Recently in Professional services Category

On week I delivered a keynote in London on behalf of LexisNexis to a select group of senior executives of large professional services firms. The broad theme was the future of professional services and in particular practice management. In my speech I emphasized the network perspective on professional firms.

In an economy where value is increasingly based on deep professional knowledge and relationships, it is increasingly valid to ask why professional firms exist. Why don’t professionals practice as individuals, and collaborate with other professionals simply as client situations require it? In fact there is currently a significant shift to professionals working independently or in very small groups. Of course there are a number of good answers to this. Most importantly, the existence of professional firms should facilitate different expertise to be brought together seamlessly to address clients’ issues and create uniquely valuable offerings.

However this is only valid if the firm is well connected internally. Professionals need to be aware of each others’ expertise, and actively bring that together in teams to meet client needs. I have described some of the key issues underlying that in my presentation Tapping Networks to Bring the Best of the Firm to Clients that I did at the Network Roundtable conference last November.

Yesterday I gave the opening keynote at the Managing Partners Forum at Byron Bay, on the topic of Creating the Future of Professional Services, focusing on how to create differentiation in a highly competitive globalized market. The event brought together a small and exclusive group of the Managing Partners of a wide variety of major law firms. The two presentations following my keynote were from Gavin Bell, the Managing Partner of Freehills, Australia’s largest law firm, and David Childs, the Managing Partner of Clifford Chance, the largest law firm in the world. The organizers, Chilli, told me they’d turned away many registrations, keeping the attendee level exclusively at top executive level.

Unfortunately I was only able to stay for these first three sessions, however the themes of the presentations and the subsequent free-wheeling discussion between attending managing partners underlined some of the major issues for law firms today:

* Effectively developing and implementing strategy in a partnership, and the degree to which the strategy process is centralized.
* Strategic choices in geographical expansion (e.g. into China) in a world of law firm globalization.
* Defining the role and ability to enforce policies of the Managing Partner in a broad-based partnership.
* Choices between lock-step (seniority-based) and performance-based compensation, taking into account propensity to collaborate and retaining senior partners.
* Whether and how to outsource both back-office functions and legal support to low-cost countries.
* New capital structures, including public listing.
* Managing cultural change in firmly established organizational structures.
* The ability to attract and retain talented staff as the ultimate driver of firm success, in the face of global competition for talent.

The UK magazine Legal Week has just published an article co-authored by myself and Josh Bottomley, the Managing Director of LexisNexis UK, titled Managing a Law Firm: A networked world.

The genesis of the article is that I will be delivering the keynote to a group of Managing Partners of major law firms in London in late February 2008 for an event organized by LexisNexis. As a prelude to the event, I wrote this article in collaboration with Josh.

The article is available on the Legal Week website, and also below.

Managing a Law Firm: A networked world

Five key factors are driving today’s economy:
* client sophistication;
* connection;
* transparency;
* governance; and
* modularisation.

These forces are steering the professional services sector towards commoditisation, where clients perceive minimal differences between most offerings and often squeeze their suppliers on fees. Only legal services suppliers that actively engage their clients in deep, collaborative relationships are able to differentiate themselves.

We suggest four approaches to improve management, customer service and ultimately profitability.

On December 5 I am giving a “View from the Top” online presentation to US and European members of the Association of Executive Search Consultants on Developing Knowledge-Based Client Relationships:The Key to Avoiding Commoditization.

There is no question that commoditization is one of the most powerful driving forces in the global economy. While this has been starkly obvious in product markets such as textiles and manufactured goods, commoditization is also fundamentally shaping professional service industries.

If clients believe that professional firms are replaceable, then they are commodities. Even if firms boast top talent and long-standing relationships, it is self-deception if you believe no-one else can do the work. The ‘black-box’ style of professonal services that relies purely on expertise is dated, and encourages clients to shop around. Ultimately the only thing that cannot be replicated and commoditized is a deep, collaborative, “knowledge-based” relationship. The field of competition for professional firms is increasingly the ability to build these high levels of engagement with their clients. This requires, among other capabilities, building effective networks to deliver value to their clients.

The slides for the AESC session are below (as usual, do not expect these to make complete sense without my accompanying presentation):

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For more detail you can download chapters from Developing Knowledge-Based Client Relationships: Chapter 1 on the big picture of professional services and knowledge-based relationships, and Chapter 6 on implementing key client programs.

