If each of your practice groups is primed to win, then there’s a pretty good chance your firm will win as well.
With this in mind, there’s much benefit to be derived by assessing all of your practice groups on two dimensions:
- A winning strategy – from strong to weak, and
- Execution capability – from strong to weak.
Illustration of portfolio map – not real data
If most of your practice groups are in the weak-weak quadrant, perhaps it’s time to take that call from the headhunter. If all the groups are strong-strong, don’t change a thing! If you have a mix of everything, it’s time to get to work…
A winning strategy
There is a range of factors to take into consideration to assess whether a practice group has a winning strategy for the next three years:
- Does the practice have clear aspirations to win? Is there a stretch intent?
- Are they competing in sizeable, growing and profitable market segments?
- Does the practice have a compelling value proposition, that is, clear reasons why clients should choose them over others?
- Does the practice have a profitable and sustainable business model? Bonus points if the model is scalable.
- Is there a Plan B if non-traditional competitors strengthen?
- Are there pilots and experiments in place creating options for future growth?
- Is there a clear implementation roadmap with accountabilities, measures and timing?
- Is it clear what they say ‘no’ to, and why?
Execution capability
On paper, the practice group might have a world-beating strategy but it may not have the skills, resources and systems to implement it.
Source: fotolia
The first, and most important, the question is whether you have the right practice group leader. Is she a true leader or merely a convenor? Does she lead or just manage? While she might seek to lead, does she have loyal followers? Does she have the ability to inspire and support team members to be their best? Is she strong enough to stand up to the recalcitrants?
Other questions to ask around execution capability:
- Is the team a real team or just a loose coalition of colleagues?
- Does the team generally follow-through on their commitments?
- Does the team own its strategy and take accountability for it?
- Does the team have the right talent necessary to win, now and in three years time?
- Does the group have access to the right technology, processes and systems to underpin its business model?
- Is there sufficient open-mindedness to adapt to new inventions and work methods?
- Are there mechanisms in place to regularly review progress and tweak their plans?
The portfolio
While it’s important to assess the competitiveness of each practice, there’s also a lot of value in assessing the inter-dependencies, synergies and gaps across the portfolio. Another portfolio overlay is the amount of partner equity allocated to each group and expected ROE (return on equity).
A review of the portfolio should indicate which practices require investment, divestment or just be maintained. Handling the politics of these decisions is a topic for another post, or three.
In conclusion
While a firm is more than just the sum of its parts, the parts play a critical role in sustaining success. Your firm’s strategy needs to reflect firm-wide themes like overall market positioning, culture, brand, strategic clients, talent, R&D, infrastructure and support. It also needs to deep dive into the practice portfolio, making sure each plays its part and leverages the strengths of the whole.
business, change management, client relationships, culture, governance, growth, innovation, Measurement, planning, pricing, professional service firms, strategy management, Workshop facilitation
10 questions for your PLAN B
In Commentary on 1 June 2017 at 8:04 amSource: CoffeeStencil
MY 50th BLOG POST…
What’s your firm’s PLAN B?
PLAN B addresses the scenario of your firm primarily selling talent, to selling a combination of talent, technology and data. It means moving from the pyramid to the rocket business model (read this BCG report if you don’t know I’m talking about). It’s about the digitisation of professional practice.
These 10 questions may be helpful in crafting your PLAN B:
#1 How big do we need to get?
Economies of scale have not traditionally been a key success factor in talent-heavy professional services. One shining example of this is Wachtel Lipton Rosen & Katz, which is one of the world’s most successful law firms despite being a relatively small single-office partnership.
With the addition of technology and data to the mix, there may be specific advantages that larger firms may have over smaller rivals, including…
Small may be more nimble and cosy, but if you can’t afford the new bright shiny toys clients might stop playing with you.
#2 What’s our dividend policy?
The “cash burn” phase of new technology acquisition is generally much longer than that of new talent. It took Amazon over 20 years to turn a profit. Firms need to re-align their dividend policy and balance sheets to suit their business models. Without patient capital, firms won’t be able to invest in or acquire the new tools necessary to compete.
#3 How do we (re)structure ourselves?
The rocket model raises a range of interesting organisational design issues:
#4 Who can become a partner in our firm?
Most firms see “multi-disciplinary” as adding more work types or professional disciplines. With the onset of the rocket model, this definition might need to widen to include designers, technologists, project managers, marketers and sales engineers. It is interesting to note that Herbert Smith Freehills (HSF) recently appointed the head of their ALT business as an HSF partner.
#5 What do we measure?
David Maister’s profit formula (Leverage X Hourly Rate X Utilisation X Margin) has been the foundation of measurement (and therefore reward), practice management and pricing for the past four decades. The key assumption in this model is that the core asset being leverage is human capital. With new tech-based assets and products, firms will need to radically transform what and how they measure things. To illustrate, if a firm sells compliance systems and AI tools via a subscription model, tracking staff utilisation will not only be meaningless, but dangerous.
#6 How do we price?
Time-based pricing will be less prevalent in a talent + data + technology world. New pricing models will be required to set, communicate and capture value. This will include things like user license fees, subscriptions and incentivised retainers. What constitutes a “fair price” will become more complex, and need to factor in development costs and risks, IP fungibility, the scale and scope of application, and duration of benefit.
#7 Who are we competing with?
In 1960, Ted Levitt published a brilliant HBR article called Marketing Myopia. He cited the example of US railway companies going out of business because they defined themselves as competing in the railway rather than in the transport industry. In a world, where the client solution includes a combination of talent + technology + data, your biggest competitor may not be the lookalike firm three floors up, but rather the software vendor who is using your firm to iron out bugs before attempting global domination going directly to your clients.
#8 Which clients do we say ‘no’ to?
There is a general trend towards more co-created integrated solutions between firms and their clients. In this environment, firms may be forced to choose target clients, not on size, scope or sector, but rather on systems sophistication and complementarity. One could imagine a very progressive firm not being able to service clients who were technology laggards. Platforms and standards could equally determine relative client attractiveness.
#9 How do we adapt our talent pipeline?
The pyramid model creates a “tournament” where a large group of aspirants start at the bottom and are encouraged to beat their peers on the way up. The rocket model potentially changes the game with far fewer recruited at the bottom and a philosophy of retention rather than competition. It also challenges the apprenticeship system of learning and development.
On the plus-side, the rocket model opens up a number of new career pathways and facilitates a more diverse talent pool.
At more senior levels, the prerequisites for partner promotion might need to shift to include digital literacy, project management and solution integration. Partners need to be able to supervise people who are not like them. They also need to be able to align clients’ needs with the firm’s full talent + technology + data offering and be confident in selling it.
#10 What kind of culture do we want to become?
Many professional service firms have technical excellence as the dominant cultural norm. In the end, it’s scarce specialist knowledge, advice and skill that clients are willing to pay for. In changing the business model, firms need to question the kind of culture they’d like to become and what constitutes “cultural fit”. The new culture could be anchored around things like…
Your next strategy workshop
Rather than focussing on reviewing or tweaking PLAN A in your next strategy workshop, run an “alternative futures” session and flesh-out your PLAN B. As stewards of the firm, you owe it to your partners to have thought through these possible futures and your contingency plans. An expert independent facilitator would add considerably to the discussion. Call +61 417 305 880 to speak to one.