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The State of the Legal Market

In Articles, Commentary on 27 September 2017 at 4:26 pm

This is my conclusion, as lead author, to the 2017 Thomson Reuters Peer Monitor Melbourne Law School report on the state of the Australian legal market…

Screen Shot 2017-09-27 at 4.18.55 pm Over the past 30 years, larger law firms in Australia have had to make only two major strategic decisions: [1] whether to become a national firm and how, and [2] whether to become an international firm and how?

They now have to make a third.

The 2017 Peer Monitor data leaves little doubt that technology is changing the practice and business of law and that firms need a clear and coherent strategic response. Firms might decide to be pioneers investing in lawtech start-ups, teaching their lawyers how to code and experimenting with new cognitive technologies. Other firms might prefer to keep their powder dry and wait to see what works, which platforms take hold, and what their clients prefer. Either way, an active choice needs to be made. Each comes with their own risks and opportunities.

A key challenge in investing in a new way is that the current core business is still very successful. The 2017 Peer Monitor data suggests that despite a flat market overall, a fair number of firms are still making healthy profits. The challenge comes in balancing the old with the new.

One way for firms to address this balance is to think about strategy as two parallel streams: one being Exploit and the other Explore (based on the work of O’Reilly and Tushman). Exploit refers to efforts to leverage current strengths and capabilities to make the current core business as good as it can be. Explore refers to new exploratory and experimentation efforts that will hopefully bear fruit in the future.

One approach is to make the whole firm ambidextrous, that is, change the firm’s culture so that everyone embraces Explore AND Exploit in their everyday work and client interactions. An alternative approach is to keep the Explore and Exploit far from each other and avoid cross-contamination. In this instance, Exploit is the cash cow and hires the suits, and Explore is a cash burner and hires the black skivvies. A third approach is to try to do both.

Source: academiedecafedemontreal.com

In an environment of rapid change and hyper-competition, every firm needs a healthy portfolio of both Exploit and Explore initiatives. A genuine commitment to Explore will most likely mean substantial changes to the firm’s dividend policy and capital structure. Firm governance and structural arrangements are also likely to be impacted, as will marketing, pricing, IT, operations and HR.

The role of managing partners is to lead the thinking around these issues and prepare the firm for its third really big strategic decision.

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account planning, business, business development, change management, client relationships, executive leadership team, governance, growth, innovation, internal collaboration, key account management, marketing, planning, pricing, professional service firms, Sales management, strategy management

A professional services value chain

In Articles, Commentary on 31 August 2017 at 2:00 pm

Michael Porter’s famous value chain did NOT have me at hello. I’ve never found it a particularly valuable tool in crafting professional service firm strategy. Most firms don’t talk about “Inbound and Outbound Logistics” or have “Procurement” as a major support function. Distinguishing between “Operations” and “Service” in a service business is just plain confusing.

In the spirit of further developing the theory of the professional service firm, here’s my go at a professional services value chain…

Screen Shot 2017-08-31 at 1.36.26 pm

WAYS TO ADD VALUE

Firms can add to their profitability and competitiveness (my definition of adding value) in the following ways:

#1 Profiling and Pitching

Brand and Network Building – branded premium providers command higher prices and attract top talent. Firms with better networks spend less on mass marketing and get more low-cost referrals.
Client and Industry Insights – firms that really understand their client’s business and industry have better bid-win strike rates and a higher percentage of sole-sourced work.
Selling and Pricing – firms that are adept at selling and pricing capture more value, discount less and win more.

#2 Resourcing and Communicating

Process and Workflow Design – firms that have streamlined workflows use fewer resources for the same outputs. They generally have faster and more predictable response times and enjoy lower error rates.
Resource Planning and Project Management – significantly higher margins can be realised by configuring the right combination of talent, tools and technology for each matter or project. More and more clients are choosing firms based on their ability to plan and project manage their work.
Client Interaction and Co-creation – better client communication and engagement usually increases the chance of client satisfaction and value perceptions. These, in turn, improve client loyalty, pricing and billing outcomes.

