Disruptive Innovation has been slowly eating away at traditional models and revenue streams for professional service firms over the last few decades.
In the last 10-15 years, this has included outsourcing, business advisory services, value pricing, paperless office, and now more recently, cloud accounting. Each innovation implemented well drives more efficiencies and increased capacity but usually results in customers expecting many traditional compliance services for much less money. The resultant reduction in fees for traditional services has over the years pushed the early adopter professional service firms towards more value added / business advisory services with some adapting to a full service advisory model and the rest largely ignoring the need to adapt.
There are no quick-fix solutions contrary to some of the claims currently being made. The key success factors for providing business advice and strategy services include training, practice to develop fluency, 24/7 support (a combination of face-to-face and online), and building the confidence levels of the advisors. This takes an investment of time but the benefits start accumulating from day one. Mindshop has provided such a support resources for over 20 years and now operates in Australia, the United States, the United Kingdom and several other countries.
Disruption drives Business Advisory growth but where are the opportunities?
Business Advisory is HOT again but how do you cut through the clutter?
Business Advisory services are once again the HOT growth opportunity in professional service firms. Inbox’s, social media feeds, and conference agendas are full of topics / solutions promising to provide all the ‘secrets’ to success in business advisory. There are the dashboards, the 2 hour webinar series, the proven systems, the gurus, and best of all some are suggesting turn-key solutions to a $1million+ advisory division, who could say no to that! To many it feels like the early 1990’s all over again.
Back then some progressive advisory firms cut through the clutter of options, learnt new skills, evolved their business models and built successful, full service advisory firms that they still continuously evolve today. Other firms ignored the hype at the time and continued on with their traditional services and models. Today many of these firms that have not adapted are at risk.
Disruptive Innovation accelerating the need for change
So 20 years on what is accelerating the need to adapt again and move more heavily into business advisory services. The answer is “Disruptive Innovation” which is a term first coined by Harvard Business school professor Clayton Christensen in his book, The Innovators Dilemma. Disruptive Innovation within any profession is something that doesn’t tend to occur overnight. It creeps up over many years, refined by innovators and early adopters, slowly eating away at traditional models and revenue streams until one day most firms look around and the new model or technology has become ‘the norm’. Reflecting on the professional services industry over the past 10-15 years the disruptive topics have included:
- Outsourcing compliance work (offshore)
- Paperless office technologies
- Boutique / Niche
- Business Coaching
- Value based pricing
- Leveraging Business Advisory services
- Cloud based accounting software
A short interview we conducted with a partner of one of our UK advisory firms regarding his view of the opportunities created by disruption can be viewed by clicking the image below.
(Randall & Payne partner Will Abbott talks with James Mason re: Disruption. Watch Now)
Disruptive innovation continues to build pressure on the industry to adapt and more recently the term Digital Disruption gained popular acceptance through the release of a paper in 2012 by Deloitte entitled: Digital Disruption ‘Short fuse, Big Bang’. This thought-provoking paper mapped 18 different industry segments as to the level of digital disruption that would impact the respective industry and the time frame until that disruption would occur. The ‘professional services’ industry fell into the ‘short fuse, big bang’ quadrant which highlighted that in a short space of time the industry would be heavily impacted by digital disruption. At this time their predictions certainly ring true.
Does your firm have the tenacity and experienced support to change?
Each disruption is a double edged sword that can provide a wealth of efficiencies in traditional compliance areas but as more of the market makes the shift, an expectation from customers to do more for less grows. The disruption may also drive exciting new growth opportunities but requires considerable change for the firm and its senior partners. With only 30% of change projects being successfully implemented it can often be a case for many firms of one step forwards, two steps backwards as each disruptive solution sold by some as a ‘magic bullet’ rarely ends up as straight forward as that. Strong leadership, great support, and the tenacity to push forward are required for success.
The next ‘disruption bus’ is here – Standard Business Reporting
Standard Business Reporting (SBR) as it is referred to in the Australian market, is an initiative by the Australian Tax Office to reduce the red tape and the costs of compliance to businesses. SBR was first introduced in 2010 in order to have a standard approach to online record keeping across all businesses. SBR is rapidly growing in acceptance and when paired with the right cloud accounting software will automatically gather all the required information for relevant government agencies. In the very near future, this will see clients (via their cloud accounting software) sending this information in a matter of a few clicks directly to the tax office and potentially bypassing their accountants all together for basic compliance services. In relation to the impact SBR will have on professional service firms, the Deputy Registrar at the Australian Business Register in a speech to a national accounting conference in October 2014 stated: “Modernizing your practice may present a challenge. But using SBR is an opportunity to realise significant productivity and efficiency improvements as well as savings. Your role as a professional advisor is also likely to change. Over time the business community may rely on you more for professional advice and guidance” Further to this Second Commissioner of the Australian Tax Office, Geoff Leeper at the ATSA conference in October 2014 (run by smithink2020) delivered a speech outlining how SBR will impact Professional Service Firms. Watch the thought provoking 4 minute video containing extracts here: http://vimeo.com/113350315
Tipping point to moving higher up the food chain
The writing is on the wall that when SBR enabled cloud services become mainstream across all clients, it will have a direct impact on lower level compliance services for advisory firms. This potential loss of revenue may be the tipping point (when combined with disruptive innovations for the early and late majority of firms who have for many years ignored other ‘higher up the food chain’ service opportunities) to finally swing their attention toward further value added services. A recent tag line from a CPA Australia conference said it all when implying that professional service firms need to: “Look beyond the numbers”.
