Disruptive innovation in professional services: the value in expertise


The concept of disruptive innovation is now well-recognized in business. It was originally described by Clayton Christensen almost exclusively in terms of products – often technology-based – such as storage devices.

Disruptive innovation can happen in any industry, however it can need translation and interpretation for other domains such as services.

I recently I ran a presentation and interactive workshop on the future of professional services to kick off a law firm partner strategy offsite. Among the more specific challenges, opportunities, and responses that the professions face, I ran through some of the core principles that could disrupt their industry.

In fact a broad range of expertise-based industries are being subject to disruption, however with quite different dynamics than in product industries. The 3 key drivers of disruption of expertise are remote work, process automation, and artificial intelligence.

Four expertise-based services industries that are being disrupted are:

Higher education: While the brand of leading universities are strong, the rise of OpenCourseWare, in which all of the content of university programs are provided online for free, changes the role of tertiary institutions. As mechanisms for more efficiently assessing the competences of students arise, mid and lower-tier institutions may be severely challenged.

Health care: Christensen’s latest book, The Innovator’s Prescription, is on disruptive innovation in health care. He focuses on many of the systemic and process issues, however aspects disrupting doctor’s provision of expertise include medical tourism and tele-surgery. Venture capitalist Vinod Khosla says technology will replace 80% of doctors, and while doctors not surprisingly object to the idea, it is possible.

Financial services: Many parts of financial services are being disrupted, ranging from Liquidnet, which disintermediates stock exchanges by connecting investors directly, to Nobel Prize winning economist Bill Sharpe’s Financial Engines, which provides analysis and advice often superior to that given by financial advisors.

Professional services: Classic professional services such as law, accounting, and consulting are being particularly disrupted by process automation, with for example many of the world’s largest legal firms choosing to offer a wide range of online services (See Allen & Overy, Clifford Chance, Linklaters etc.). In addition, new virtual firm structures, illustrated by the highly successful Axiom Legal, are challenging traditional structures such as partnerships.

I have long said that an increasing proportion of value creation in the global economy will be from professional services based on deep specialist expertise. However many of the traditional forms of delivering those services will be challenged.

One of the key implications for professional firms is the need to identify and acknowledge where disruption may come from, especially remote provision of services, process automation, or artificial intelligence.

From that recognition, firms can examine how to create a modular approach, in which elements of service provision that are suited to remote or automated execution can be done efficiently, and integrated into human judgment work.

This is the only way that human expertise can maintain its premium place across a whole range of high-value services markets that are in the midst of massive disruption.