Seven MegaTrends of Professional Services – #4 Transparency

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Continued from Connectivity. Full table of contents below.

MegaTrend Four: Transparency

On October 25, 2004, the board of directors of financial services conglomerate Marsh & McLennan announced “significant reforms to the business model… which will be rooted in transparency.” The controversy on the payments its Marsh insurance brokerage arm was making to insurers, unbeknownst to its clients, resulted in a settlement of $850 million to policyholders. While this tale relates to another MegaTrend—that of Governance—the result is greater transparency. Transparency to clients, to the market, to regulators, and often even to competitors.

Transparency is in fact one of the most powerful trends across all of business and society, hardly just professional services. One of the early catch-cries of the digital revolution was “information wants to be free.” In a world of email and the Internet, it’s certainly very easy for it to escape. The Internal Memos website claims to be the Internet’s largest collection of corporate documents and internal communication, providing a home for any company documents that may have been liberated by disgruntled employees. Clients and competitors can login and have a peek if they wish. At a broader social level, the presence of cameras—often video cameras—in many mobile phones today means that incidents, accidents, and misbehavior can be seen by all, whether or not a television crew is there to capture the moment.

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Seven MegaTrends of Professional Services – #3 Connectivity

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Continued from #2 Governance. Full table of contents below.

MegaTrend Three: Connectivity

As we bustle about with Blackberries, mobile phones, WiFi laptops, and for the novelty seekers sometimes an entire armful of devices, we can now consider ourselves connected. Aside from when they’re out hiking in vast expanses, airplanes are for most businesspeople the last space where they’re more than minutes from a broadband connection. Not for much longer.

For knowledge workers, most of whose daily working material can be zipped about the globe in seconds, this is indeed a different world from when phone, letter, and fax were the primary ways of communicating. Certainly the first implication is clients’ expectation of faster responses. But it goes far beyond this. For example instant messaging, which allows you to see whether your counterpart is present and to rapidly exchange brief missives, is the antithesis of ponderous, formal communication. Thirty-six percent of over 400 professionals who participated in a webcast I did last year indicated they use instant messaging with their clients. This is just the beginning. These new forms of interaction start to change the entire client-professional relationship. The use of informal, highly interactive communication throughout a professional engagement means that clients feel they are part of the process. Increasingly, they are. Professional work is becoming visible, and the path towards client participation has begun.

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Seven MegaTrends of Professional Services – #2 Governance

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Continued from #1 – Client Sophistication. Full table of contents below.

MegaTrend Two: Governance

The cowboy days are over. In the space of a couple of years at the beginning of the century, the business world shifted dramatically. Enron, WorldCom, Arthur Andersen, and similar debacles in other parts of the world, such as Parmalat in Italy and HIH in Australia, demonstrated to the investing public that companies weren’t to be trusted. Ever-ready with voter-friendly legislation, US Congress swiftly enacted the Sarbanes-Oxley bill, which put strict measures in place on public companies and their auditors to ensure strong governance.

The rise of governance as a key driver in business impacts professional services firms across the board. The first driver is in how clients deal with their professional services providers. Sarbanes-Oxley specifically legislates how audit firms can and cannot work with their clients. However in a world in which regulators, investors, and media commentators are keenly seeking potential transgressions, few companies are prepared to test the boundaries.

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The Seven MegaTrends of Professional Services – #1 Client Sophistication

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Continued from Introduction. Full table of contents below.

MegaTrend One: Client Sophistication

What do you prefer? A sophisticated client, or an unsophisticated one? It’s an interesting issue to debate with professionals. Some say they like unsophisticated clients, because, as they usually express a little more euphemistically, they can take advantage of them (for a little while, anyway). Others prefer sophisticated clients, as they know what to expect, they know how to work effectively with professionals, the professionals can learn from their clients (as they must to keep ahead!), and usually the opportunities are far larger.

Irrespective of what professionals want, the reality is that professional services clients are becoming increasingly sophisticated. The rubes off the street that you can awe into silence and charge like a wounded bull without protest are rather thin on the ground these days.

The drive to greater client sophistication has in turn been created by other broad shifts in the business environment. The most powerful is the ever-increasing pressure on corporations to reduce costs. Whenever business conditions turn down, the edict goes out to cut expenses. In order to cut supplier costs, companies need to understand what they’re buying. In 1992 DuPont established its “DuPont Legal Model”, which consolidated its legal suppliers from 350 to 35, and established clear processes for how its law firms would work for the corporation. This program established a precedent that has been copied by many other companies, and is highly innovative in how aligns the objectives of the company and its service providers. However the initiative was initially driven by the then-chairman’s drive to cut $1 billion from DuPont’s costs.

