Azeem Azhar, creator of Exponential View, on what rapid digitalisation has in store for CAs

Azeem Azhar was exposed to accountancy from an early age. His parents, both accountants, ran a small practice in east London in the 1980s. It meant familiarity with financial statements, and the scale and inner workings of companies, by the age of 10. “You start with a lot of scepticism around what you read in final reports,” laughs Azhar when explaining the influence of those formative years.

Fast forward a few decades and Azhar has gone on to establish himself as a credible entrepreneur and one of the world’s leading voices on technology. His internet incubator eSouk raised $15m (£11m) at the turn of the century. More recently, his customer intelligence service PeerIndex was acquired by market leaders Brandwatch in 2014, which itself was sold to Cision for $450m in 2021. Since then, Azhar has concentrated on building his thought leadership platform, Exponential View, which collects his journalism on the intersection of technology and business, and counts Spotify CEO Daniel Ek among its fans. A book, Exponential, published by Penguin Random House, followed last year.

Technology is a double-edged sword for CAs. While it has great value in automating repetitive, transactional tasks, it also raises philosophical questions about the role of the CA and the general direction of the accountancy profession. If technology is taking on – and simplifying – a greater part of the traditional workload, how does accountancy ensure it stays relevant and adds value as a profession? Azhar knows these anxieties around the transformative power of technology well.

“Largely, I don’t see a wilful ignorance around technology. But I see questions of not understanding what can be done – or sometimes a fear of having to do something in the first place,” he says. “There are lots of value-added tasks, apart from keeping machines running.

“I look at the relationship with my accountant and my business and it’s a much more interactive one. I explain the things we have coming up, and he provides what you might call structuring advice. It’s a totally different relationship from 15 years ago. And it’s partly because I enter all my business on an accounting platform. It might be a day or two out, but my accountant knows exactly what’s going on. For a small business working with a small accountancy firm, that’s changed the game.”

Trust and technology

That pivot towards advisory services, empowered rather than replaced by technology, is a story with which many CAs will have become familiar in recent years. And while the numbers remain critically important, underpinning and informing everything the accountant does, it’s that nurturing of personal relationships – building professional trust – which technology helps to facilitate. Azhar sees the future of accountancy as being built on those interpersonal skills.

“The technology we have is not great at making choices because we can’t encode all of the trade-offs that we’re juggling in our head,” he says. “A simple example is the type of employee benefits you offer, where you’re judging employee retention against risk. That is not something you can put into an algorithm and get a good answer for. An accountant can help paint a full picture and act as a sounding board to the discussion. That’s a natural evolution.

“Judgement is really important – and judgement is not yet automated. Good accountants for SMEs are able to intuit what’s going on with their clients. These new tools that are becoming available to the profession will only make performance better. Surgeons are better now they have laparoscopic surgery tools, not just saws and scalpels. There are more of them, they’re doing a better job and survivability is higher. I see that trend applying to other professions – accountancy being one of them.”

But, drawing on those years helping out, and long summers of data entry, at his parent’s small practice, Azhar recognises that achieving shifts in professional behaviour and service offerings via advances in technology is harder than it sounds.

“It was really interesting to see the difference between my dad, who was still ledger-based, and my mum who was starting to computerise. She brought a computer into the practice in 1981. And what was fascinating is how processes get deeply embedded,” he explains. “My personal computer kept upgrading, but my mum didn’t change her computer until 1995, when it finally gave up the ghost. All those shifts that you might think of as advantages – like moving to a mouse – have huge retraining costs on the part of a small accounting practice. I think that’s a microcosm of the things companies deal with now.”

Knowledge gap

There’s another crucial challenge that CAs will need to wrangle as technology becomes more complex. And it can be summed up in one word: intangibles. The emergence and rapid growth of technology-based behemoths – such as Apple, Facebook/Meta, Amazon and TikTok/ByteDance – is stretching the application of traditional accounting methods, as well as the preparation and legibility of financial statements. In this new world, intangible assets dwarf property, plant and equipment.

“Back in the 80s, chatting to my dad, he’d say ‘Oh, that’s just goodwill’. And it didn’t really matter that much because it was more of a rounding error back then. Now, that line item is much bigger,” says Azhar. “There are going to be more intangible assets, with customer information being the most critical. Helping the client understand that it’s got value, above what you may have to report statutorily, needs to be a discussion, as there may be a misalignment between the expectations of reporting standards and what actually matters to your business.”

Azhar illustrates this shift in balance sheets towards larger and larger intangibles by comparing his hot tip for the next decade of transformative technology – the intersection of AI and biology – to traditional industrial processes. “The way that you currently produce a plastic is that you buy lots of oil at a certain price, you put it through this value-added process, which has capex and opex attached to it, and out comes a finished product. All the way along, you have a tangible asset and the value is in that,” he says.

“In this new biological arena, the real value will not be in the feedstock, which will be sugar, water, carbon dioxide, oxygen, energy and heat. The real value will be in the intangibles: the design of the micro-organism, the knockout of genes, and what it ends up growing into within a controlled environment. Now, there’s going to be some capex, but it’s not a physical manufacturing process of, ‘I took a raw material, I added value to it, shaped it into an intermediary, took it along and turned it into a final product.’

“And that’s the shift we’ve been seeing in the economy for the past 40 years. [The cost burden] has really moved to the early stages – to that R&D stage. Think about your iPhone. It sells for about $1,200, but the total bill of materials inside it is about $400. The rest is Apple’s knowhow, design and intellectual property. The value starts around the creation of the design and the ideas – and that’s all driven by intangible assets. It speaks a lot about the challenges of old-style systems, particularly around accounting, and therefore around how companies raise capital.”

Along these lines, Azhar sees the future of the profession, and the standards that dictate how company value is measured and reported, as embracing some of the ambiguities raised by technology. Otherwise, accountancy may risk failing to deliver on its promise of providing accuracy and insight to stakeholders. While that may spook generations of CAs trained to achieve technical precision, Azhar suggests that all-important quantitative rigour need not be sacrificed to capture the complexity of tomorrow’s companies.

“Asset allocators, portfolio managers, derivative traders, venture capitalists and scientists deal in probabilities and uncertainties; accountants deal in certainties,” he says. “There is almost epistemic challenge in trying to square that circle. But if you look at the companies that have [embraced technology], they have been able to navigate uncertainty. They have this sense that delivering certainty is subordinate to exploration. And the deal with investors, your board and your shareholders, to whom you’re accountable, is that we’re going to do some experimentation.”

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