in the age of ai, conversations, not calculations, will define the future of the profession.
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the disruptors
with liz farr
ed kless believes accountants can do much more than monitor the numbers. together with ron baker, their latest venture, threshold, is a community that aims to support professionals in facilitating transformations in their customers. as kless explains, transformations occur when someone makes lasting changes in one or more of the domains of human flourishing.
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“the purpose of business is to promote human flourishing. profit is the result of a business. and there’s nothing wrong with that,” kless says. “i think profit is good, but it’s the result. it’s not the purpose.” drawing from benjamin franklin and economist russ roberts, kless explains that human flourishing has four domains: making people healthier, wealthier, wiser, or helping them live with more purpose.
when accountants work with customers across these four domains, they are not merely providing accounting services, but are also facilitating transformations. in a recent episode of the disruptors, ron baker explained joe pine’s model for economic value, which pine described in his earlier book, “the experience economy.” in this model, transformations are the most valuable of economic offerings.
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an interesting aspect of transformation is that marketing is easy. “you don’t have to generate demand for them, because all four of those things are the human condition. we all want to be healthier, wealthier, wiser, or live with more purpose,” kless explains. the foundational conversation with customers shifts to “can we, as an organization, help you become healthier, wealthier, wiser, or live with more purpose?”
this reframing requires a shift in perspective. “products and services marketing is about, ‘look what we can do, right? look what our system does, look what we can do.’ that’s what a product and service says,” kless says. “transformations are about, ‘look at who you can become.’”
shifting to transformations also changes how the offerings are framed. instead of hours, kless suggests that invoices should state the “from state” and the “to state.” examples might be moving a client from on-premises to cloud-based software or developing an accounts payable clerk into the organization’s ap champion.
because transformations can’t generally be measured in hours, this framing will prevent the disappointment that kless’ clients experienced when he implemented erps earlier in his career. the promises of impressive new erp capabilities showcased in the product demo were rarely achieved. “we burned through all of the quote billable time, the billable hours on just getting them onto the new system, and then all they were getting was a new p&l and a new balance sheet from a different system.”
kless admits he is uncertain about pricing transformations but feels the best model may be the subscription model, which he defines as “recurring payments for ever-increasing value and transformations.” kless recommends frictionless cancellation policies that allow either party to cancel with 30 days’ notice.
looking ahead, kless predicts that while there will still be accounting professionals, “the role and the tasks that they are doing will be utterly unrecognizable to people today.” agentic ai will accelerate the transformation so that “it might not even be recognizable a year from now,” he says. but what will remain central to accounting will be “having conversations and building relationships.”
10 key takeaways
- productizing services is a regression, not a progression of economic value. this can drive commoditization and push prices down.
- instead, consider “experientializing” services to move upwards in value toward transformation.
- burnout may be better diagnosed as moral injury, which means doing something detrimental to oneself or others.
- burnout blames the professional, who is burned out because they worked too hard. moral injury holds the business model responsible.
- unlimited pto can’t cure moral injury, but changing the business model from providing services to facilitating transformations in customers can restore the notion of purpose for professionals. what the customers receive aligns with what the professional is doing.
- when private equity entered other sectors such as car washes and veterinary medicine, the business model changed to subscription pricing. however, in accounting, private equity has been doubling down on utilization and realization.
- private equity in accounting has been employing the “donkey strategy:” increase revenue, reduce costs, make people work harder.
- progressing from service provider to transformation facilitator requires asking new and better questions.
- an approach to asking better questions can be found in peter block’s book “the answer to how is yes.” instead of immediately asking, “how have other people done this?” ask, “what do we want to create together?”
- treat ai as a teammate, not just a tool. apply the 10-80-10 rule: spend 10% on developing prompts, let ai do 80% of the work, then spend 10% publishing
more about ed kless
ed kless believes entrepreneurs continue the work of creation and that business exists to promote human flourishing. to advance this vision, he cofounded?threshold, where he guides professional leaders and teams through encapsulating transformations. previously, kless served as sage’s senior director of partner development and strategy, hosted the sage thought leadership podcast, and designed curricula for sage partners and customers. he also co-hosts?the soul of enterprise? podcast with ron baker, his friend and fellow threshold co-founder.
transcript
(transcripts are made available as soon as possible. they are not fully edited for grammar or spelling.)
liz farr
welcome to accounting disruptor conversations. i’m your host. liz farr from 卡塔尔世界杯常规比赛时间 and my guest today is a repeat of an appearance with ed kless, who is a senior fellow at the verasage institute, co host with ron baker of the soul of enterprise podcast and co founder with ron baker of threshold. welcome to the show, ed how are you doing?
ed kless
so good to be with you. liz, we’ve done this on a number of occasions. both ways, i’ve interviewed you, and now you’re interviewing me, so it’s fun to be opposite on the other side of the microphone.
liz farr
yeah, i think now we’re both two for two, so we’re even the universe is all in order.
ed kless
that’s one way to look at it. let’s hope, let’s hope that this begins an orderly progression outward to the rest of the universe.
liz farr
we can only hope. now the topic for our conversation is going to be on transformation. and i would encourage listeners to listen to a separate episode that i recorded earlier with ron baker, where we go more in depth into joe pine’s work and the progression of economic value. and now let’s get into what i want to talk about with you. now you and ron baker recently published a document called threshold: a revelation for the transformation economy. and now in this document, you declare that the ambition of the transformation economy and the purpose of a business is human flourishing. can you explain to listeners what this means?