Clients have the knowledge and data now so where are the growth opportunities?
Another trigger pushing advisors to change is the fact that mature customers via cloud applications and the web are now accessing quality knowledge and data (often referred to as BIG data) about their business / industry more rapidly than ever. Five to ten years ago this material was only provided by their trusted advisors. The customers challenge is then what to do with all this information, what are the insights, what are the strategies, what does it all mean, and how do they implement the right solution? This presents exciting opportunities for advisors to assist their clients with areas such as:
- Growth and Profit
- Strategy development
- Complex problem solving
- Decision making
- Team Development
While many firms are already assisting their clients in these areas, many need to start going deeper as clients move past just seeking more ‘insights’ or ‘thought leadership’ and seek out real change in their business. Experienced business owners are no longer dazzled by the dashboards, showing them via slick dials and info-graphics the key statistics of their business. They want more.
Are you a true Trusted Advisor?
Customers now want the true ‘trusted advisor’ who can help them navigate the complexities (and emerging opportunities) in their business and personal lives. The exciting thing for professional service firms is they will typically (if they are proactively engaging with their customers) discover these opportunities first before other professions or support advisors. The challenge is then do those within the firm have the delivery skills, confidence, sales ability and capacity to say ‘yes’ to the wealth of opportunities OR do the opportunities just pass them by, ultimately ending up with a competitor?. In some cases assisting customers will require a skill not currently present within the firm. This highlights the importance of tapping into a virtual network of other specialists so advisors can confidently refer customers to a ‘safe pair of hands’ where required and thus keep control of the relationship. Many firms don’t have these relationships in place.
Business Advisory – there are no short-cuts to great client outcomes
Success in business advisory is rarely as simple as a buying a plug-in, prescriptive solution. Getting ready and building the skills takes time. It also takes both a mindset change for the partners and an evolved business model to ensure it achieves momentum. Imagine for a moment the following example scenario: “A professional service firm’s biggest client is a large manufacturing business. The CEO of this business sends an email asking for help from the firm with what they ‘think’ is a profitability issue. The firm welcomes the opportunity and upon agreeing to terms over the phone sends a junior manager from within the firm (because they are seeking to leverage all strategy work to the team) who is armed with a dashboard product and prescriptive script they learnt during a two day training course a few months ago to solve the apparent profitability issue. The junior manager sits in the boardroom surrounded by the experienced CEO and senior management team and proceeds to work through their ‘advisory’ system ignoring the real underlying challenges within the business. Two hours into the process the CEO has heard enough of the mundane, scripted questions which are all just fact finding and calls an end to the meeting. He calls the senior partner at the firm to explain his disappointment with the process and explains that he had hoped for practical strategies and to be challenged rather than ‘educating’ the person sent to deliver a solution. The ultimate outcome of this example being a potential large client goes elsewhere and a junior manager has had their confidence severely dented. A lose-lose for all concerned.” The above is a scenario that plays out time and time again around the world with firms seeking quick wins and it normally ends poorly for all parties. The reason being is that most of the solutions on the market to support customers seem to have been designed to be quick fixes for professional service firms first and valuable for customers second. The diagram below illustrates how the dashboards, questioning techniques, diagnostics, and graphs are only the tip of the iceberg as solutions, the core issues remain under the surface.
Prescriptive Business Advisory solutions rarely work in a complex and unpredictable business environment
Most prescriptive solutions incorrectly assume that both businesses and their team members are predictable with similar issues requiring similar solutions. While the issues may ‘sound’ the same, every business and its people are different. When implementing successful change, it is essential for an advisor to be able to respond to events evolving around them within the flexibility of an over-arching frame-work for change which could be as simple as one of the core Mindshop methodologies of Now-Where-How. Often the real issues or opportunities don’t become clear until weeks or months into the change initiative. In a complex and volatile business environment you need to have flexibility and be adaptable.
Practice, Practice, Practice
While quick wins for experienced advisors are achievable, there is no substitute for practice, practice and more practice of the tools / methodologies being adopted. This could be achieved early on through friendly client engagements, internal weekly training sessions, team problem solving, marketing seminars, and using the tools and change processes on the firm itself.
A clear over-arching change methodology with the flexibility to draw on the right tools / methodologies as required is essential for success. Coupled with this, a successful advisor needs to be ‘fluent’ in a wealth of tools / methodologies to ensure they can comfortably address most challenges or opportunities that their target client is facing. Questioning alone will only get advisors so far with an experienced client. For richer strategies it’s essential to use business tools to dig deeper. The added benefit of this is that advisors are then on-training the client to continuously improve their own skills / knowledge to solve problems and drive the process when the advisor is not present. This has a hidden benefit of pushing the continuous improvement of the advisor at the same time to continuously improve their knowledge! Imagine how high an advisor’s confidence would be if they knew they couldn’t fail because they had a tool to fix any issue (and complete confidence in the framework they were using to give them the flexibility to adapt to any challenge).
Finding the real blockages to success
Being able to challenge clients to discover the root cause rather than the symptom takes confidence and experience. To have the confidence as an advisor it’s important to have practiced enough so that you are unconsciously competent. This allows great advisors to ‘lift their eyes’ to discover the real blockages to a client’s success. An experienced support coach that provides in-field guidance and support is also a key strategy to building this confidence in the advisor. To build the confidence to say ‘yes’ to more opportunities takes time and practice. There are no short-cuts.