Yesterday professional services expert George Beaton and I ran the inaugural Clients and Firms of the Future: How to Compete conference in Sydney, bringing together around 100 senior leaders of professional services firms to look at the future of the industry.
It is just over 15 years ago now that my first book was released with the subtitle The Future of Professional Services (now out in its Second edition). While these days my work covers a far broader scope, over the years I have worked extensively with professional services firms to help them create successful futures.
There has been substantial change in the professions over the last decade, however there will unquestionably be far greater change in the years to come.
It was an absolutely fascinating day at the conference exploring the future of professional services. I will be sharing more from the conference over time, but today would just like to put down a few initial thoughts from the three themes of the day.
One of the biggest challenges to professional firms is how clients are changing. In my not-so-recent white paper The 7 MegaTrends of Professional Services, the first MegaTrend I named was Client Sophistication, and since that was written this trend has gone a lot further.
At yesterday’s conference, two executives together responsible for purchasing over $1 billion in professional services showed how far the bar has gone up recently.
One company is consistently increasing its in-house capabilities, through staff acquisition, improved processes, and the introduction of task automation, virtually all at the expense of the use of external providers.
Another major company, while it recognizes the importance of relationships in professional services buying, is doing more work internally as well as finding ways of tapping the network of its staff to find the best professional providers.
Unquestionably client organizations are rapidly changing, developing their capabilities, and are increasingly capable of selecting and working with the best specialist firms in highly collaborative relationships, moving far beyond the “one-stop-shop” mentality.
There are three major domains in which digital technologies are disrupting professional services.
Connected work and crowdsourcing. Work can be done anywhere, leading to the globalisation of both clients and service delivery. More importantly, connectivity is allowing crowdsourcing of professional services, including expert marketplaces such as SkillSapien and Expert360, and expert aggregation services such as Kaggle, 10EQS and Wikistrat.
Process automation. Many tasks that have traditional been done by people, notably context-relevant document generation, can be readily automated.
Artificial intelligence and machine learning. The emerging generation of artificial intelligence is being applied to highly complex tasks and decisions, in domains including medicine, law, and consulting.
Business Model Innovation
It is clear that traditional professional services business models are being challenged on many fronts. Three of the high-level issues that need to addressed are:
Business model transition. There are a wide variety of fundamental factors that firms can consider changing, including pricing structures, workforce models, ownership structure, and market positioning. Legacy models are often poorly suited to an evolving marketplace, and important strategic decisions need to be made about which levers should be changed and how to do this.
Positive feedback loops.
A sound business model needs to have built in to it mechanisms that reinforce the foundations for future success. I described one of these feedback loops as the heart of professional services, in linking great people and great client work. Every firm is either in a positive or negative cycle on this critical front. New business models also need to be designed to have positive feedback loops at the center.
Business model portfolios.
Professional services firms almost always have not just one business model, but multiple business models. Professional firm leaders need to recognize the diversity of business models, and make clear choices about which current business models should be maintained in a changing business environment, but also which potential new business models will strengthen with change, and be complementary to existing business models.
Over the next while I will share more insights on how professional services leaders can shape a successful future in a rapidly changing world, drawing on my own work, that of my colleague George Beaton and his team at Beaton Research + Consulting, and the insights developed by the participants at yesterday’s conference.