ed kless
sure, and this is has really coalesced over a number of years and conversations that ron and i have had, and then, of course, reading joe pine’s work, me being an avid listener of russ roberts’ econtalk podcast where he talks about this notion of human flourishing. and it’s something that i have always believed, that the purpose of business is is to promote human flourishing. profit is the result of a business. and there’s nothing wrong with that. i think profit is good, but it’s the result. it’s not the purpose. and i think that’s where i think people get confused, like, oftentimes we’ll hear, well, the purpose of business is making money? no, that’s the result. the purpose is some sort of to promote some sort of human flourishing. and really, there’s a four prong definition of what we mean by human flourishing, and three of them come from benjamin franklin. what is it that businesses, or a, or a business, can do to make people healthier, wealthier, wiser. those are the ben franklin ones, and then the fourth one is or live with more purpose themselves. so can we promote purpose in the business itself? so just to recap, what is it that we are doing to make it make people healthier, wealthier, wiser, or live with more purpose? and all of those things harken back to what you talked about with ron, which are transformations. so you’re making transformations in those different domains. now, some businesses focus on healthier, such as, say, doctors, direct primary care physicians, dieticians, those kinds of things. some are wiser. let’s talk about the notion of duolingo, maybe, or a college or university, though that might be wiser and then wealthier might be your accountant, cpa, your person who is is taking care of your books. the person who is is making sure that you’re managing your wealth properly, tax provision, those kind of kinds of things, and then live with more purpose, can can be lots of different places, certainly that can be your religious institution that you belong to, or some other organization that you feel feel a connection to. but what is interesting is, i think, don’t, in all four of those domains might be emphasized to one extent or the other in each business. what is interesting about all four of those is that you don’t have to generate demand for them, because all four of those things are human, the human condition. we all want to be, to some extent, healthier, wealthier, wiser, or live with more purpose. so the question is, is, can we have a foundational conversation that will allow us to establish, can we, as an organization, help you become healthier, wealthier, wiser, or live with more purpose? and one of the things in the document that we can talk perhaps more about a little bit later, but is this, when, in the past, when professionals have been promoting products and services. products and services marketing is about, look what we can do, right? look what our system does, look what we can do. that’s what a product and service says. transformations are about, saying, look at who you can become, right? so it’s, it’s external to the organization.
liz farr
yeah, and that that really goes towards the human yearning.
ed kless
correct.
liz farr
so you don’t have to convince somebody that they need this or that widget, but you just need to find the people who are seeking that kind of transformation, and many times they will just say, oh, you are offering this? sign me up right now.
ed kless
yeah, absolutely. and, but this is not to say that this is easy, right? it is perhaps it is perhaps fundamentally more difficult than product and services marketing, because there’s lots of tools and techniques beyond that. this net now says we have to go out to market with with more questions than we do answers. and that is not always the most popular thing, because what people oftentimes want is they want the answer, what’s the quick fix? as one author that i’ve studied put it, what is the quick fix? and what ron and i saying is, well, you know, there’s really not a quick fix. and that isn’t always the most popular thing to say,
liz farr
right? and and to to help people kind of grapple with these complex notions. you and ron have a new community called threshold. now, can you tell listeners what this is? because i think it’s a great organization.
ed kless
well, thank you. thank you. yeah, and you know, we just started this in earlier this year, i’d say we pushed it out probably more the february timeframe. ron and i formally came together january 1, but we really didn’t get this this launched at all until january, and we have now over 1200 members. and let me, let me talk to you a little bit about this, what we’re trying to do with threshold. and by the way, the website is thresholdnow.com unfortunately, someone had threshold.com parked and wanted $250,000 so we weren’t going to do that. but so we have thresholdnow.com and this is what we call our foundation level of membership. so the price of it is your email address and name. that’s it. that’s all we need to know your email address and name, and you can get access to some of the content that ron and i provide. and the idea behind this is, this is the movement. this is the quest aspect of it. so you mentioned earlier that as a senior fellow at the verasage institute, well, we’re beginning probably by the end of this year, and i’ll make an announcement here retiring the verasage institute. so it will be rolling, rolling up under, underneath threshold, or the concepts, anyway, will be there. and what we’re trying to say is we want, we want community, because part of this is a quest of ron and i to get these ideas out. so we always want to have this foundation or a complimentary level, where people do not have to pay anything, but we want to know that we have access to them with email address and name. one of the things that you get as part of that is an invitation to our monthly calls, or let’s we’ll call them webinars that we do. there’s two types of those. one are every other month we do an ask us anything type session where people get on and ask us anything. and you know, if you know ron and i, it’s literally anything. if you want, you want to talk about major league baseball, we’re happy to talk about that. so, so that. and then the but then on. on the other months, we are delivering content to to folks. so there’s a monthly webinar. the schedule that has that has a cadence to it, that people can attend, and that’s free. you can show up and participate as as you want. in both of those things? there’s also access to a couple of the tools that we have put out there as as well as just the the community resource, where we do some blog posts that are specialized. i did one last month, which i thought was was really fun, on people getting started on using ai. and so what i did is i wrote a wrote a prompt, or actually helped, had ai, help me write a prompt for someone who says, well, what do i what prompt should i use to get myself started on using ai? and so that’s that’s the kind of thing that we’re providing. and as well as some tool sets, we also then do have a paid version as well, where people get access to more content. first of all, they get access to all of the previous conversations that we’ve had on our monthly call. so. but there’s also two classes that we have out there. one is a is 12 hours worth of content on project management for knowledge workers, and then the other one is a four hour course on pricing in the transformation economy. so we’re getting those out, and if you join it at the $150 level, you get access to those courses for as long as you want, and we’re starting to deliver on more and more courses over through the course of time.
liz farr
this sound like quite, quite useful stuff. now, is this just for accountants?