#3 Delivering and Controlling

Technical and Commercial Capability – firms that are perceived to provide better quality and more commercially relevant advice are usually able to command a price premium.
Service Delivery, Quality Assurance (QA) and Billing – firms that are able to deliver efficiently, effectively and consistently usually outperform their peers. So too are those that bill and collect fairly and promptly.
Team Engagement – firms that can motivate and inspire their staff will usually enjoy higher productivity, better quality work and less regrettable turnover.

#4 Connecting and Innovating

Client Relationship Management – firms that have wider and deeper relationships with their key clients will usually enjoy lower business development cost, higher share-of-wallet and more predictable revenue flow.
Client Education and Support – firms that support their clients through ongoing education and other activities relevant to their needs will enjoy better client relationships and loyalty. Informed purchasers often brief better, respect their providers and know what they don’t know.
Service Innovation – firms that continue to evolve their service offering to address new market needs will retain current clients and attract new ones. Innovation that lowers costs will give firms more price-setting discretion.

USING THE MODEL

Where to invest

Source: Dreamstime

The value chain model can be used to assess where resources are currently deployed and where they should be. For example, most law firms put a lot of time and energy into just five areas: Brand and Network Building; Technical and Commercial Capability; Service Delivery, QA and Billing; Team Engagement and Client Relationship Management. This means that seven other value-adding areas are potentially sub-optimised. A more deliberate focus in each of these areas could add up to a significant improvement in profitability and competitiveness.

Where to innovate

Many professional service firms are looking to innovate and “digitise” their business. The model can be used to determine what elements of the value-chain should be the focus of change and investment. For example, rather than spreading themselves too thinly, a firm might want to focus their energy and dollars on getting closer to their key clients and enhancing client connectivity and engagement. This would mean an emphasis on Client Engagement and Co-creation, Client Relationship Management and Client Education and Support.

What should we make, buy or borrow

By analysing its value chain, a firm can decide which elements it should make, which it should buy, and which it should borrow. So, for example, one of my accounting firm clients has engaged a specialist lead generation company to help out with Sales and Pricing. They recognised that prospecting for new clients was a key weakness, and that re-training the firm’s partners would be like flogging a dead horse. They pay the consultancy $500 for each meeting they set up within defined ‘right client’ parameters.

How do we compare

The value chain model can be used for head-to-head competitor analysis. Further insights can be gained by examining each of the 12 areas, assessing where a firm is ahead, where it’s at par, or where it’s behind its key competitors. A firm can then use the model to decide its core strategy, that is, how it’s going to win and what capabilities will be needed for success. For example, if very few direct competitors are focusing on Resource Planning & Project Management, this might be a source of competitive advantage in the period ahead.

How do we organise

The final application area of the value chain model is to ensure there is oversight of each of the value-adding areas or categories. For example, a firm may elect to create a Resourcing and Communicating SWAT team, with a blend of Practice, IT, HR, Finance and BD executives, charged with identifying and making improvements.

TO CONCLUDE

I’ve stuck my neck out and come up with an alternative value chain model. What do you think?

Sorry, Michael. Nothing personal. Just business. Professional service firm business.

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account planning, business, business development, change management, client relationships, culture, governance, growth, innovation, Leadership capacity, marketing, Measurement, planning, strategy management, Training

From collegiate to collaborative

In Articles, Commentary on 14 July 2017 at 3:25 pm

With increasing competition from freelancers, boutiques and solo specialists, most professional service firms are realising that their primary source of competitive advantage is the ‘collective’. By winning and delivering together, they can offer things the one-person bands can’t. The edge is not from economies of scale, but rather in more holistic advice and lower client transactions cost. The value proposition is not cross-selling but integrated cross-practice problem-solving.

So why not just do it

The biggest constraint to collaboration is that autonomy is an intrinsic motivator for many professionals (see the work of Larry Richards and Dan Pink). Your firm is full of Frank Sinatras looking to do it my way. It’s messy and clunky to collaborate, especially with other smart independently-minded sceptics. For many, the perceived loss of control is too great.

