The Seven MegaTrends of Professional Services – #1 Client Sophistication

By the complete White Paper: The Seven MegaTrends of Professional Services

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.

Read more

The Seven MegaTrends of Professional Services – Introduction


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)


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


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.

Read more

Peer-to-peer banking


A new peer-to-peer bank,, is launching in the US, attracting articles in both the New York Times and BusinessWeek, with the latter titling the story “The eBay of Loans”. The principle is simple – you lend to individuals at interest rates based on their credit rating, and since you’re cutting out the bank as middleman, both lender and depositer get more attractive interest rates than they can get commercially. This is not a new idea – UK-based Zopa has been running for almost a year with essentially the same business model. Anecdotally Zopa is doing well, and intends to set up in the US soon. One of the differences is that focuses on groups that know each other or have common interests. It also has a more evolved bidding model so lenders bid to have the lowest (and thus winning) interest rate for a particular lender.

Banks are the archetypical intermediary, in this case between depositers and lenders. They get a very hefty spread for lending to individuals, however they do some things to create that value, including insurance (by pooling loans), risk assessment (making independent and accurate assessment of creditworthiness), and convenience (at their best!). allows lenders to split their loans across many borrowers, giving some loan pooling and security against default. Certainly, an online marketplace cuts out the middleman and the spread it charges – all part of e-commerce 101. However rhe really interesting part of this model is the risk assessment. In the first instance, people can find out about someone as an individual and make a personal assessment on their default risk. The next phase is when more sophisticated models are used to assess credit risk, aggregating a wide range of perspectives. This is not possible by a financial institution. However, with a borrower willing to disclose information, arguably more accurate credit assessment is possible. If some kind of effective deposit insurance through pooling or other mechanisms is put in place, in addition to superior credit assessment (not difficult given the paucity of the bank’s data and models), then there is no reason peer-to-peer banking will not over time become a competitive issue for mainstream banks.

Positive word of mouth


Lexus has given iPod Nanos to some customers who had delayed delivery of their cars, and has got big coverage not just in the Club Lexus Forums, but also in blogs and even on Digg. These days, companies can get massive benefit, as well as problems, from how customers spread how they feel by word of mouth, including of course blogs. Incidentally, the Word of Mouth Marketing Association had their inaugural conference last month, and got plenty of traditional media coverage, as well as word of mouth. It’s the buzz in the marketing world!

Linking the conversational threads


What many people don’t appreciate about blogging is that its power comes from how blogs are interlinked, not the blogs on their won. Individual blogs can be interesting. However it is the linking and commenting on other bloggers’ posts and thoughts that creates a single “blogosphere”. This unitary space of all blogs has powerful emergent properties, not least the ability to make the most interesting and valuable information and ideas float to the surface and become easily visible. The single most important way of creating threads between blogs is simply linking to other blogs – or traditional media – and adding thoughts and opinions. The next critical feature is comments. A blog that doesn’t allow comments hardly merits the name. Comments from others allow readers to see opinions and segues on the original post. However this starts to split the thread of discussions. That is why the trackback feature of blogging is so important. Trackbacks allow people to post their comments on other blogs’ posts on their own blog, and then place a link on the original blog. This allows readers to know that there is a relevant comment posted on another blog, and to go and read it. The primary problem with this is that you need your own blog in order to keep your comments on other blogs in the one place.

The recent beta launch of coComment seeks to address this issue, by allowing people to keep the comments they’ve written in the one place, make these visible in the one place without having their own blog (which in effect creates a blog, albeit exclusively of comments on others’ blogs), and track how comments evolve on a particular post or topic. Stowe Boyd recently proposed a “conversational index”, which rates blogs by the ratio of posts to comments. The reality is that a large proportion of activity in the blogosphere is in the comments. Now frequent commenters who don’t have their own blogs can participate fully, opening the door for a significant expansion in the scope of the emerging global conversation. Interestingly, coComment has been funded by the Swiss telco Swisscom, which happens to be one of the first telcos to launch proximity dating, some years ago now. There’s a very strong buzz about coComment. Not everyone is convinced, however the context is that blogger extraordinaire Robert Scoble was shown the site while visiting Switzerland, blogged about it, and the coComment folk are now desperately trying to keep up with the buzz, even though it’s well before planned release. Word spreads very fast in the blogosphere, when people are interested.

