Keynote: building the networked professional firm

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Last 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.

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Keynote at Managing Partners Forum: Creating the Future of Professional Services

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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.

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Strategy in a networked world for professional service firms

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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.

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Presentation: Transcending commoditization in professional services

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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):

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.

Professional services are the future of the economy

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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.

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Implementing Web 2.0 is critical for attracting talent to legal and professional firms

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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.

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Innovation in professional services: the case of DDB and Keith Reinhard

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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.

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Professional services network offsite: Tapping the Power of Collaboration

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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.

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Self-publishing in a networked world: The case study of David Maister

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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.

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SAP Thought Leadership: Service Delivery Innovation – Creating Client Value and Enhancing Profitability

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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…

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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.

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