ed kless
no, yeah, no. i mean, i would say that this is, this is really for professional organizations. that’s really the sweet spot for this offering, per se. but we’ve, we’ve been working with some organizations that are are not professional organizations per se. we’ve been working with some not for profit societies on some of this work because they have been wanting to transform themselves, and then also even a software company that was it was trying to go to market with a new product, and wanted to view it as a transformation, a really transformative product as well. so it’s been, it’s a lot of fun work, but we, we certainly want to engage with as many people as want, at the level that they want to engage with,
liz farr
all right, right. and i would tell listeners that you get quite a bit of value, even if you aren’t just at the free level. so
ed kless
well, thank you, yeah, yeah.
liz farr
and now you’ve been doing this for some time. can you share some of the transformations that members of threshold are working through?
ed kless
well, sure, i mentioned one of them, like was a software company, company doing a go to market. so that that was a transformation for them, because they they had not really gone to market previously with a product. it was really more of a different type of offering. so they had to make a transformation inside of their organization to do that as well, and we’re what we’re hearing, some good things initially from their launch. more to come on that it’s still in the relatively early stages, but, but i would say that, let me give you a more a typical example. might be some organization that wants to say, you know, we really are ready, are sick and tired of the timesheets, and we want to ditch them right? so that would be a transformation that ron and i have assisted with, both, both in the past and hope to in the future, whether they are not, they’re going to full subscription or just going to value based pricing instead, you know, we want to help organizations that can make that or want to make that transformation as well, because that that that is, in fact, a transformation inside their organizations. it’s not, it is a business model change, but it’s, it’s beyond that too, because it changes even the nature of the culture of the organization oftentimes,
liz farr
yeah, i can see that, you know, for unfortunately, all of the accounting firms that i worked at were focused on hourly billing. now, the last one i worked at said we do value pricing, but what i think that really was was, let’s take last year’s bill for the tax return and add something and we’re just gonna throw a dart at the board and hope that we hit something reasonable. so,
ed kless
yeah, yeah, yeah, that’s not, that’s not value based pricing.
liz farr
it was not, you know, it was all after the fact. i mean, we had to, we were still encouraged to report our time and the little time management thing, but it wasn’t. we didn’t have the value conversation up ahead. we didn’t talk about scope of work. we didn’t do any of those things. it was just, well, here’s the tax return. do it,
ed kless
yeah, yeah. and, well, and, as you correctly point out, liz, i mean the and i came the number of times that i’ve talked about this is large. value based pricing, the definition that ron and i use is one in which the primary, but not sole consideration in setting price is the perceived value of the customer. makes sense, right? so value based pricing, we have to have the perceived value of the customer in order to then set that price, because that’s where the value base comes from. well, if you don’t have the value conversation with people, and don’t have what the perceived value is, by definition, you cannot and are not value pricing. you might be offering a fixed price, but that’s not a that it’s not at a value based price. you can have a fixed price that’s still cost plus that’s still an accumulation over your what your anticipated costs are, and then some profit multiplier on top of. it. but that’s, and i think there’s still, to this day, and you know, this is 20 plus years on that ron baker has been talking about this. there’s still a ton of confusion about that in the in the marketplace, and people say, claiming that they’re doing value pricing, when what they’re really doing is is fixed pricing based on a cost,
liz farr
yeah, or just a wild hairy ass guess, yep, yeah. now you mentioned that this document threshold talked about how transformations and experiences were superior in value to products and services. now, why is that? why? why are we willing to pay more for experiences and transformations than just
ed kless
yeah? because they’re, they’re, first of all, they’re highly personalized, right? and we’re specialized even, because you can transform an organization as well as individuals. now, usually it’s the individuals that have to come first and then the organization transforms. but because it’s highly customized to them, it’s not a cookie cutter approach. one of the things that that is just makes me a little bit bonkers lately is this, this push toward product we need to productize our service. and to me, and again, i’m assuming that people have listened to the conversation that you had with ron, and if you go back to that, you will note that that that product, productizing a service is actually moving downward on the progression of economic value. it’s a it is a regression, not a progression. now that this is not to say, by the way, that having productized services is it completely invalid strategy, i just want people to go into it and be clear that what it does mean is a more is a further commodification of what you’re offering. by definition, you are becoming more commoditized because you are pushing down toward a product, because you are doing that. what that means is, is that it is going to ultimately result in a lower overall price. right? so if you productize your services, that’s fine, but understand that that’s going to end up usually being a lower price. and that is, means you’re that you’re going to have to to extract your profit by be doing the other stuff in the background. and ron and i are, like, as a professional, i don’t want to do that, right? that that’s not, that’s not what i aspire to as a professional. i don’t, i don’t want to be worried about, am i? am i keeping my costs low here? because what we believe that the professions do is, is human flourishing, is in, is in making humans better humans. and you can’t do that while making sure that you’re eking out and lowering your costs
liz farr
right, and the the other way to make a profit when you have productized services, when you’re really pushing down your profit margins, is just to do a lot of them right. and that’s not very conducive to human flourishing for the people who were doing that.
