Driving innovation in large professional service firms: Six high-return initiatives


Over the last years I have spent significant time assisting professional services firms to drive innovation. This year I am finding that the economic climate is intensifying the focus on these issues rather than pushing them to the background.

The pressures that commoditize services are intensifying, local and global competition is increasing, and clients are seeking value in different forms than they have in the past. Another critical driver is the war for talent. Young, talented professionals show little interest in continuing to plough the furrow of long-established processes, however wax enthusiastic about creating new approaches to their work.

However there are many barriers to innovation in large professional firms, including billing imperatives, strong functional specialization, and often highly risk-averse cultures. Much of the management literature on innovation focuses on product development and design, and is not always relevant to a professional services environment.

I’ve written before about innovation in professional services, including the White Paper I wrote for SAP on Service Delivery Innovation and in Chapter 9 of Living Networks.

Here are some reflections on where I see the greatest potential for value-creation in the space.


There are several key domains for innovation for professional firms:

Services and products. In a rapidly changing business environment, providing the services that are most relevant to clients’ needs can provide real competitive advantage. The issue is not just in quickly generating new offerings, but also in packaging these so they can be readily communicated to clients by front-line professionals.

Service delivery/ Process. There are many aspects to service delivery innovation, notably the integration of internal, external and online resources to create efficient and differentiated value creation for clients.

Structure. One of the perennial issues for professional firms is to how to structure themselves to balance and integrate functional specialization and industry expertise. There is continuing scope for innovation in how to do this effectively as the business landscape evolves.

Pricing/ Business model. There continues to be interest and demand from clients in new pricing structures. Effective innovation in this space enables offers that create value for both clients and their service providers. While business model innovation will be slow for professional firms, it is important to incrementally introduce new ways of leveraging professional talent.


There are a variety of initiatives that I have found are particularly useful in developing innovation in professional service firms that directly generates business results.

1. Develop a systematic innovation strategy. Creating an innovation strategy does not need to be a massive project. However it is critical to identify and prioritize the kinds of innovation that are aligned with the firm’s positioning and long-term strategy. Governance is a key element of this process, in establishing parameters for allocating resources and managing risk. A clear strategic framework helps identify the initiatives that will best support useful innovation.

2. Establish lightweight innovation programs. Over the last decade many companies have established innovation programs of various kinds, often including idea submission, stage gate filtering, and innovation funding pools. In many cases overly ambitious programs haven’t met their expectations. However this kind of program, scaled appropriately, can play a valuable role within a broader array of innovation activities.

3. Set up a program of pilot projects. Pilot project programs are one of the most relevant and effective tools for generating useful innovation. These provide defined parameters for establishing, supporting, assessing, migrating and if necessary closing pilot projects. Managed well, these programs can generate substantial value with limited resources.

4. Implement product development processes. Product and software companies that live on bringing new offerings to market have well-established product development processes. Professional firms rarely have these kinds of processes in place. Establishing these can strongly support a firm-wide shift to proactively creating new product and service offerings.

5. Run industry strategy workshops. In many cases the most valuable activities lie in providing a structured process for generating relevant, value-creating ideas. For example innovation workshops can focus on the current industry structure of key client segments, and identify how shifts in the business landscape are creating new priorities and opportunities for companies and their service providers.

6. Identify and support innovation champions. In a large firm, the majority of the impetus and energy for innovation is usually found in a relatively few people. Identifying the people who have the most positive energy for change enables them to be supported in creating or evangelizing new ventures. This is one of the single strongest levers for success in large firm innovation.

In summary, there are many ways of successfully driving innovation in professional firms, often without requiring substantial resources. Times of rapid change in the business environment are when innovation initiatives are the most important. Those firms that continue to work as they have in the past are at risk of losing market share and emerging opportunities. Effective innovation will be extremely richly rewarded both in the short-term and in the years ahead.