Heart shape latte art coffe in black cup on old wooden desk , top view

Source: fotolia

Most firms have built their measurement and reward systems around the individual. A partner’s personal financial contribution is often the #1 criterion used to determine reward and progression. It’s going to be pretty hard to be deeply collaborative as a firm when what really counts is scoring well on individual performance reports.

A vast majority of client relationships start out as one-to-one engagements. The partner that wins the initial work tends to keep on going and develops strong personal relationships with key buyers and influencers. Whilst these personal bonds are great, they can become to define the overall relationship and limit others stepping into the frame and joining the club as equals.

Some firms are in indeed challenged by very high variability in technical ability and inconsistent service standards. When you are to be judged by your weakest link, there is often a strong reticence to involve or trust others that are perceived to be less capable.

Seven areas to work on

If you’re keen to deal with these constraints and move from being a nice group of colleagues to a deeply collaborative one-firm firm, then your list of priorities should include some or all of the following:

Address the sceptics.
Your firm will most likely have its fair share of soloists, deal junkies and control freaks. Getting the majority on the collaboration bus is crucial to realise your firm’s potential. Providing objective research evidence for collaboration (see Heidi Gardner’s work) and actively addressing concerns is a good pace to start to winning hearts and minds, or at least just minds.

Set the right signals.
Firm leaders need to set the right measures, incentives and sanctions to facilitate teamwork across the firm. While it’s tricky, it’s not impossible. Magic Circle firm, Linklaters, is just one recent example of a firm attempting to adjust their partner compensation model to enable deeper collaboration.

Develop your boundary-spanners.
The Client Relationship Partner (CRP) role is the most important boundary-spanning position in your firm. CRPs lead the community of practitioners servicing the client over time. The financial returns expected from collaboration will be a function of CRPs’ empowerment, energy and capability. Many firms are now running strategic account leadership programs for just this purpose.

Create the right technology platform.
Technology can assist in connecting your partners with the right opportunities and knowledge. It can also help mitigate the many barriers to collaboration. Software products like Performance Leader, Objective Manager and Trello have been used very effectively for sharing client knowledge and collaborative planning and execution.

Revamp client governance.
Many firms introduce a key client program and then shift into “set and forget” mode. Ongoing client governance is crucial to driving a client-centric strategy. This includes inter-alia, [i] making the behavioural expectations shockingly clear; [ii] redeploying resources to accelerate the growth of strategic clients; [iii] supporting the apostles and tackling the recalcitrants; [iv] tweaking the client portfolio, and [v] providing guidance and injecting fresh ideas on key client strategy.

Drive consistency.
As stated above, variable quality in advice and service makes it really hard to go to market with a compelling one-firm value proposition. The key here is to listen to your clients, find the weakest links and act promptly, fairly and forcefully.

Live your values.
If your firm’s values reflect something about respect, integrity, teamwork, service excellence, or similar ideas, then there’s enough ammunition here to start and win the battle. It’s really up to the firm’s leaders as to take up the fight and ensure the firm’s values move beyond wall decorations and screensavers.

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business, business development, change management, client loyalty, client relationships, culture, executive leadership team, governance, growth, innovation, internal collaboration, Leadership capacity, marketing, Measurement, planning, professional service firms, strategy management

Are your practice groups primed to win?

In Articles, Commentary on 26 April 2017 at 8:23 am

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.

a cup of coffee on the wood table.cafe latte with tulip latte art pattern on the wooden background.

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.

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account planning, business, business development, change management, growth, innovation, internal collaboration, marketing, planning, professional service firms, strategy management

Innovation for sceptics

In Articles, Commentary on 9 February 2017 at 3:19 pm

Many professional service firms have innovation as a key strategic theme. At the front-end of most innovation processes, is the step of generating fresh, creative, out-of-the-box ideas. In marketing-speak, this is called the “ideation” stage.

Conventional ideation methods include brainstorming workshops, shark tank competitions, market studies and voice-of-the-client programs. While each of these have merit, I’d like to suggest the trusted sparring partner* as an alternative approach. Put simply, this method involves setting up pairs of people to work together to come up with some fresh innovative ideas. In the sparring process, ideas get suggested, expanded, challenged, expanded again, refined, explored, split, elaborated, and then captured.

