Professional services firms need to build innovation bridges – Part 1
So much of what professional services firms are dealing with around the areas of technology evolution is not unique to their sector, and yet very often there is a tendency to adopt a relatively insular view. Alternative Insights was set up with the intent of looking across the sectors and looking for the bridges that can be built to connect otherwise siloed thinking. Topics that I have covered so far such as data and how it is being used, the rise of blockchain and the authenticity gap in innovation goals compared to actions are all cross-sector topics. However, we need to go further. We want to start framing the debate more and getting the best industry experts sharing how change is being handled in their sector around particular topics. There are enough news sites out there, but what innovation leaders want is depth and analysis to stimulate thinking. However, a community site only works when a community collaborates.
In this two-part article I will be reviewing some recent change across the sectors, grouped by some common themes, and then introducing our plans for the coming quarter on the topics we plan to explore, where you can get involved. Within this I will also reference some of the other articles that you can find on the site, and some of the results of our recent online poll of innovation leaders.
In my last article I talked about the innovation gap that was emerging between what people said were their goals and what actions they are taking. In the article I explored the risks that this can create when so many are saying that the goals are transforming the client outcomes compared to the actions that are predominantly being taken around internal efficiency. This is not to say that internal efficiency isn’t a key driver across professional services however.
Right across the sectors there is a focus around how people use their time best whether in accounting, in-house or law, and each article below touches on aspects of this and how to innovate around that to achieve efficiency. Optimising usage and tracking of time is not unique to one sector.
Accounting Web runs through some tried-and-tested ways of boosting efficiency within an accounting practice, including the use of cloud-based software to keep track of and work on your clients’ financials.
On the related topic of how to effectively track time, Nicholas D’Adhemar, founder and CEO of Apperio, considers the ability of in-house legal teams to effectively manage their legal spend, pointing to figures suggesting that nine in ten legal departments don’t know what they’ve spent on external legal counsel in the last year and that one in five fixed fee arrangements are billed over agreed budgets. He suggests that while technology has delivered greater speed, ease and transparency across other sectors, legal is “lagging” and relies on “old, ugly and complicated” software. He offers that much of the issue stems from “historic, systemic” financial management failures across the industry and says legal spend data is inconsistent. He suggests that advances in cloud computing and analytics capabilities could offer a solution, giving a far clearer oversight of large sums of legal spend data, adding that real-time insight will “protect legal teams from nasty surprises three months down the line.”
Also related to how to use time more effectively, at a recent Solicitors Regulation Authority event in Birmingham, a panel of entrepreneurs including Karl Chapman, strategic adviser at EY Riverview Law, suggested lawyers take time away from day-to-day work pressures to analyse how they would compete with their own business if they were building a new one from scratch.
There is I am sure more that organisations can explore across the services around how to drive internal efficiency in areas such as how time is best used and tracked on their most valuable commodity, their people, and for their most important driver, their clients.
Data is such an essential topic right across professional services, as previously discussed in our initial article. As I said before, professional services firms are on the cusp of a fundamental transformation driven by data, enabled by technology. Most clients of services firms are focused on their businesses and solving problems, not always separating whether something is a question for an accountant, tax adviser, lawyer, consultant or property specialist. It is for this key reason that professional services firms need to adopt a broader view when considering how they innovate through technology.
For example, big data has changed the role of the finance professional in a number of ways. The introduction of predictive analytics means practitioners can track customer data in real-time and evolve from simply keeping records to carrying out in-depth analysis of the data – moving from asking “why did it happen?” to exploring “what happens next”. It has also highlighted the importance of using non-financial data to further enrich insights. Customer behaviour patterns can be used to detect fraud and suspicious activity, and supplier data can be used to anticipate shipment information so that this can be considered when creating forecasts. Research by FSN on planning, budgeting, and forecasting has found that CFOs that make good use of non-financial data are able to forecast with 90-95% accuracy.
One core use of data is around Blockchain and Smart Contracts as per my earlier article. This is impacting right across industries and therefore professional services firms. David Hodge, the director of European operations for AEI Consultants, a real estate-focussed international consulting firm, looks at how the real estate investment and transaction landscape is changing due to blockchain technologies. He notes that a growing number of countries have begun the process of implementing functional and legal frameworks to regulate blockchain-recorded tokens in recent months, and this has encouraged increasing exploration of these technologies across many investment sectors.
Another area powered by data which will impact right across the services space is the Internet of Things (IoT) where consultants are clearly looking to do more to help clients. McKinsey & Co partners Fredrik Dahlqvist, Mark Patel, Alexander Rajko and Jonathan Shulman consider the maturing underlying technologies that will make Internet of Things (IoT) technologies easier to implement and foster new opportunities for companies and investors. They say that the beneficiaries of the latest wave of IoT maturity will be small and medium-size enterprises which may not have the means to execute bespoke implementations but can nevertheless invest in easy-to-use IoT solutions.