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The Seven MegaTrends of Professional Services – Introduction

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Around six months ago, I wrote a White Paper for the enterprise software company Epicor titled “The Seven MegaTrends of Professional Services: The Forces That Are Transforming Professional Services Industries and How To Respond”. The paper has attracted a huge amount of interest, however up until now, it has only been available on sites requiring registration. The White Paper is now available for free download from this site (no registration required!) as a pdf here:

The Seven MegaTrends of Professional Services.

I will also serialize the paper on this blog in 13 parts:

– Introduction (below)

MegaTrends

– MegaTrend 1: Client Sophistication

– MegaTrend 2: Governance

– MegaTrend 3: Connectivity

– MegaTrend 4: Transparency

– MegaTrend 5: Modularization

– MegaTrend 6: Globalization

– MegaTrend 7: Commoditization

Responding to the MegaTrends

– Lead Your Clients into Knowledge-Based Relationships

– Build Strategic Transparency

– Create a Highly Networked Firm

– Evolve Your Business Models

Developing and Implementing robust strategies

Introduction

Not so long ago now, professional services were a solid, predictable domain, performed by gentlemen (and only rarely ladies) who played by gentlemen’s rules. The world has changed, and pine as they might, those who yearn for the “good old days” are finding that the nature of their chosen occupation has irreversibly shifted.

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David Maister and marketing as a conversation

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David Maister, the über-guru of professional services, has embraced blogging and podcasting. In a revamp last week of his website, which has always provided extensive resources, he has launched a blog titled Passion, People and Principles. It is highly interactive, responding in depth to questions and conversations raised by clients and the professional services community. Not long before, he released an article Marketing is a Conversation, in which he advocates creating conversations and “salons” with clients, engaging in joint problem solving, setting up blogs, and replacing capability brochures with interactive spaces.

David has for a long time said that he focuses on the fundamentals of professional services, because that is still where the most difference can be made. He kindly suggests that in contrast my work deals with the “frontier topics”. He has been very supportive of my work, and gave me a nice blurb for the latest edition of my book Developing Knowledge-Based Client Relationships: “Dawson has pulled off the nigh-impossible: improved on what was already a terrific book. Even more than before, this is essential reading for professional service firms.”

I have immense respect for David’s work, and discussed his immensely successful personal strategic positioning in my book Living Networks. While David has always talked and written about listening to clients and great service, I think that he has shifted his approach in how he now strongly encourages collaboration and shared value creation with clients. In my latest book there is a subheading “Doing Great Work is Not Enough”. It’s far from enough, and true knowledge-based, collaborative relationships require an entirely different attitude. These are truly fundamentals of professional services.

Speaking about professional services marketing

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Bruce Marcus has been writing the Marcus Letter on Professional Services Marketing for about a decade, originally as a print newsletter, and now online. His broad experience makes him one of the true doyens of the field. His excellent recent book, co-authored with August Aquila, Client at the Core, goes into the practical detail of creating the oft-spoken of but rarely realized “client-centric firm”.

Bruce recently wrote an insightful and kind review of my second edition of Developing Knowledge-Based Client Relationships. Well worth a read – just taking a few brief excerpts from his review:

“Two critical elements have evolved, and are continuing to evolve. We see more clearly the uses of information as a discipline in law and accounting practices. And we begin to learn to harness that information to our benefit in serving our firms and our clients. And that is what Ross Dawson addresses, and addresses brilliantly in this book.

It is, I should note, a pleasure to read this book, not only for its lucid and rational instruction, but for its confirmation of much that I and others have been saying for some time. We agree on virtually every aspect of it, although he goes much farther into the process than most have done.

As knowledge management penetrates the consciousness of a greater body of professionals, Developing Knowledge-Based Client Relationships will be a well-read and well-thumbed handbook. It is certainly one of the more important works in the field of client relationships and practice management.”

Thanks Bruce!

The heart of professional services strategy

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Last week I chaired a conference on Strategic Law Firm Management organized by Ark Group. While there was disappointingly little on law firms’ high-level strategic positioning and how that may shift over coming years, there were a wealth of insights into more general management issues. Clearly, people and culture are at the heart of managing professional firms, while the competition for talent is growing ever more intense. Getting people and culture right is the single most important determinant of success. Other success factors will be driven by this.