Why does it work so well in professional services?

3d-late-art2cats According to Dr Larry Richard‘s research, many professionals are [1] trained sceptics, and [2] insecure overachievers. Put a group of these types into a brainstorming workshop and you have a pretty low probability of generating anything fresh. The sceptics will dismiss unconventional ideas as unworkable, the insecures will stay quiet or back down to protect their ego, and the dominant (hiding-something) overachievers, well you’ve heard all their good ideas 20 times before.

In a group of two…

there’s nowhere to hide,
there’s greater safety to explore,
it’s really uncomfortable to say nothing, and
it’s easier for the discussion to go on and on, if it needs to.

By the by, there’s also a growing body of research that dismisses the idea of the lone genius driving all breakthrough thinking. This partially explains why client interviews are helpful for service feedback, but often not great for fresh insights and ideas.

Putting it in practice

Ideally, the pairs should be set up so that there’s some diversity of experience and background. Don’t put two people who hate each other together, but no BFF’s either. The idea is to create safe trusting dyads that can spar and spark off each other. Diversity can also come from pairing up one internal person with a key client or a referrer. Mixing up disciplines eg. a technologist with human behaviour expert, might also be fun.

Assuming you wish to have a short and sharp ideation process, I’d recommend giving the pair a limited time to work, say two to three weeks, and a semi-structured brief to orientate their discussions. This brief may, for example, focus on new products and services, alternative business models, ideas for cost-reduction, client experience enhancements, better staff engagement, and or smarter use of the firm’s balance sheet. You may elect a much wider brief such as “ideas to improve the firm’s competitiveness”, but beware, some people can drown if the ocean is too big.

At the beginning you may limit the duration of their discussions and narrow their task, however, if the pair flourish, there’s no reason to limit their energy and creativity by stopping it.

Call to action

The world has benefited hugely from trusted sparring partners: Lennon and McCartney, Jobs and Wozniak, Laurel and Hardy, Gilbert and Sullivan, Sturridge and Suarez, Batman and Robyn, Gates and Allen, Mork and Mindy, Simon and Garfunkel… Wouldn’t it be great if you could enable your very own Rolls and Royce to emerge in your firm? Really easy to try…

* This idea of sparring partners comes from a 2016 HBR article by Roberto Verganti, The Innovative Power of Criticism.

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account planning, business, business development, change management, client relationships, culture, innovation, internal collaboration, key account management, marketing, Measurement, planning, professional service firms, strategy management

There are two words in “strategic plan”

In Articles, Commentary on 3 February 2017 at 6:53 am

Some strategic plans are heavy on plans, but light on strategy. Some have beautiful strategy descriptions and diagrams, but no roadmap for execution. There are two words in “strategic plan”, and you need both of them.

The strategy bit

Lafley and Martin (Playing to Win, Harvard Business School Press, 2014) suggest strategy is about describing an integrated and coherent response to five key questions:

What are our winning aspirations?
Where will we play?
How will we win?
What capabilities are critical to our success?
What systems and enablers are required?

From my experience, this model works extremely well in professional services. It’s simple, practical and not overly jagonised. It can be used at multiple levels – the firm overall, for practice groups and individual practitioners. When challenged by a sceptic there’s a strong body of research evidence to support it.

The plan bit

The plan element describes your strategic priorities, where you will (and won’t) be investing, what key initiatives will be actioned, who, when and how things will be done. There are five frameworks that you might find helpful to organise and present your thinking:

#1 McKinsey Three Horizon Growth Model – listing key strategic initiatives around the expected timing and certainty of benefit. H1 is around defending and extending core business; H2 building the momentum of emerging new business; and H3 creating options for future business. The graphic below illustrates the use of the Three Horizon model in a strategic plan for a key client.

#2 Kanban Boards – a visualisation tool that enables you to categorise and optimise the flow of work, be it a specific project, a program of work or a major strategic initiative. This agile-friendly tool is brilliant for cross-firm collaboration, accountability and transparency. The graphic below shows a Kanban Board, using Trello software, for a specific strategy project.