McKinsey & Co
The area of data analytics continues to be interesting right across services firms. A study by ResearchAndMarkets.com reveals the global legal analytics market accounted for $456.1m in 2017 and is expected to reach $5.1bn by 2026, growing at a CAGR of 30.8% during the forecast period. The Legal Analytics – Global Market Outlook (2017-2026) report found that increasing demand for automation in legal analytics for data-driven decision making and technological advancements are among the factors fuelling growth. However, it also found that a lack of awareness among litigators is hampering market growth.
Global Legal Post
Finally, firms are beginning to really get to grips with how to use data services to help clients. Capgemini has entered into an 18-month partnership with Airbus to develop the company’s data services platform for airlines. The platform is based on a cloud-hosted data lake that offers visualization, alert management, predictive and machine learning capabilities to enable airlines and other operators in the aeronautics sector to store, manage and analyse their data and that of their ecosystem more efficiently. Capgemini chair and CEO Paul Hermelin said: “This agreement reflects our ambition to become the key partner for strategic programs of global players who are themselves leaders in their industry. Our customers are facing considerable challenges to continue to grow in the new digital economy.”
No doubt there are many other aspects around how to best use data both internally and for clients that firms could share cross sector, on topics such as big data, blockchain, IoT and analytics. For reference back to the recent poll on how firms saw these topics in terms of future impact see the earlier article.
Culture and collaboration
Following the recent professional services leaders summit I wrote a summary article in which I said the themes that really came out were data, process and culture. I have covered the topic of data and highlighted some of the interesting news in this area, and will cover innovation process in part 2. Culture remains the most important for me, as this is the single biggest challenge to grasp across professional services given they are all fundamentally people businesses. One aspect of real cultural change is the way in which collaboration is changing the way people need to work together, with competitors and with clients.
Arguably the biggest thing that is going to impact culture in what has been a largely people-based model historically is the use of AI, and the way this might drive more collaboration. Speaking at the launch of the ICAEW’s AI in Corporate Advisory report, Lord Timothy Clement-Jones, the co-chair of the all-party Parliamentary group on AI, highlighted the need for collaboration between professional services firms and tech developers in order to create an environment of best practice and trust in the UK. He said artificial intelligence will have a “profound” impact on corporate finance in the next five to 10 years and noted that this had already stimulated collaboration between professional services firms – PwC, Grant Thornton, Deloitte, BDO and KPMG contributed to the report, alongside a number of law firms – but added this needs to be taken up several notches if the UK is to be competitive with nations such as the US and China. AI technologies in tandem with professional expertise should help the business, advisory and investment communities make better predictions and deals and create faster, more accurate and more insightful due diligence processes as well as satisfy the public interest, Lord Clement-Jones said.
Perhaps one of the central themes around people people-based change is how to effectively engage people with such fundamental changes in the workplace. Amanda Clack, executive director and head of strategic advisory at CBRE, looks at how organisations can attract and engage talent through an enhanced workplace. She notes that those born after 1997 (aka Generation Z) often choose an employer based on their qualitative merits – meaning there “is a pressure on CRE provision and workplace like never before to provide high-quality, sustainable and healthy environments in which people can enjoy being at work and, as a result, be more productive.” CRE occupiers will have to have a strategy in place for the convergence of skills, space and service provision that will necessarily require collaboration between business support functions such as real estate, HR and technology to provide “the workplace of the future for the employees of today.”
Effective use of technology matters in the war for talent, and yet a recent survey by Progress, a global specialist in application development, found that 47% of organisations are yet to initiate a digital transformation, while 59% expressed concern that it may be too late for them to begin implementing digital transformation measures. Karbon sets out seven steps that companies might follow to ensure a successful digital transformation – including identifying objectives, focussing on customer needs, establishing new processes, and making sure that the technology utilised is appropriate for meeting the organisation’s aims.
Taking a wider view on culture and collaboration, analysis in the legal sector suggests that achieving buy-in for technology regulation from everyone involved in lawtech is crucial to it performing well. This is the view of academic lawyer and King’s College, London law professor Roger Brownsword, who has written a paper published by the Legal Services Board on the matter. He says that all regulators have a shared interest in promoting innovative uses of emerging technologies while not forgetting their duty to protect consumers from potentially harmful effects. He suggests that the basic challenge is “neither to over-regulate (impeding innovation) nor to under-regulate (exposing consumers to unacceptable risks)”. Prof Brownsword says legal sector regulators should be “guided by a three-pronged general principle”, offering that they should “ensure that practice and provision in their sector is lawful, socially acceptable, and geared for compliance and sustainability”.
Firms can I am sure share much more around how to adapt cultures and foster effective collaboration both within the organisation, with competitors and with clients.
In Part 2 of this article I will explore some other areas along with recent news, namely innovation approaches, some examples of and productisation. I will also then outline the way we will over the next few months address the topics of the client of the future, workplace transformation and how collaboration is changing the dynamic. We will be exploring each of those topics in more depth so get in touch if you would like to share your ideas on any of these (contact email@example.com).