ed kless
now, if you’re doing it with technology, if you’re doing with with ai, more power to you. that’s that’s great. but i mean, i, you know, i don’t think, and especially if the notion of of billing by the hour, or even costing by the hour, remains pervasive in that model that that’s a recipe for disaster, and this is how it relates, in some ways, to what we see happening, happening with private equity. you know, ron and i are not anti private equity qua private equity. i mean, i think there are some people out there who are just like private equity is the devil. and and i don’t, i don’t think that’s necessarily true. what we are confused about, especially with regard to the accounting profession, is that where, when private equity went into other other sectors, for example, dry cleaners and and into that veterinary medicine, not not not medicine for humans, but veterinary medicine, this is curious. and car washes, they actually changed the business model, and for the most part, they changed the business model to subscription, right? so you have your car washes that are offering subscription, monthly, based pricing. and you know, you have your car washed an unlimited number of times at that particular car wash, and you even get a special lane and express lane to come in and all of that. well, they changed the business model when they went into into into that sector. but it seems that most of them, not all, but most of them, when they’re coming into the accounting profession are just doubling down on utilization, realization. and they’re, they’re, they’re, they’re implementing, what, what ron and i, or i can’t remember the guy who came up with this. it wasn’t us. so i’m, i apologize to whoever this was, but it’s called that. it’s called the donkey strategy, which is, you know, increase revenue, decrease cost, make the bastards work harder. that’s, that’s, that’s, that’s the donkey strategy, right? no kidding, let’s just keep kicking the mule, right? you know, that’s right. so, so that that’s, it’s not that private equity we have a problem with it’s the fact that they, they’re not even in many cases, curious about changing the business model, and we think they should be.
liz farr
i think that that’s absolutely right, you know? i think that, you know, i remember when i first started my first job in public accounting, one of the managers came and sat with me and said, we sell time. that’s what we do. we sell time. and so you need to keep track of all your time, because that’s how we make money.
ed kless
and by the way, that person was not wrong in saying that they sell time. the question is, and this is something that peter drucker points out is, is time what the customer buys? no, right? that’s really the trick, right? is understanding that. and this is a, i believe, a direct quote from peter drucker, sell what your customers buy. and it’s like, of course. well, that’s insane. why would well, but if you are putting hours on an invoice, and your customers don’t want hours, they want a result of that hour, or the outcome or or a transformation, if that’s what they want, well then you’re not selling what your customers are buying,
liz farr
right? and that and selling time puts up all these ridiculous incentives on the firms. you know, instead of doing it the most efficient way, we sometimes get pushed to do things a little bit slower, to juice up the invoice
ed kless
well, and this is where, where you’re damned if you do, and damned if you don’t, because if you spend too much time, you’re called an idiot. if you don’t spend enough time, you’re like, well, what now you’re under billing, yes, right? and you’re penalized, oftentimes, for doing stuff well, because and those people are just penalized with more work, usually,
liz farr
yes,
ed kless
right? and so it’s really, you know, liz, you may have been in a session when i’ve done this, i’ve done it a lot of times. i call this the nuclear option, because it really, i think, gets to the heart of things. and that is, i’ll ask everybody in the room to raise their hand if they’ve ever filled out a timesheet. and of course, every hand goes up, especially if i’m speaking to an accounting audience. and then i say, all right, keep your hands in the air if you’ve ever not put down on the timesheet. what actually really happened either too many hours, or too few hours. and of course, every hand remains up, nice. there are some people who fight, fight me on that they’ll occasionally, well, i put, i’m at, you know, i’m like, okay, well, you’re, you’re the 1% because it’s, it’s a very small, small contingency of people who are that scrupulous about it, and i guess kudos to them. but the point being is that once you realize that, then one of the things that leaders or managers are saying is, well, we need, we need to track time, because we need to understand what our actual costs are. they said, well, this exercise just demonstrates to you that it’s not actual costs,
liz farr
no, and it’s not cost. it’s really capacity.
ed kless
that’s right, that’s right. you know another thing that’s in the document, i know this is probably a question that you had. i’m just going to going to jump too well. it’s just because this is related. this is related very much to this topic, is that ron and i have come to the conclusion that what is often labeled in the professions, by the way, again, not just the accounting profession, as burnout, is not burnout, right? it’s, it’s actually what is better diagnosed as moral injury, which was, was a diagnosis that came out of the the vietnam war, and probably is, is also an example of post traumatic stress disorder. it’s related to that. and what moral injury is, is, it is when a person is put in a position where they are doing something that they know is detrimental, possibly to themselves, but also to the person that they’re trying to serve.
liz farr
yeah, right. i i would agree with that 100% in accounting that it didn’t really do anybody any good for exhausted accountants to be filling in tax returns and making mistakes, which just added to the work that we had to redo.
ed kless
redo. but again, what is interesting about this is i had a conversation about this concept of moral injury with with a with a young, younger professional. she was one of the 40 under 40 group that circulates about and and when we were talking about this, she said, you know, it’s really interesting. you bring this up. she says, because i have friends who are are are working in certain sectors that don’t do time sheets, and they’re only working 35 hours a week, and they are claiming burnout. so, so it’s, it’s it doesn’t it, because they’re not really burnt out. they are also a victim of moral injury. they’re being asked to do things that are antithetical to themselves and those that they serve so you can suffer from moral injury and be working 35 hours a week. yep, and i think that that’s an important distinction to make. the other thing that we really dislike about the whole diagnosis of burnout is as it puts the onus on, on the the professional, and says you worked too hard. it was your fault that this happened to you.
liz farr
that’s right, right? instead, instead of trying to transform the work you do into something that fosters human flourishing,
ed kless
yep, so that it’s in alignment with that, right? so it’s, it’s not fatigue, it’s, it’s injury. and unless and until, by the way, this diagnosis of moral injury gets out there and is incorrectly diagnosed as burnout, we’re not going to be able to fix the problem because, liz, how long have we been hearing about? you know, four day work week that’s going to be the solution. or, you know, unlimited pto or, or there’s so many different things that, or, you know, and this is not making fun or saying that these are bad. but you know, by by just offering yoga sessions to people who are suffering from moral injury, that’s not going to fix the problem.