#3 Strategy Roadmaps or Infographics – expressing the strategy in the form of a journey, noting key events and milestones on the way. When the strategy is expressed as a narrative, one often finds there’s much greater understanding and buy-in. The graphic below shows a roadmap for an innovation strategy.

#4 Past Present Future – detailing the specific things that will be changed and those things that will be preserved. This is a simple device to explain the implications of a particular strategic direction. The graphic below shows the changes an engineering firm is seeking in adopting a client-centric strategy and culture.

#5 Strategic Pillars – a graphic device summarising the key areas that will be focused on in strategy execution. The symbolism of the pillar model is that each component is necessary for success – missing one pillar compromises the integrity of the whole. The graphic below shows a pillar model for a strategic account management program.

Call to action

Take a quick look at your current strategic plan and ask yourself these three questions:

In light of market, client and competitor trends over the next few years, have we put enough thought into where will play and how we will win?
Are we crystal clear on our major priorities, investments and actions?
Have we presented our strategic thinking in a coherent and compelling way?

If the answer is ‘not really’ to any or all of the questions, then it’s appropriate to invoke another famous two-word phrase: IT’S TIME.

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business, business development, change management, executive leadership team, governance, innovation, marketing, planning, pricing, professional service firms, strategy management

5 takeaways from teaching management at the Melbourne Law School

In Articles, Commentary on 31 October 2016 at 7:30 am

“The best way to learn is to teach.”

Cup of hotlatte art coffee on wooden table

Source: fotolia

I had the privilege and pleasure to present the Management for Professionals subject on the Melbourne Law Masters program over this past week. The course covered the foundations of leadership and management within a legal context. Reference material was sourced from Maister, Porter, Kotter, Beaton, Martin, Susskind and Day, amongst many others.

After road-testing all the material in the classroom, my five key takeaways are…

#1 Maister needs an update

David Maister’s famous practice spectrum outlines a range of business models for professional service firms to consider. These include Rocket Scientist, Grey Hair, Procedural and Commodity, which in turn influence the settings on leverage, utilisation, margin and rates.

Maister’s models are still largely relevant in a people-intensive firms, but less so in technology and data-intensive legal businesses. These latter firms clearly price, operate and scale up differently. Perhaps a better business model map – see below – is to have High to Low Complexity on one continuum and People to Tech-Intensity on the other. The top right position is currently vacant, but has a huge number of aspirants.

#2 NewLaw is no longer new

During the course we studied INSEAD’s new case study on Axiom Legal. We had a great presentation from Jarred Hardman, the founder of Crowd & Co, and explored alternative models such as Keypoint, Lexvoco and Bespoke.

It appears that over the past 12 months, many traditional law firms buying-in or are copying the “new” bits of NewLaw to the point that they are no longer really fresh or compelling differentiators. One student commented that many NewLaw models shifted so much business risk to individual lawyers that they would struggle to attract really top talent.

#3 Love the grey

One of the most interesting class discussions centred around a HBR video on the common myths of strategy execution, that is, success will come from aligning goals, better communication and following the plan. The video highlighted that while the latter approaches are worthwhile there are many nuances and subtleties that need to be considered. It appears there are few absolute truths in management and most things are contingent on context, characters and constraints.

#4 Strategy should be for everyone

“I wish I had done a course like this when I started my career. It would have made sense of all the decisions my firm has taken over the years.”

It is common in many firms for discussions around strategy to be treated as secret partner business. In my view there is a strong case to give everyone in the firm a deeper appreciation of how the firm competes and how it makes money. Better understanding of these key concepts will facilitate innovation and execution.

#5 The world is small

From the class discussions, it appears that cats in Santiago, Perth, Beijing, Milan and Jakarta are equally hard to herd. The Melbourne Law Masters program attracts law students from over 40 countries across the globe. Professors, such as Katharine Christopherson (also teaching last week), come from far and wide to present their classes. Being immersed in this global village for one-week was truly an amazing experience.

