The need for strategy innovation is very real in a world where firms must compete much differently than even 5 years ago. There will likely soon be complete audits, and even virtual audits. Law firms are now competing with traditional audit-centric firms, and upstart analytics firms are eating into the market share of traditional management consulting firms. Those once fuzzy, on-the-horizon concepts (e.g., blockchain, machine learning, and the like) that seemed at least a decade off? They are already being commercialized and in ways that many leaders acknowledge will change the business model and competitive dynamics entirely in the next 5-10 years. Given what is at stake, strategy innovation is not an option. It’s a must.
Successful companies of all types, both public and private, have been driving deliberate innovation agendas for years. Innovation labs, big data and machine learning leverage, artificial intelligence, and new business models are not just passing interests—rather they are core capabilities woven into the rich fabric of an integrated new growth strategy that addresses the future of a profession or industry.
Professional services firms? Not so much.
A recent survey of GCs and other Senior Corporate Lawyers, 96% said innovation was rare or nonexistent. While a few have taken significant steps forward, many others are only beginning to ask the right questions about strategy and their future-states.
Bryan Cave creating BCXponent: Bryan Cave is already one of the most innovative law firms in the business today. Why would they start advising clients on how to manage legal spend and their in-house legal team? Because it is a client-centered differentiator in a market where differentiation is required given the pricing pressures on GCs. They have reconceived the go-to-market offering and model, leveraging a nascent opportunity into a revenue generating service and a new entry point for traditional legal services.
DLA Piper’s use of predictive analytics to drive client growth: Client insights can get stale and account management input can be contradictory. What do you do when the Partner Lead, client, and overall relationship dynamics all tell a different story? Start paying more attention to the underlying facts in the form of your existing data. And most firms have a lot of it – millions of data points embedded in the monthly invoices. Why not leverage that data to predict which clients to focus on and how to build those relationships worth millions of incremental fees? DLA Piper learned to play “Moneyball”, law-firm style.
Grant Thornton partnering with Information Services Group (ISG) to turbocharge future capabilities: The choice is not always to build “it” in-house. Grant Thornton sees the ripple in time that artificial intelligence is creating. Rather than double down in their traditional service areas or try to build from nascent capability, they’ve partnered with another firm that brings complementary capabilities to the table and have accelerated their entry into new approaches to audit and tax services. Grant Thornton’s CEO, Mike McGuire, was recently quoted as saying: Grant Thornton’s alliance with ISG allows us to deliver RPA (Robotic Process Automation) as part of a comprehensive approach to innovation, including robotics, data analytics, blockchain and artificial intelligence.
In truth many professional services firms appreciate the need for such strategy innovation, but the approach too often pursued is incremental in nature, i.e., how can we improve 5% or 10% on where we are now? This present-forward, mindset often leads to debates regarding how to add a couple of service lines, attract a star lateral-hire, install a data warehouse, or add more large clients. These debates and decisions only consider growth and profitability in the current competitive environment and do not adequately address the opportunities and necessary change required to create the relevant and vibrant professional services firm of the future. Is finding a way to expand footprint or market share of billable hours going to win in a world of predictive models that determine the best legal path? Or in a world of accounting and audit where ledgers are automatically generated using a blockchain platform?
Given the rapidly changing landscape, professional services firms need to take a future-back approach to strategy innovation – one which contemplates the future business landscape (including new client expectations, all new competitors, and technology disruptors) and potential models that keep the practice relevant.
One way to characterize the difference is in terms of “questions answered.” Fundamentally, you must unhook from the shorter-term thinking of how to make your current world a little better and conceive of how you might reconfigure the practice and model altogether.
So how can you innovate your strategy? How can you act on future-back strategy thinking, and break the cycle of present-forward extrapolation that keeps us in our current ways of doing business in a world that threatens to pass you by? Approaches may vary, but underlying principles remain consistent. You must:
The key to meaningfully innovating your strategy is a future-back mindset and accompanying approach. Don’t start “here” and determine the next several steps. Start “there” and create a point of view as to what it takes to connect there to here. It’s been done for years—actually decades—in consumer electronics, packaged goods, automotive, and many other industries.
Time for the “billable hours” businesses to step up.