When I was in Singapore recently to deliver a keynote for a client, I was interviewed by Radio Singapore International.

Click here for the transcript and podcast of the interview on the Radio Singapore website – the complete interview is also below.

While it was a brief interview focused on professional services, a few themes emerged. One is that the economy is shifting to be predominantly based on professional services. Products and technology-based services are increasingly commoditized, however specialist expertise is becoming more valuable. If a professional has truly world class expertise, it doesn’t matter where he or she is located. However collaboration – or what I term knowledge-based relationships – is what makes that professional expertise valuable.

In short, the future of the global economy will increasingly be focused on professional services, not in the narrow sense of law, accounting, consulting and so on, but in the broader sense of deep specialist expertise applied to create value. The art and science of managing professional services firms and economies is a critical domain.

Here is the interview transcript:

Join me, Melanie Yip in Business Ideas this week as I speak with Ross Dawson, CEO of international consulting firm Advanced Human Technologies to find out.

RD: Traditionally, professional services have been what we think of as professions - law, accounting, consulting and so on. Yet, more and more professional services are becoming a larger part of the economy. Today, 82% of the US economy is professional services. It is also a wide variety of other services. But what professional services are about nowadays is the application of specialist knowledge. As the economy advances, and more information is available, a professional is one who has deep specialist knowledge. And it helps their clients as a result of that.

A recent article in Lawyers Weekly magazine titled Firms warned to embrace Web 2.0 opens as follows:

AUSTRALIAN LAW firms risk losing clients as well as talent if they don’t make use of Web 2.0 technologies, an expert warns.

Ross Dawson, chairman of Future Exploration Network, said that Australian firms are lagging far behind their US and UK counterparts, which are leading the way when it comes to adopting new web technologies.

“If you look at the corporate sector globally, the industry that has been one of the first to take up blogs has been the legal industry, primarily in the US and UK. So you’ve had a proliferation of blogs that are both external in terms of providing clients with information and internal ones used for a wide variety of means including project management, knowledge management, and effective internal communication,” Dawson said.

“One of the fundamental issues is that organisations in Australia tend to be conservative. And while it’s arguable the legal industry is also quite conservative in other countries, that can certainly be said about the Australian legal industry.”

Dawson, who specialises in assisting major global organisations to develop future strategies and innovation capabilities, said technologies such as blogs, wikis, social networks, RSS feeds and social bookmarking are of most direct relevance to information- and knowledge-centric organisations such as law firms.

“Ultimately [if you don’t embrace these technologies] you’ll lose to competitors in terms of their use of these tools and their ability to bring people together and collaborate. There is now a whole suite of technologies and tools and approaches for this purpose and if organisations don’t take that up they are not as competitive or effective as others.

On Thursday I was in Singapore to give a keynote speech on The Future of Professional Services for clients and prospects of Epicor, a mid-tier enterprise software firm that has developed a substantial global market for its professional services software suite.

Some of the issues I covered were the Seven MegaTrends of Professional Services, building knowledge-based relationships, organizational networks, and professional services strategy.

One of anecdotes I told was about how Keith Reinhard, now Chairman Emeritus of advertising giant DDB Worldwide, has been a consistent innovator in advertising and professional services. Below is the case study on DDB Worldwide which is in Chapter 11 (on value-based pricing) of my book Developing Knowledge-Based Client Relationships, followed by an excerpt from Chapter 6 (which can be downloaded in full from here) on Keith’s ideas on relationship agreements.

The image below refers to the delightful story at the end of the case study. This range of flavored drinking water for cats was created by DDB and is licensed to provide an ongoing revenue stream.

This morning I gave an extended keynote session at the annual offsite of a very interesting global professional services network, which brought together the leaders of the member firms. International networks in accounting, law, consulting, and other professional services have flourished over the last years as small to mid-sized firms have sought the benefits of belonging to a network. Brand, access to resources, providing a more comprehensive offering, and being able to offer integrated services to clients that are active overseas all make it an attractive proposition.

Yet the reality is that the degree of collaboration within most of these networks is, to put it kindly, far less than it could be. There is often little awareness of the distinctive capabilities of other firms in the network, let alone the inclination to bring them business or to integrate their services into what they offer their clients.

