of similar solutions to similar problems across industries, tearing down barriers that once existed between industry sectors and driving a degree of homogenisation of service offerings.

Those industries and businesses more adaptive to change will reap the rewards of  an expanded market opportunity, as service offerings blur beyond traditional boundaries, whilst those slow to evolve will find increasing competition ultimately making survival difficult.

Convergent Evolution is occurring as each industry sets about redefining itself as it adapts to a new definition of service delivery. One in which Software-As-A-Service lives up to its very definition, in which service delivery and technology combine.

Accounting

Many more qualified than I have been describing the changes besetting the accounting industry (thought-leaders like @Clayton Oates, @David Smith, @Doug Sleeter etc often speak about “the firm of the future”). Driven largely by technological disruption, there is general consensus of a trend toward maximising efficiency through the use of (particularly online) technologies and adding value to clients by shifting away from traditional, compliance and transactional services to high-value, recurrent, advisory and value-added servicing.

With the ATO and technology vendors warning of their desire to drive down the cost of compliance for SMBs, modern and future service offerings of accounting firms need to evolve and are, including (but not limited to):

• Technology supply, advice, integration and servicing, historically the domain of IT service providers and software consultants
• Bank reconciliation, accounts payable services – once the clear domain of Bookkeepers, now a clear “recurring engagement” service for Accounting Firms as technology completely changes how these tasks are performed (see below).
• Payroll services, once the domain of dedicated Payroll Bureau Services.
• Business Analytics and Big Data – an under-serviced, growing opportunity for servicing SMBs, as it is “the next battleground for competitive advantage“.
• Business Improvement / operational efficiency advice. Hand-in-hand with technology, there is a growing trend towards “Advisory Services”, particularly focused on Ca$h Flow improvement. From debtor management to costing and expense management.

Bookkeeping

Bookkeepers are being warned that they face obsolescence with the emergence of technologies like automated bank reconciliation and accounts payable automation (such as @Receipt Bank and next gen. artificial intelligence driven apps like @Xtracta). As they adapt to the changes in their operating environment, Bookkeepers service offerings are evolving, including (but not limited to):

• Technology supply, advice, integration and servicing, historically the domain of IT service providers and software consultants
• Payroll services, once the domain of Payroll Bureau Services – we are seeing service offerings arise at industry level, like ABN Payroll.
• Business Analytics and Big Data…
• Business Improvement / operational efficiency advice…

Yes, I’m starting to get a little repetitive, such is my point. Without continuing the repetition, a few of the emerging service offerings of note include:

• Banks beginning to offer technology & support historically the domain of IT service providers and vendors (such as CBA’s Albert, point-of-sale hardware and applications)
• As traditional network support evolves, many IT Service Providers are offering application selection, customisation and integration services, which was very much the domain of Software Consultants historically.
• Traditional Software Consulting firms offering Business Improvement Advisory (such as debtor & inventory management) beyond just technology implementation and integration, as well as consultative Data Analytics services (both areas accountants are trying to “own”).

So what of the future of B2B professional services? Will Convergent Evolutionsee one super-industry arise?

Probably not, but as we have found with the evolution of the retail sector over the past few decades (in which we have witnessed the dominance of mega-markets and category killers like Bunnings), with convergent evolution, I suspectwe are entering the era of the multi-disciplined B2B service company.

From compliance accounting to IT, from bookkeeping and payroll outsourcing to data analytics services, I foresee a future (perhaps dominated by traditional accounting firms, but certainly evolving out of successful bookkeeping companies, IT service providers, business consultants and alike) of all-encompassing B2B professional services companies.

This absolutely will NOT be the death of niché, specific discipline service providers. I am just predicting we will see less of them as consumers demand more and the traditional industries become dominated by companies offering multi-disciplined service offering