_______________________________________________________

I will be presenting the Management for Professionals course again in October 2017. It is available as a single subject study option or as an elective on the Masters and JD programs.

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business development, executive leadership team, growth, innovation, marketing, planning, pricing, professional service firms, strategy management, Workshop facilitation

Key takeouts from major new legal market report

In Articles, Commentary on 28 August 2015 at 10:14 am

I’m proud to be lead author of the Thomson Reuters Peer Monitor report on the Australian legal market, prepared in collaboration with the Melbourne Law School. The report received good coverage in the Friday 28 August edition of the Australian Financial Review.

In summary, the report reveals that the Australian legal market bears all the hallmarks of a mature industry: declining demand, increased price-based competition, worktype decomposition, entry of market disruptors, technology substitution, and growth in both consolidators and niche players. While market conditions are tough, they’re not calamitous. The larger firms generally have shrinking profit pools but have kept their heavy-hitters happy by de-equisiting other partners and cutting headcount. The contention that a firm cannot cut their way to greatness probably doesn’t hold true if one looks at how the larger firms have performed in recent years. However, the point when cutting comprises the underlying business model of scale, range and reach cannot be far off.

In my view, the biggest structural change in the market has not been NewLaw entrants or even globalisation, it has been the dramatic shift of work in-house and an increase in buyer power and sophistication. This trend has been prevalent in Australia for over a decade but its impact is really being felt in a benign economy and a demoralised political environment.

Some specific takeouts

While the long-term trend is negative, the last quarter of F15 saw an increase in demand and the first half of 2015 saw firms rehiring lawyers. It would be great to predict a bottoming out of the market and upside from here on end, but it’s foolish to pick a trend from one data point.
It’s been Christmas all year for firms with strong property and construction and M&A practices. It’s been Good Friday all year for firms with big banking and finance practices.
In the global versus local scrap, it appears the domestic firms are winning in litigation, IP and general corporate, with the globals making headway in property and M&A. It begs the question whether a global brand puts a firm at a disadvantage in targeting work perceived as domestic or jurisdiction-specific?
The data suggests that the firms that have gone down the global route have had a greater drop off in demand but have increased profits per equity partner. Perhaps it is these firms that have had more radical changes in their equity partner ranks and downsizing some practices.
In these tough times it appears that technology is the biggest investment area of the larger firms. In other sectors of the economy facing maturity, marketing and BD expenditure tends to increase relative to other areas. The signs are that law firms are banking on technology to make step-change improvements in efficiency and effectiveness.
The headhunters and recruitment firms supplying the legal market are popping champagne corks. Expenditure increased over 10% in this area in 2015 versus 2014.

Image sourced from www.theaureview.com

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account planning, Audit, business development, client loyalty, growth, internal collaboration, key account management, marketing, planning, pricing, professional service firms, strategy management

Stress test your client strategy

In Articles, Commentary on 9 February 2015 at 8:12 am

Most client plans I see are tactical, short-term and myopic. They are really sales pipeline documents with coffee catch-ups tacked on. There’s often very little about intended client strategy. By client strategy I mean a game plan to win – a big picture view as to how to respond to and potentially shape the client’s needs and buying patterns over time. A clear articulation of how to run faster and smarter than major competitors.

In my view, client strategies can be categorised into five areas. These categories provide a useful checklist in stress testing your key account plans.

#1 Price, risk and cost

Price and risk-sharing is a strategic arena that provides a wealth of competitive opportunity. Firms can leapfrog rivals by offering alternative pricing and risk-sharing models that go beyond convention and better address fundamental client needs. A recent case study on Bendigo and Adelaide Bank is a good illustration of this.

A number of professional service firms are creating an edge, not by race-to-the-bottom discounting, but by negotiating long-term incentivised retainers to deliver positive outcomes to both the client and the provider. I think there’s rich pickings for firms that can truly understand the nature and scope of client risk and identify options to de-risk the client’s business.

Another strategy in this category is to reengineer the firm’s processes to significantly reduce cost-to-serve and to enable the firm to have greater price-setting discretion. Similarly, exploring new ways to measure and enhance perceived value can drive client commitment.

