Productised service delivery + effective proposition development = growth
Over the course of last year I wrote about many areas around the drive towards productisation. You can read more about areas such as productisation, data, and innovation, within accountancy, law and in-house in these links. Some recent work I have done with law firms around legaltech, with product businesses and accounting firms on proposition development along with some innovation benchmarking across law and accountancy firms has crystallised my thinking on how this will evolve. In the model I published last year around legaltech I talked about the shift towards using tech for service delivery, and this shift is not unique to law. I have said before that in many ways accounting firms are even more strongly positioned to utilise data to drive future value, and I am more convinced than ever that this is the case based on recent projects.
I have sadly not had the time to write much this year as it has been so full on with advisory work, which is not a bad thing in the current climate. My reflection over recent projects is that while the statements around productisation is unquestionably true in my view, many are still focused in the wrong places with their ‘innovation’ initiatives. Innovation for the sake of it is a complete waste of time, and the current crisis has certainly focused minds from what I have seen.
So much of the focus from firms in the past has been to look at technology more as a way to drive efficiency through areas like automation. While this helps deliver a client output more efficiently is doesn’t fundamentally transform the outcome from the clients perspective. Those focused around how to transform what they offer to the client will ultimately be the winners. Those that really think this through will see the opportunities in looking at how to better reframe the service delivery and transition it to a more productised approach.
Show me a client that really cares about internal efficiency within a firm, rather than how they can get the outputs they need in a better, more cost effective way. This usually translates to a more digital experience.
Something I have been considering is why more professional services firms are not therefore more focused on this productised or digitised service delivery. Clearly there are the obvious areas such as:
- The challenge to the current business models and the risk of cannibalisation of revenues;
- The genuine belief that many still hold that they are ‘artists’ creating a unique and bespoke offering to each client;
- The inherent constraints of the partnership model that many still have, which inhibits investment approaches;
- The attitude to risk and the fact that product businesses have different dynamics to services businesses;
I could carry on the list, but you get the picture. Anyway, my overriding observation from recent advisory work is that it is all of these plus the fundamental challenge that in many cases they lack the perspective around how to approach Proposition Development. For sure product strategy is a core part of this, but the bigger challenge is the gap of really stepping back and asking the basic and yet surprisingly hard questions for many in professional services. What is the client really wanting? Why do they want this? What is our offer? What painpoints does this address and how? How does this differ from competitors? How do we price this? What is the sales path to up-sell and cross-sell? How do we deliver? I use a model to map this all out that I call the gameplan.
Proposition development and execution needs a structure, a process. It also needs a goal – what is this worth to us in 5 years time, based on how many clients, in what addressable market, on what assumptions, at what cost to develop, over which time it will payback, at what margin it will operate? In short – how will this deliver growth?
The key is being able to develop a Proposition and then to develop a plan to deliver the proposition. In both cases these are areas where often professional services firms lack the skills.
So who is doing this well? I have worked a lot this year with PE and VC backed businesses, and in my view these are the exemplars. The reason in my experience is that the types of questions I list above are just as obvious for PE/VC’s as they are for product businesses. This is not to say that these are the only businesses that will succeed but they do have a natural head start as at their core they want to create highly repeatable revenue streams that are as digitised as possible, with low churn, high margins, and clear up-sell and cross-sell paths.
PE businesses naturally see the productisation of services as not just inevitable but as something they want to actively drive to at a faster pace than the ‘traditional’ market can adapt.
I’m not saying for a minute that everything should be digitised and that there is no need for the truster advisor, but rather that people really need to question some of their past assumptions around service delivery when they look at future propositions. The trusted advisor will be more important than ever, but that isn’t the same as saying people will value what they do currently in the same way. Clients want to consume services in more digitised ways based on all the work I have been involved in, and already changing face to face interactions have now likely transformed for good in places. Trusted advisors will be more important than ever but just for those areas that can never be productised.
In addition to delivery models changing, so too are expectations of how clients will ‘subscribe’ to services in the future with likely significant price transformation disruption yet to come.
The biggest challenge for many businesses I see is when you ask many of the questions I pose in this article they can only see it very clearly from an internal perspective. Successful proposition development means standing in the clients shoes and really understanding them, and then building and delivering something that surpasses their expectations. It is far more likely than not that this will be much more of a product nature in the future than a bespoke service.
The professional services firms that succeed will be those that effectively challenge their existing assumptions and delivery models, really focusing on effective proposition development. The successful product businesses will be the ones that help them achieve these goals. Perhaps the unanswered question remains where the boundary between professional services and product businesses will finally settle.