As such, my keynote address was on the Power of Collaboration, covering among other issues the Seven MegaTrends of Professional Services, knowledge-based relationships, organizational networks, trust-building, and core strategy issues for professional services firms.

I have long said that networks of professional firms have the potential to challenge and rival the major professional firms. We’ve seen many examples emerge, and clients are increasingly happy to deal with networked firms. I’ve experienced this directly with Future Exploration Network, where we’ve run significant consulting projects drawing on a global network of resources, and been chosen in preference to big-name consulting firms. For any professional services network, there is absolutely extraordinary potential in being more collaborative. Yet there is also the reality of significant cultural and behavioral change being required from member firms for this to happen.

Professional services guru David Maister has announced that his next book is going to be self-published. He says:

Ask any business author who has published a book what the experience was like: for the vast majority, the horror stories are endless.

Basically, publishers don’t actually add any value. Yes, they can edit a manuscript and get a book typeset, but both of those things are freely available as stand-alone services to anyone.
Publishers, like record companies, would be incredibly valuable if they marketed your book for you – most authors can use all the marketing help they can get. But just like the record business, the truth is that publishers don’t do any marketing for you unless you’re already a star. Since so few books succeed, it’s not worth them spending anything on an individual book: they put a portfolio of product out there and wait to see what succeeds.

In my book Living Networks I proposed a basic “Creative Career” trajectory, illustrated below.

SAP has just released a Though Leadership White Paper on Service Delivery Innovation, which I wrote with Matthew Horenkamp of SAP America. Service Delivery Innovation is an absolutely critical issue for professional firms. Firms’ ability to do this well will undoubtedly be a major factor in determining the winners and losers over the next decade. See the paper for more detail…

SAP White Paper: Service Delivery Innovation

Click here to download the complete Thought Leadership White Paper on Service Delivery Innovation. Executive Summary and Table of Contents below.

Executive Summary

A variety of forces shape the professional services industry – from fierce competition and globalization to the modularization of business processes and technology. Clients want professional services firms to deliver cost-effective services in smaller, fixed-price contracts, but at the same time want to retain highly seasoned professionals equipped to address their most challenging industry-specific process needs.

To succeed in this environment, professional services firms must continually improve their service delivery methods to increase client value and profitability and lower costs. This involves implementing more efficient resourcing and partnering processes, creatively packaging services, and cocreating value with clients. However, for any of these endeavors to work, a firm must have a foundation that supports global processes and workflows that enhance client and supplier collaboration. For the firms that succeed, the rewards are great. They can differentiate themselves in a crowded marketplace, lock in loyal clients, use internal and external resources more profitably, and improve time to market.

I recently pointed to the launch of the second edition of Developing Knowledge-Based Client Relationships, including the free download of Chapter 1 of the book. Following on from this, the other free chapter from the book is
Chapter 6 - Enhancing Client Relationship Capabilities: Implementing Key Client Programs.

Over the last decade most major organizations have implemented key client programs or strategic account initiatives in various forms. Technology and institutional financial services organizations got there a little earlier in the piece, while most large professional services firms have developed solid initiatives just in the course of this decade.The fundamental issue is how organizations continually enhance their capabilities at client relationships. Whatever their organizational abilities at client relationships, they must develop these further over time. Increasingly the field of play that distinguishes competitors, particularly in professional services, are the firm-wide capabilities in engaging in collaborative, knowledge-based relationships. In this chapter I look in detail at the five domains that organizations must address to enhance their client relationship capabilities, as illustrated in the diagram below.

However the most vital issues are in the realities of how key client programs are successfully established and implemented. The majority of these initiatives experience limited success. The chapter goes into detail on launching programs, selecting key clients, segmentation, remuneration, developing client strategies, establishing client action plans, and more of the nitty-gritty of making key client programs work. Have a read.

One of my deepest interests is professional networks – how groups of independent professionals coalesce to serve clients. I’ve written about professional networks in both of my books, and this will be a central theme of one of my future books. Future Exploration Network is my own implementation of a professional network, in which we bring together global best-of-breed consultants and thinkers as required for specific client projects around the world.