#2 People and relationships

Many clients plans concentrate on relationship mapping and connecting. This is great, but cherrypicking is a client strategy often not considered with any rigour. Cherrypicking starts by asking, “if we had to hire three people that would fundamentally advantage us with this client, who would they be?”. These new hires might be in a competing firm, in the client organisation or in an adjacent provider. A quick business case analysis of the options can be extremely revealing.

I recently heard of an accounting firm that captured the lion’s share of a major client’s spend by headhunting a senior manager from a rival firm. Client feedback revealed this manager had become the ‘go to’ adviser and was far more important to the client than the figurehead client relationship partner.

#3 Data and technology

Information and communications technology is increasingly being used improve client connectedness and service. A great illustration of this is a leading Australian law firm that provides each client end-user a tailored smartphone app that features:

contact details and specialisations of service providers
seamless integration with Skype for videoconferencing
real-time project status updates
billing data and analysis
relevant legislation, case law and industry updates
on-demand and live professional development modules
upcoming events and service improvements
a feedback and suggestion space
FAQs
discussion forums.

Big data is going to be one of the next frontiers of client strategy. At the moment, most firms and clients operate with islands of data that are not linked in any meaningful way e.g. procurement, matter management, time recording, document management, billing, HR, client satisfaction, etc.. There’s much opportunity to integrate and analyse all this data and offer both the client and the firm deeper insights into how to run more effective and efficient projects.

#4 Delivery, capacity and coverage

At the heart of the Big 4’s multidisciplinary strategy is a compelling value proposition: our capacity, coverage and consistent service delivery allows you, Mr/Ms Key Client, to lower your transactions costs, leverage your scale, make you look good, de-risk innovation, facilitate new market entry and improve compliance across ALL of your operations. Did I mention ‘make you look good!’?

Benchstrength or depth of expertise in a particular area important to the client can be at the heart of a firm’s client strategy. It’s not that the expertise itself is superior but rather it’s the critical mass of high quality talent and a strong team approach that builds trust and creates preference in the client’s mind.

#5 Knowledge and expertise

The fifth area of client strategy relates to the firm’s knowledge – both [1] technical discipline expertise, and [2] understanding of the client’s business and industry. The key here is the firm’s ability to contextualise advice and make it relevant to the client’s specific needs. A firm may have a wizz-bang CRM, but it’s useless if they can’t use this knowledge to pre-empt competitors, bring fresh ideas to the client or simply make the advice more cost-effective and valuable.

In my experience many firms over-estimate the distinctiveness and durability of their knowledge. Consequently, if you’re number 2 or 3 on the client’s pecking order i.e. the challenger brand, investment in deepening client knowledge and its application can be at heart of your client strategy.

Another related client strategy in this category is “flanking”. This is about avoiding direct head-to-head competition with a strong incumbent and instead picking up work around the edges in new expertise areas and/or locations. Once a foothold is created a direct assault on the incumbent can then be launched.

In conclusion

In stress-testing client plans it’s important not to get too hung up on the client plan document itself. A plan is not a document. A plan is the outcomes you’re seeking and your intended actions to achieve those outcomes. What’s critical is that there clear evidence of robust strategic thinking and discussion around how to compete, where to invest and, the hardest bit, deciding what not to do.

Check out Barolsky Advisors’ Profit Growth Now! to make a step-improvement in your firm’s critical client relationships.

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business development, culture, growth, innovation, internal collaboration, marketing, planning, pricing, professional service firms, Sales management, strategy management

Redefining shared services

In Articles, Commentary on 17 September 2014 at 8:48 am

I think it’s time to think differently about shared services in professional service firms. By shared services I mean the HR, IT, Finance and Marketing functions.

In many firms these functions have been limited to service, support and enablement. Their job is the provision of day-to-day “back office” operational services, but that’s where it ends.