liz farr
no, no, no. now, how do we fix this? you know, one way we can do this is to move up the value chain and provide transformation. so what are ways that accountants can do this?
ed kless
yeah, what we have to do is is rightfully restore the notion of of purpose and alignment to what is being offered to the customer and what the professional is doing. so we have to go back to this notion of, what is it that we’re selling, which is why we’re advocates of when and when we say, sell transformations. what is on the invoice, if you will, is always a from to i or we are here to help you or your organization move from this state to this state, and we define what those from to states are. so from this to that, that’s what we’re going to sell to you. we’re going to price that at x dollars per month, let’s say. and not only are we going to help you make that trend, and we don’t know how long it’s going to take, because it’s, it’s we’re there to help you, right? but we also want to make sure that you sustain that once, once you’re you’re through that to to, you know, move from, from to, and then, in all likelihood, what you may may see is that there might be yet another from to that you need. you need to be put in place as well. but it’s also sustaining these transformations that are important. you know, my my background is on doing erp implementations, so, but i had an organization back in the 90s that did implementations of of new accounting solutions. and all they, they, they sometimes they stuck, and sometimes they didn’t. and i think that that was also because i was not selling the right thing. i wasn’t selling a transformation. i was i was selling, okay, well, here’s your new system, right? and i wasn’t, and i what? and because even back in those times, i was doing an awful lot of billing by the hour, i wasn’t making sure that i was remaining involved to sustain the transformation that should have taken place,
liz farr
right? so you weren’t making sure that they understood the people using this right fully understood how to use it, and the power of access to the information could be.
ed kless
right, right and extract the full value out of it. you know, what is was, was often ironic, is that we would, we would demo all of the cool stuff up front and the prospective customers like, wow, that’ll be fantastic when we, you know, get to that point where we’re producing, you know, these, these, these, these wonderful reports that are perhaps even predictive of how we should maintain our capacity all of this stuff. and that’s what we would show is, you know, this was show show the sizzle, not the steak, right? so we would show the show the sizzle. everybody would get involved in that. then we get to the point where we’re implementing the software, and we we burn through all of the quote billable time, the billable hours on just getting them onto the new system, and then all they were is they were getting a new p, l and a new balance sheet from a different system. but we never got to the point where we were even beginning to think about implementing all of the stuff that we showed them back in the demo, because we were over budget,
liz farr
right? and if you if your business model requires you to charge by the hour, then you can’t get them to that final mile. you can’t do that.
ed kless
not only can we not get the analogy that i used to use, and you know, i didn’t even realize it myself, is that, to me, it was, it was we were helping them as a sherpa get to the top of the mountain, right? we’re getting them to the top of mount everest, and then we are, we are helicoptering off the top of the mountain and telling them, good luck getting down.
liz farr
that’s about, right? yep. yeah. you know there, there’s a blizzard coming up, and you might have to hunker down, or you might be able to to push through it, but we’re not going to be around to help you.
ed kless
that’s right. that’s right, you know, there’s, there’s a story that, and i witnessed this, so it’s not apocryphal, because i was at at a conference that sir edmund hillary spoke at. he was the keynote speaker and, and this was, it’s got to be 15, 20, years ago. i forget the year on this, but he he was asked, because it was, it was right after they had discovered that some climbers had gotten to the summit of mount everest the year before sir edmund hillary did and but unfortunately, they perished on the way down. right, right. but they, you know so, but they found their their journals, or what have you. and they asked him, i said, so you know, what do you think the fact that you know this other, this, these other folks made it to the top before you? he said, kind of deadpan says, well, getting down counts too. yeah, that’s right, you know, by the way, always, i always saw, it’s already, always a shout out to tenzing norgay, who is the sherpa, who is shoulder to shoulder with sir edmund hillary, when they both got to the top of mount everest for the first time, it wasn’t just sir edmund hillary, it was also tenzing norgay. so
liz farr
absolutely, absolutely. now, what are some examples of transformation that accounting firms could perform for their customers?
ed kless
yeah, let’s, let’s take what will and there are different types of transformations. i won’t, i won’t get into into that with you. but let’s take one of the more the more major ones, which is a metamorphosis type transformation. so something like going from on premises software to cloud based software that’s that would be a metamorphosis type transformation, especially for your general ledger, right? i’m not talking about maybe a little app here and there, but something major, a major system, that would be example of a transformation, but, but, but something let’s say, let’s call it a little bit more mundane. let’s just call this maybe refining or a honing type transformation. is taking an individual, say, who’s in your accounts payable group, and making them go from just being kind of a user of the system to being the accounts payable champion inside the organization, the go to person inside the organization. for when things come up with regard to accounts payable, they’re the one you go to. so this would be in a large organization, you know, you’d have somebody who’s just typically in charge of that, but i think, you know, just that kind of thing that’s, that’s an example of us of a smaller type transformation that’s a honing. it’s certainly going to take less time. but when you begin to add those up, you might find dozens of those inside an organization. that need to be done. so if, if you’re, if you’re a large organization that’s working with another large organization, you can still be performing transformations over and over with them. and some, some of them are still individual. so it’s not just organizational. they can be individual like that. another thing might be going from, you know, just using spreadsheets to using some, you know, real powerbi type things to do analysis work that is a transformation, right? so it’s not just about product education, but it’s about learning the hows and whys of using that tool and then rolling that out inside the organization and making sure that it sticks, and perhaps giving users more direct access to the content, so that it doesn’t have to be provided by someone on high all the time, right? that the people inside the organization can get it themselves,
liz farr
all right? and another one i can think of is creating an estate plan for a client, sure, so that they can make sure that whatever legacy they have is carried out.