One of the more interesting and successful professional networks I’ve seen is Connect Marketing in Australia, led by the energetic Carolyn Stafford. This started from a series of networking breakfasts for marketing professionals. It has now grown to a national network of professionals, with Connect providing clients with introductions to appropriate professionals, a series of packaged offerings, and the ability to create ad-hoc teams for specific projects. While Connect focuses on the small to medium size sector, it also does work for some top global brands.

Carolyn, as part of her own very successful promotion efforts, has written a book, Small Business, Big Brand, that provides 33 marketing tips for business, together with a wealth of case studies. There is also a mini version of the book with just 5 tips, which Carolyn has kindly allowed me to put on my blog – you can download it for free here. You can also purchase the physical book here. The downloadable mini version includes a case study on Future Exploration Network on how we promoted the Future of Media Summit 2006, titled “Stop wasting your money on ADVERTISING”.

This section of the ebook, including the Future Exploration Network case study, is below.

Download the complete White Paper: The Seven MegaTrends of Professional Services
Continued from Responding to Mega Trends - Evolve your business models. Full table of contents below.

Developing and implementing robust strategies

Professionals tend to focus on their domain of expertise rather than developing and implementing strategies for their firms. Yet in the face of powerful driving trends, it is clear that traditional approaches to providing professional services are under threat. Professionals need to become effective strategists, by setting and implementing strategies that go beyond simply their selection of practice areas and office locations.

One of the key issues for professionals is their positioning. There are four core professional services models, as illustrated in Figure 1. This is created by examining two key aspects to how firms create value for clients. On the one hand, firms can deliver their services either as a black-box, or using knowledge-based approaches, as described in the previous section. The other dimension is that of the firm’s domain of expertise, which can either be content, or the actual process of creating knowledge. Mapping these two dimensions against each other yields four core professional services models:

• Ask the expert. The history and tradition of professional services is centered on humble clients asking experts for their wisdom and advice. The professional has deep knowledge in a specific area of content, and delivers his or her advice as a black-box service. This model certainly has a future, but this is not where the demand lies.
• Creative ideas. In this domain, a company knows how to come up with great ideas, yet just delivers its brilliant ideas to its clients once they’re done. This is how the advertising industry, for example, has traditionally worked. Again, this model is becoming harder to sustain, and many professionals in this space are starting to shift their approaches.
• Outcome facilitation. A rapidly growing field is that of assisting clients to come up with the answers for themselves. Many design and innovation firms have build expertise in the processes of creating great ideas, and apply these from within their client organizations. Professionals in many other fields are starting to work with their clients in this way.
• Collaborative solutions. The professionals that have deep content expertise, yet deliver that using knowledge-based approaches, are essentially collaborating with their clients to create solutions. While this is by no means the only way to position yourself as a professional, this is where the market is shifting, not least by client demand.

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.

Download the complete White Paper: The Seven MegaTrends of Professional Services
Continued from Responding to Mega Trends - Build strategic transparency. Full table of contents below.

Create a highly networked firm

Many professional services organizations are not really firms, they are a set of individual professionals working under the one banner. If, however, firms can bring together deep specialist expertise across their organizations, and integrate and apply it in ways designed specifically for their clients, they can create a uniquely relevant offering that no other firm can match. The value firms can create in this way both transcends and takes advantage of the seven MegaTrends of professional services.

Cross-selling is a hot topic in most professional services firms. In order to cross-sell services to existing clients, four conditions must be met. The first is that the relationship leader must be aware of the expertise of his or her colleagues. The second is a broad understanding of that person’s or department’s expertise, and how it can be applied to create value for clients. The third is confidence in the capabilities of the colleague. The fourth is personal trust that the colleague will do the right thing and effectively fulfil their role as a team member in working with the client. The reality is that in larger firms, spanning a variety of practices, locations, major clients, and even countries, these four conditions are met in only a fraction of cases. The perfectly networked firm, where all professionals are able and willing to draw in any other professional in the firm, is a pipe dream. Yet even slightly improving the internal networks in the firm along these four key dimensions will result in significantly better performance.

A rapidly emerging domain of management science, social network analysis, helps professional services leaders to gain deep insights into the essence of their structure and how their resources are combined to work with clients. These kinds of tools can assist greatly, by identifying blockages and opportunities, and providing a template for building truly networked organizations.