Posted , in Business model
Will the audit challenger brand of the future look like this?
Our recent report on the audit industry argues that there’s a role for a challenger brand in the audit industry. But what would it look like? We sent an intrepid analyst into the future to find out…
THE SCENE: THE SPARKLING FOYER OF AUDITMAGIC, INC.
THE DATE: NOVEMBER 2, 2029.
ANALYST: I’m speaking to you today from the control centre of Auditmagic, the firm that’s shaking the audit business to its foundations. Around me are screens, showing in real time the amount of data being gathered and checked by this extraordinary business. And, of course, it’s not just financial data that’s being gathered here, but environmental data, information on gender diversity and equal pay, and a whole host of other areas. I can see data coming in from operations in Asia, from Europe, and, no doubt in the future, from the proposed missions to Mars. With me is AuditMagic’s Chief Executive, Melanie Fremantle. Melanie, this is a remarkable achievement. How did you do it?
MELANIE FREMANTLE: Well, it wasn’t just me, of course! [LAUGHS] My honest view is that this was a disruption waiting to happen. Change couldn’t have come too soon. It may have taken the finance function by surprise, but there were plenty of other people in organisations who could read the writing on the wall…
ANALYST: … Which was?
MELANIE FREMANTLE: That technology was going to change everything. At the time we started, almost everyone’s attention, on both the supply and demand side, was focused on what the regulator might do next. Yet it was quite obvious that technology was opening up all sorts of possibilities when it came to both the scope of the audit process—who talks about sampling now?—and its efficiency. Once we’d built the ‘bots and algorithms that could ensure our data gathering software could adapt to the systems and infrastructure of any organisation, then there really wasn’t anything that could stop us. As you can see when you look around you, none of this looks like the office of an audit firm. We don’t have ranks of people at banks of desks, trawling through figures and reports. We have people who write programmes, data scientists and analysts.
ANALYST: But you don’t have many?
MELANIE FREMANTLE: That’s true. We looked at the people-less factors that were being built 10 years ago and asked ourselves why we couldn’t apply that same thinking to professional services. Of course, there’s plenty of complexity in what we’ve designed. We’ve had to design systems that monitor systems otherwise the traditional audit firms would have simply reinvented themselves as the people who check systems.
ANALYST: You haven’t completely replaced those audit firms, have you?
MELANIE FREMANTLE: That’s also true, and why would we want to. It was never part of our plan to offer audit opinions. That’s high-risk work that’s rightly very expensive to provide, and it’s simply not the market we’re in. We have decent margins because we use a lot of technology, not because we charge high prices.
ANALYST: Was success just about technology?
MELANIE FREMANTLE: [LAUGHS AGAIN.] No, that was a big lesson for us. We thought that, if we developed clever software, that would be enough, but we quickly realised we had to look and sound different. We had to rock up with the coolest-sounding software on the planet. Suits were banned: Everyone is in jeans and T-shirts. In retrospect, we realise it was classic challenger brand stuff.
ANALYST: Hence the name?
MELANIE FREMANTLE: Indeed. I mean we could hardly call ourselves XY&Z Partners, could we? Getting organisations to change the way they bought audit services depended on two things. The first was to get them to recognise that what they’d thought of as one thing—the audit process—was in fact two things: A data gathering process, that was highly dependent on technology; and the traditional audit opinion. Once we’d got them over that conceptual barrier, the next challenge was to persuade them that they could give the data gathering work, not to one of the generic tech IT behemoths, but to a virtual start up.
ANALYST: And how did you manage that?
MELANIE FREMANTLE: By being cool. It sounds silly, but never underestimate the magnetic pull of being seen to be cool. You’d think audit committees are some of the most conservative collections of people on the planet, and they can be, but there’s always been plenty of latent frustration there. When we offered them an audit that used data and advanced analytics to predict problems, not simply report them, they were all over us. They wanted to disrupt audit: We just gave them the means.
ANALYST: So, what’s next?
MELANIE FREMANTLE: That’s a tough one to answer. We’ve got a commanding share of the audit data gathering market, so we could spend the next 10 years hoovering up the rest. Or…
MELANIE FREMANTLE: We could sell ourselves to an audit firm.