Download the complete White Paper: The Seven MegaTrends of Professional Services
Continued from Responding to Mega Trends – Create a highly networked firm. Full table of contents below.
Evolve your business models
In 1748 Benjamin Franklin first wrote the credo that seems to have become the foundation of modern society: “Time is money.” In 1865 Karl Marx supported that, proposing the “labor theory of value,” stating that value is proportional to the labor used. Contemporary professionals, by charging clients based on the time they spend working for them, are in effect modern-day Marxists. Hourly billing, the strategic foundation of many professional services firms, is a major constraint on success in a world driven by the seven MegaTrends. In order to create more value for clients and to lock them in, professionals need to find ways of charging that are more clearly related to the value created for the client.
An excellent example is providing risk services to clients. The MegaTrend of Governance means that companies have an entire array of new risks to manage, in addition to the usual strategic and operational risks. CEOs and CFOs who watch their peers regularly head off to the penitentiary are pointedly reminded of the personal risks involved. Yet assisting organizations to manage risk is not best done by the hour. Ernst & Young has introduced a suite of online services to help their clients manage risk effectively, including a board governance tool that clients can use first to identify and analyze risks, and then to generate action plans to mitigate those risks. The world’s largest law firm, Clifford Chance, has introduced a similar range of tools and systems to help clients manage their compliance risk.
Working with clients in knowledge-based relationships requires new approaches to creating value, and to extracting part of that value for yourself. While hourly billing is not set to die in a hurry, new pricing models are rapidly gaining currency. US regional law firm Powell Goldstein works with its clients that have implemented Six Sigma to meet their internal Six Sigma targets, and charges fees by how its assists its clients in achieving those objectives. Professionals must innovate not just in their field of expertise, but also in how they deliver value to clients.
The seven MegaTrends have emerged from a wide variety of factors. The single most important of these is the swift advance of technology and how we as a society are responding. This certainly does not mean that technology also provides all the solutions. However the seven MegaTrends are equally impacting the nature of business technologies available. Increasingly, technology facilitates modularization, enables transparency, supports governance, and gives firms flexibility in configuring how they apply their expertise to their clients’ problems. The challenge for professional firms today is both to implement technologies that will give them great flexibility in their business operations, and to use this enabling platform to build the relationships, transparency, networks, business models, and strategies that will create extraordinary business success.
Table of contents
Responding to the MegaTrends
- Evolve Your Business Models