ed kless
yes, yep, no, absolutely. and that would probably be one of those more higher end transformations that we’re talking about, is get, you know, making sure that you’re preserving someone’s legacy.
liz farr
yes, yes. and i would add as a side note that if your customers are waiting until too late, that’s not a good idea, because no bed, death bed, estate planning doesn’t really work too well.
ed kless
no, it does not. nope.
liz farr
now, now, as accountants move into transformations, this requires a mindset shift, so we have to be more of a guide, so we are guiding the transformations, instead of being the hero with the answer, with the solution. so how, how can accountants learn to do this?
ed kless
so this is, this would be a great example, liz, of what is a transformation that has to take place within the the the accounting organization itself, right? so we were just talking about transformations, and we were talking about how the end user for the we like to call them aspirants, the aspirants of a professional firm would would, would undergo a transformation. but how is it that the people inside the accounting professional organization make their own transformations. and one would be is, is making a transformation of themselves to going from someone who believes themselves as the quote solution provider to someone who is the guide and someone who is asking, asking better and more effective questions. you know, i think one of the big the and this, this, i’ll blame the it sector for this is, this is, you know, back 20, 30, years ago, they were often called solution providers, right? what is your organization? we are a, you know, such and such and such and such software solution provider. so we provide solutions. and i think that the the better notion is we are a such a such question asker, because our role needs to be asking new and better questions. and you know, two two nods on this. one is, is, is one is to eric hoffer, who is a longshoreman turned business philosopher, or philosopher really, and, you know, he has this great quote about that human understood or human humanist came with the ability to ask questions. you know, answers can be given in grunts and gestures, but, but to to really be human, to ask and form a language, question is what separates us from other other animals. wait, you know, your your dog may indicate preference. you know, look at you, look at the popcorn. look at you. look at the popcorn. look at you, look at the popcorn. but they’re not but they can’t formulate the question, can i have some popcorn? or maybe even more importantly, would me eating popcorn be a good idea? right? so what
liz farr
what do i need to do to get my owner to give me pop
ed kless
popcorn? right? right? so they’re not the form. so that’s a separator for for us and and i think that that the lack of of businesses, lack of people to ask new questions of themselves, is what has led to a lot of social stagnation. we we have, we have lots of politicians with their plans, their 14 point plan solutions, and this is on both sides of the aisle. i’m not getting, you know, whatever they’ll have, they’ll have that. they’ll have their plan. but to me, it’s like, why we are we even asking the right questions? or maybe we just asking ourselves the same questions over and over and. we’re not getting anywhere, right, right? so how do we begin to transform these questions? and you know, this is a one of the great books about transformations, is even about transforming questions, and that’s peter block’s books. the answer to how is yes, where he says that oftentimes professionals or the customers of professionals come to them with with a how based questions, how do i do it? how long does it take? how much is it going to cost? how can you get people to change? how long is this going to take? how have other people done it successfully? all those are those how based questions that people come to the professional with, and he says, it’s the role of the professional say, i think you’re asking the wrong question here, right, right? so an example might be, if somebody says, how much is this going to cost? well, the real question is, not, how much is it going to cost, but what? what is that? what is the perceived value? this is, this is a transformation question that relates to something we earlier, we talked about in the in this, and that is getting to the value conversation. me telling you what my price is, which is what you know that is, is not the same as having a value conversation, where you understand what the perceived value is going to be, the upside potential is, and that’s got to happen first before we talk about price. because if we don’t any price might be too high, if you think that the perceived value is at or near zero,
liz farr
right, right? yeah, and that that book is one of my favorites, and one of my favorite yes questions that he has is not, instead of, how have other people done this. but what do we want to create together?
ed kless
yes, yes. yes. that is, and that is a if, when i do a session on creating a scope in organizations that effectively is the scope, right, i might even, i might even say now, that the transformative question that which is beyond what do we want to create, is what transformation do we want to make?
liz farr
right? yes. and he has another question in there. what is the question that, if i had the answer, would solve everything,
ed kless
would make you free. they actually it’s and he calls that the mother of all questions. he calls it the mother of the moaq, m, o, a, q, i think he has an acronym, the mother of all questions. what is the question that, if you had the answer, would make you free? yes, right,
liz farr
right, right. so how, how do we get accountants to learn to ask better questions.
ed kless
no notice what you just did there. liz,
liz farr
i asked, how
ed kless
question, how do, how do we right? so the question then becomes, is, you know what? what do we what do we need to do? right? not how can we get them, but what do we need to do? and the and the answer is, is we need to to begin to talk in the language of transformations to people. we need to have more conversations like this. i, you know, i there are some cliches that are really good. one of them is become the change in the world, become the change that you wish to see in the world. yes, it’s cliche, but it is absolutely 100% true.
liz farr
that is true. yeah. so,
ed kless
so what do we do? we have conversations like this one. we, we, we as we espouse to have these conversations whenever we possibly can. we invite people into communities of transformation, like threshold and all of those, but we extend invitations. another great book by peter block is on building community, and he says it’s all about framing the invitation, and he even has a frame for it. and i’ve used these, by the way, in my session descriptions at conferences. for years, i have used this. i’ll call it, you know, peter block-ian session description, and that says, this session, this session, what were this conversation? is dedicated to the possibility that, and you name, what that possibility is, that professionals could be better if they ignore ours and instead focus on creation of value. but that’s i’m going to state that right then the next thing is to say, is to say that there are barriers to this. doing this is really hard, making this transformation is really hard because it requires us to think differently than we have in the past. that’s what it requires something of us to come here and do something differently, if, however, if however you think you have the capability of thinking differently, or would like to explore the possibility of thinking difficulty. well, then we invite then i invite you to come to this session where that’s what we’re going to do is explore this possibility.