Collaborative filtering supports meritocratic Internet TV


Following on from my recent story on collaborative filtering for music, it’s worth taking a look at Videobomb (Thanks for the link Steve Rubel!). This enables people to post links to online videos. If enough people vote for the video, it appears on the site’s front page, so users can immediately find the most popular videos. This voting structure is extremely similar to the technology news site Digg, which has rapidly become one of the most popular technology websites around. Videobomb needs to get more users before it reaches critical mass, however its intent is to help provide a platform for Internet TV. On Current TV, the producers choose what to screen from all of the public submissions (see my earlier comments on this). Videobomb’s approach enables the audience to choose what they view. In the words of the website, they want “to create an independent, creative, engaging, and meritocratic TV system for millions of people around the world”. Some way to go towards this objective yet, but I don’t think it will be too long before we do have a system that meets this description.

Mass media is “nearly obsolete” for some buyers


Market research company Polk has found that first-time car buyers barely use traditional media in assessing potential options, leading to a description of traditional media as “nearly obsolete” for this sector. Internet is the primary information source for 35% of these buyers, four times that for television, and eight times that for magazines. Sixty-five percent of vehicle buyers did so without any influence from family or friends, making their media information sources all the more important. As first-time car buyers are in the 18-30 age bracket, the bias to online media is not surprising. However the superior information search and multiple perspectives available online mean older buyers are increasingly dependent on online information for their high-value purchases. One implication is that specialist buyer magazines will find it very hard going as advertisers shift to where the buyers spend their time. Another is that classifieds, for cars and other high-value items, will continue their shift to online. Print classifieds will soon be considered archaic. The issue will become who owns the classifieds – traditional media players, or new players? This will be the subject of some of the research on the future of media my organization will be doing over the next months – more details soon.

Moving beyond zero-sum thinking


John Hagel has a very interesting piece on zero-sum thinking – the idea that there if one person wins, another must lose. He draws out how this is epidemic in the business world. A great example is how companies treat their suppliers. In what way do companies do better if their suppliers suffer? Yet that seems to be how many suppliers are managed today, in squeezing them as much as possible. The trick is to move beyond the single dimension of price. Once you do that, there are unlimited ways to create value for both parties. Yet there are far more ways that the implicit assumption of a zero-sum world drives business strategy. Intellectual property and organizational design are just two examples. The vast majority of value creation in the economy today is collaborative, with more than one winner. Executives must actively seek “non-zero-sum” games, in which you can collectively increase the pool of value available. This shift in mentality is in fact required for survival. Zero-sum thinkers and players will find business swiftly becoming more difficult. If you’d like to learn more about zero-sum thinking and how to transcend it, read the great book Nonzero, by Robert Wright.

David Maister and marketing as a conversation


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.

P2P and human evolution


In a great example of how digital connection brings people together in face-to-face meetings, Michel Bauwens saw my blog post saying that on my vacation I was going to pass through Chiang Mai in Thailand, where he lives. He sent me an email to suggest we get together, and we had lunch in a picturesque local restaurant. Michel is a dot-com and telco veteran who has decided life is better in North Thailand than Europe or North America. He has now established the P2P Foundation, which examines and supports the application of peer-to-peer concepts to all aspects of society. Michel has a compelling vision for how P2P can be applied to creating value, organizational design, social structure, and political structures. Some of his vision is already well visible:

“we have to posit the birth of a new capitalist class segment, the netarchists, based not on the control or ownership of information, but on the enabling and exploitation of the participatory networks themselves.”

At the P2P Foundation website and other sites such as Integral Visioning, Michel has provided substantial resources on the vision for applying peer to peer across society, notably his excellent essay Peer to Peer and Human Evolution, and his P2PFoundation blog. Michel is now looking to establish a for-profit organization that will provide services and implement business models around the P2P frame. I look forward to seeing this develop far further. The potential is certainly there for a global society based on peer to peer structures and thinking, though this may take decades to evolve. It is an immensely worthwhile vision.