Listening to the speakers reminded me of a framework I’ve been mulling over for a while, on how attracting, retaining, developing, and motivating great people is linked to attracting the most worthwhile work from the best clients. Clearly, these two highly desirable outcomes feed on each other, yet many firms do not explicitly link them in their strategies and activities. To my mind, building knowledge-based relationships is at the heart of being able to link client development and people development. In knowledge-based relationships you are able to learn most from clients, get the most interesting work, and attract the best clients. Providing “black-box” services to your clients disengages your ability to attract either great people or great client work. It is important to recognize that there is a very real difference between great clients and great client work. Many professional firms have outstanding clients, but often the work they do for them is mundane and unstimulating. It is getting great work that is more important for developing your people and capabilities than getting brand-name clients. Small clients can give you fantastic work.

The framework below shows the nature of great people and great client work, how these feed on each other, and what is required to link them. At the center of attracting both great people and great client work are a set of common values and behaviors. These are fundamental to both of these outcomes, and how they are linked. Leaders of professional firms need to consider what specific activities and initiatives will help to develop this cycle, which is at the heart of professional services strategy. Successfully engaging in this cycle will rapidly develop meaningful, recognized differentiation in highly competitive marketplaces.

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More on the future of PR and influence networks

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Ketchum PR, one of the top few public relations agencies in the world, has just posted on their company intranet an interview with me on major trends in PR. They’ve kindly allowed me also to post it here on my blog. The key themes they distilled from our original wide-ranging interview are on the role of knowledge-based relationships in PR, the importance of relationship leaders, the need for agencies to adjust to the rapidly changing media landscape, and why agencies should get their clients to participate in the marvellous world of blogging.

Ketchum PR is noteworthy on a number of fronts. I wrote about their client extranet initiatives in my second book Living Networks, and also referred to it in my Microsoft White Paper How to Lock-in Your Clients. As early as 2000 Ketchum was inviting clients to participate in project workspaces, giving them visibility of the work being done for them as it happened, and the ability provide their own input to the process. Paul McKeon, Ketchum’s CIO at the time, called it letting the client see how they “make sausage”, so they see the messy stuff that goes in along the way, not just the neatly packaged output. Ketchum has also recently released a very interesting service, Influencer Relationship Management (IRM), that identifies and targets key influencers in a particular market or key decision. This relates to some of the work I’m currently doing on applying social network analysis to the role of “influence networks” in decision-making. Decisions are primarily based on input from trusted individuals, so understanding the structure and functioning of these influence networks is critical both in making better decisions, and in effectively influencing decision-makers. More on this later!

The future of public relations

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A few days ago I gave a keynote speech at the Public Relations Institute of Australia’s premier national conference for the owners of PR agencies – a very interesting crowd who are well in tune with the flow of messages through media and society. I covered three key themes:

&#149 Client relationships. Despite many PR agencies presenting themselves as doing “outsourced PR”, that’s not what clients today want. The future is in collaborative relationships, working closely with clients to combine your expertise.

&#149 Social networks. Today, everything is a network. PR agencies need to move closer their clients to the center of the network, by creating richer and more diverse connections. They also need to apply social network thinking to how they bring together their own expertise and link that to that of their clients.

&#149 Memes and blogging. The concept of memes – information and ideas that replicate and propagate from mind to mind – is a powerful and useful way of thinking about how messages flow through society. Blogging has provided us with a world in which memes can flow fluidly and freely. Media – the traditional domain of PR – is blurring into a far more complex and variegated world in which messages can flow across many dimensions.

The resulting challenges for PR agencies are to lead their clients into collaborative relationships; to connect to help their clients move to the center of the networks; and to make their clients into media participants. Media today is a participatory sport, and PR agencies can no longer act as interfaces and gatekeepers for their clients. This means they must develop and apply new skills, especially in the new participatory media. Blogging is a invaluable tool for many organizations, yet they do need help to do it effectively.

Apart from frightening a few PR agencies who recognize that they need to quickly get on top of the rapid changes in their world, it was encouraging to see the degree of energy that is going into exploiting these shifts. The only thing that remains is renaming the industry. I was asked what it should be called if public relations wasn’t appropriate. Off the top of my head I suggested “The Meme Industry”. Any better ideas?