liz farr
yes, and this requires that the listeners, the students, take a more responsibility, take on more responsibility. they’re not just receiving an answer that they can go out and implement, right? but you have to think about what is my role in creating this change that i would like to experience?
ed kless
yeah, yeah, i have begun using in whenever i do sessions, it’s more than an hour. so usually, if i have to do something, that’s a four hour session or longer, maybe it’s even a day long program i institute what i call the pre-val, right? so it’s not an eval, it’s the pre-val, right? so you’re pre evaluating this, and the liz and the some of the, some, some of the questions are just this, you know, what, what, what do you? what do you, what, what are you going to bring to this? what are the risks that you are planning to take during this session?
liz farr
wow, right. yeah. and this, this brings to mind what joe pine wrote about most recently, the encapsulation process for making a transformation an experience, for moving an experience into the transformation realm.
ed kless
that’s right, which is what i would much rather see people do, rather than say that they have created, they are productizing their services. here’s, here’s the challenge. i’ll lay down and look, i think we can, we can help if those are who are interested in this, this is not easy. this is hard. but if you’re interested in, in working on, on with ron and i on. this is not how do we productize our services, but how do we experientialize our services?
liz farr
that is a harder thing to do.
ed kless
it is a harder thing to do because, again, it is going up the progression of economic value.
liz farr
yes, you know how, how can i turn tax return preparation into an experience? you know, i i’m just thinking off the top of my head, you know, i might make that more of an experience by talking to the customer about what their goals for the business are, and how can we improve this business to help them achieve those goals? am i on the right track?
ed kless
there you are. i mean, and look, this is where we can learn, i think, a lot from, from those that have gone before us, and have and have, have done this, you know. and i know it’s, it’s trite, but the great example is, is disney, you know. and what you know disney, disney’s transformative experience was about going to to experiences, right? he went from amusement park to theme park. he didn’t have rides, he had attractions. and the the language that was used in the shifts, and then, as a result, you go to disney. and you know, the joke is disney lines, right? is that you stand go, you’re you’re there, and you’re standing online for the ride. but they make even standing in line an experience.
liz farr
they do. so it’s, there’s stuff to look at, there’s stuff going on.
ed kless
so what is it that you’re just so that’s, that’s, that’s creating, what a service, and turning it into an experience. so same thing, what are we doing to take this, this tax return preparation, and turn it into an experience? and you know, whether that’s a welcome video from you saying, you know, hey, thanks. thanks for becoming one of our customers. we want to lead you on this experience of greater wealth transformation with etc. you put your script in there. use chat gpt to help you write it, let you know, and then that i wasn’t expecting that, you know, the right and that that’s how we begin to create experiences out of stuff that was previously a product. so again, moving up on the value chain, rather than down.
liz farr
yeah, would you know, there are some practitioners who also record a little loom video going over the return,
ed kless
great example, yep,
liz farr
yep. and then then they can just deliver the whole thing electronically so then they don’t have to set up a meeting and. go to the office and hope that the person shows up on time, and then spend 15 minutes chit chatting, and then finally, talk about the return. and meanwhile, you know the customer who doesn’t know anything about taxes, everything that the practitioner says just goes right over their head, and they don’t have unless they’re furiously taking notes, they instantly forget what was said. but if it’s in a little video, then this can be done asynchronously, and the customer can look at the video multiple times.
ed kless
and this is where, you know, i think ai comes into play here too. you know, i, i am, i am constantly using ai like dozens of times a day. and there’s a couple things that have just be seeming to emerge out of the ether on this, and one of them is, is, don’t, don’t think of ai as a tool. think of it as a teammate. yes, all right. that is not to personify it. it is does not have a soul. i do not think that we’re we are in danger, at least not yet. and i could be proven wrong on this of the singularity and being overtaken by by these things. it’s not going to, you know, decide to go into paper clip making mode and destroy the the earth by making as infinite number of paper clips, but, but i do that. but the second thing i want to talk about is, when you there’s so many people who say, well, that’s if i’m using ai that’s cheating.
liz farr
like, no, no,
ed kless
no, not. a few, not if you’re getting a if you’re do using ai effectively. and here’s an example of something that i have done, i have had a conversation where, where we were talking about, hey, this is the transformation that we want to help particular organization with. i’ve recorded it since i’m usually doing it on zoom, and i have otter running in the background, and i’ve gone in and taken the otter transcript and said, i want you to create a proposal based on this conversation and bang it comes out. now, do i then have to edit it and make some tweaks to it based on yes, i do, right. but paul dunn, the great paul dunn, maybe some of your listeners are familiar with with paul had a great post on linkedin, and he attributed to somebody else, but i’m going to attribute to paul. it’s just the way these things work sometimes. but he said it was, it’s 10, 80, 10, right? you spend about 10% of your time trying to develop the working by yourself to maybe you develop the prompt for ai. it let ai ai do 80% of the work, and then you do the last 10% of the work to put polish on it.
liz farr
yep, that
ed kless
works, you know, and it’s, and it’s not ai doing it. it’s you and ai. like, i cannot emphasize this point enough, because i think people get hung up on this is, like, did is this? this is you and ai, this is, it’s ai. is a transformative experience, or at least it has. least it has been for me.
liz farr
yes, yes, and i would agree with you that it is great at reflecting back what somebody else has said and what other people have reported on something and putting it into a digestible format so that you can understand what it was they were trying to say among all the ums and ahs and sentence fragments.
ed kless
exactly, exactly.
