70% of Australian accounting practices have no clear strategy for their business.
The strategic error
According to Michael Porter the worst strategic error is to be stuck in the middle, or to try simultaneously to pursue all the strategies (i.e. low cost, differentiation, and focus). This results in mediocrity and low performance, because the three strategies are in conflict and cannot be successfully implemented at the same time. A business practicing more than one strategy loses focus, and hence a clear direction for the future business trajectory cannot be established.
Accounting practices stuck-in-the middle
Seventy percent of accounting practices have stuck-in-the-middle strategies. They end up in this position by either trying to be ‘all things to all men’, or by being strategically lazy. It is all too hard for these practices to make a decision so they take the default option, and don’t decide on any strategy. If Porter could speak to each of these practices he would say ‘it’s embarrassingly simple– just pick one the three strategies and align with it’.
Michael Porter also said that strategy is as much about deciding what a firm is ‘not going to do’ as it’s about deciding what the business ‘is going to do‘. Similar thoughts were echoed by Steve Jobs at Apple. He said ‘I am most proud, not of the products we made (like the iPhone for example), but all the products we chose not to make’.
For practices that are stuck in the middle it is not all doom and gloom. To some of them ‘stuck in the middle’ means offering– medium cost, medium quality. Practices can make a reasonable living doing this if they are flexible, nimble, creative, and innovative. The problem of course is that a lot of these stuck-in-the-middle practices are none of these things, so returns are low.