There is growing evidence of leading firms viewing their shared services as strategic capabilities and part of their competitive armoury. My observation is that these firms define their shared services in a much broader way and expect more of them. While they might not use these exact terms, the essence of this redefinition is as follows:

From IT to Technology and Digital Transformation

Last week I had the privilege of chairing the 9th LawTech Summit, Australia’s top conference for legal IT professionals. The conference heard about the billions of dollars currently being invested in legal tech R&D and the tsunami of new toys, tools and technologies that will fundamentally change the practice and business of law. The winners will either be cash-up start-ups or agile astute incumbents who use this new technology to take out cost and improve service and client connectedness.

Leading firms realise they need their IT function to address the major opportunities and threats of disruptive technology. IT’s (expanded) role is to inform and shape the firm’s strategy in particular around the potential predictive intelligence systems, operational efficiency, big data, worker mobility, workflows and innovation. Yes, firms still need computers that work, software that runs and help desks that help, but in the future IT’s most important role will be about digital transformation.

From Marketing to Brand, Growth and Client Success

Marketing in many firms is orientated towards inputs not outputs: let’s run that event, update the website, publish that blog post, prepare that capability statement, write that tender, etc. At a more strategic level Marketing’s role should be about three key outcomes – building the firm’s brand, driving revenue growth and enhancing client stickiness and advocacy.

Positioning Marketing as agents of growth raises the bar for marketing managers and elevates their internal status within the firm.

I like the term ‘client success’ in that it has a double meaning. From an external perspective it means we work to help our clients succeed. Their success is our success. Attending a client meeting as a “Director of Client Success” has a better ring to it than “Director of Business Development”. From an internal perspective it’s about being successful with our clients i.e. creating a great client service experience, winning more of their business and getting referrals.

From Finance to Finance and Business Intelligence

I’d love a dollar for every finance report I’ve seen that’s provided without any commentary, conclusions or insights. Leading firms have finance teams provide their product with more strategic value. They deliver a range of analytics and insights about the financial and strategic health of the firm. They are constantly finding new lenses and lead indicators to inform executive decision-making. They provide dashboards to practitioners to help them establish priorities, manage their time and track progress. The new finance executive needs to see themselves as truth-tellers, provocateurs and change agents.

From HR to Talent and Performance

In the July-August edition of the Harvard Business Review, Ram Charan created a real stir by arguing that the HR function should be split into two teams: one focusing on HR processes like recruitment, payroll and salary reviews, and the other focusing on strategic talent management, capability building and creating a high-performance culture. Most professional service firms are too small to justify this type of split, but the underlying argument for both roles is spot on in my view.

Creating a Pricing and Value capability

Pricing Directors appear to be the hottest job on the planet at the moment. The firms of the future will have specialist pricing functions to win more tenders (profitably) and to help practitioners get better at capturing, sharing and communicating value.

In my view pricing should be kept distinct from marketing and finance functions. Located in finance, ‘cost-plus’ thinking will start to dominate. In marketing, a ‘revenue at all costs’ bias might eventuate.

Collaboration is key

The firm of the future has each functional area deeply inter-dependent on the other. Many of the new challenges and opportunities don’t fit into a neat box. They cross over boundaries and require multi-disciplinary thinking and behaviour. For example, a new technology to assist in client reporting and connectedness will require cooperation from IT, Marketing, Pricing, Finance and possibly even HR.

COO’ed

If shared services cannot make the transition to more strategic thinking and execution, they run a risk of being “COO’ed”. In other words, having a strategy-focused general manager sit above them that keeps shared services doing largely operational work.

C titles

Titles beginning with the letter ‘C’ (CMO, CFO, CHRO, CIO, etc.) are all the rage at the moment. While “CXX” has market recognition and internal status, my problem is with the generic nature of rest of the title. For example a CIO is a Chief Information Officer. There is nothing in this title that reflects his/her role in leading the firm’s approach to technology and digital transformation. Perhaps Chief Digital Officer is better? I think titles are important and should appropriately reflect the redefined and expanded roles described in this post.

What do you think?

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A blog by Joel Barolsky of Barolsky Advisors

Relationship Capital

Posts Tagged ‘marketing’

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Redefining shared services

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