liz farr
yeah. now, now, what about pricing? you know, we we’ve already talked about, you know, hourly pricing is not appropriate for this, and fixed price billing is also not going to capture the value. so what are some models for pricing, transformations.
ed kless
you know, this is a great question liz, because the short answer is, is it is? i don’t know, because it’s emerging. we think, and when i say we, i’m talking about ron baker and myself. we think that it, that it’s subscription. we think that that’s, that’s the best, the best way to frame it right now, but we don’t, we honestly don’t know there may be other newer ways that emerge out of this, that that we’ll discover as we go through this reflective process, this discernment process, but, but right now, we’re like, yeah, we think subscription is probably the best way to do this. and, you know, we have, we have a definite like as we did with value pricing. we have a definition of of subscription pricing, and that is, you know, recurring payments for ever increasing value and and transformations, right? and it’s, and i forgot one part of it, and frictionless that, right? so it’s got to be frictionless as well. but by frictionless, what we mean is easy on, easy off. we are big believers in, in what robbie kellman baxter in her book, the forever transaction, talks about, and that is, is that that we have to have the cancel button up front, and the cancel has to be on, on it should it should be with 30 days notice on either side, on either side. and this is an important point, because what’s i think sometimes people get hung up on is as well, what if i, you know, enter into this relationship and it becomes abusive and they want too much for me and i can’t get well, you just cancel on them. you’re allowed to do that. you’re allowed to do that too, if you’re, if you’re, if you don’t think that that’s if it’s working for you. so cancelable within 30 days notice on either side and but make it easy on you know that just, let’s, let’s get started with this. you know, i think far too often, we have delayed this process of entering into a fiscal or fiduciary relationship to the detriment, i think, oftentimes, are professionals. and this is another point that peter block makes, is that oftentimes making the decision to do something is the most valuable work that a professional does. and if that’s the case, well that should probably be something that’s part of the paid engagement process helping you make that decision.
liz farr
yes, yes, because you you have to figure out, well, what role do you want me to take in this transformation? or will it even be a transformation? do you want me to be the extra set of hands, or do you want me to be the guide, the one who will help you to achieve something further up down the road?
ed kless
and now that’s exactly correct, yeah,
liz farr
yes, yes, well, i think that that just about ends the questions i have. do you have any final words for listeners about threshold or transformation, or,
ed kless
well, first professional baseball, professional baseball, i am, i guess this is going to kind of date this interview, but i’m vehemently opposed to what’s called realignment, which is, you know, having having teams from the national league and american league mushed together in divisions by geography, i would absolutely hate that was saying to somebody, i hope, i hope i am deceased before that actually happens. sort of sort of mean that, but anyway, but with regard to this and thanks, thanks for asking this. liz, but i’ve mentioned thresholdnow.com. go and read the revelation document if you go to thresholdnow.com/revelation, or just go to thresholdnow.com. and it’s on the homepage. we would love feedback on it, read, read the document. if you’ve got feedback, shoot us an email. it’s the best way. is ed@thresholdnow.com, and where i’m happy to respond to any emails on that. and if you think the document is something that’s is interesting to you, we’d love for you to join at the foundation level, the complimentary foundation level, become part of the movement. and then if you are so inclined, you know, bump up your to the paid membership to get those added benefits i talked about earlier, or engage directly with ron and i if you think that, that there’s some transformations you want to have take place inside your organization, you know, we work on that bespoke level as well, and that’s that that’s something that is that is always priced based on the perceived value of you so,
liz farr
and i see that i forgot one question, one question that just about everyone i have on the podcast, yeah, where do you see the accounting profession in 10 years?
ed kless
and i’ll incorporate a baseball code in here that you know. yogi berra said, predictions are hard, especially about the future. i. uh, look, i think that there will, there will be accounting professionals here 10, 10, years from now. i do think that the role and the tasks that they are doing will be utterly unrecognizable to people today, but that’s not even 10 years from now. like i am, i’m firmly convinced that with the the arrival and it’s, it’s very nascent right now, of agentic ai, we are about to witness some major shifts, transformations, if you will, in in what’s, what’s happening from an accounting perspective. i mean, i think i think it’s really going to be big like so it might not even be recognizable a year from now.
liz farr
well, that, i think, is encouraging, and it also tells me, you know, if your prediction is correct, then i will never be able to go back and work in public accounting again, because i won’t know how to do it.
ed kless
well you might actually, because it might be more, more of something that you are are good at with liz, which is having conversations and building relationships. because that’s what i think that it will be more about
liz farr
that’s very true. very true. now, you already mentioned a place to connect with you, and ron is threshold. now, where else should listeners go to connect with you?
ed kless
if you want to listen to the soul of enterprise. the website for that is thesoulofenterprise.com. you can find how to subscribe in your podcast player of choice on that website, love for you to engage there as well. that just, just so you know, all of these things are going to be rolling into one brand, under the threshold brand, not that the soul of enterprise is going away in the short term, but we’ve already rebranded it as the soul of enterprise by threshold. so that’s, that’s, that’s the first step in the process, so in our transformation.
liz farr
well, that’s exciting, and i can’t wait to see what you and ron transform the accounting world and your corner of the universe into.
ed kless
well, we look forward to it, and it is as we started this interview. it is about increasing human flourishing. so we are excited to be a part of this movement. so thanks liz for giving me the opportunity to share it with your audience. it’s a it’s a great honor that that ron and i then the word audience is important to us because they any audience is, by definition, an active participant and in and because they are spending their time and investing their time in in us, in you, and i, in you, and i having this conversation, and i have of a great admiration and a great gratitude toward toward people who are willing to do that.