6 Reasons Why Innovation is so Difficult in
Professional Service Firms
The mantra over the last few years has been "change or die." So, why is it that
professional service firms, especially accounting and law firms, have found it so difficult
to embrace change, innovate and spend time and resources on research and
development in order to build a stronger future?
Here are 6 reasons why firms fail to innovate:
The focus on most professional service firms is on billable hours. While there is nothing
generically wrong with this focus, it has become the overriding focus of firms. There is
nothing wrong with making money today, but what about building for the future? With
"today" being the dominant focus, what is the encouragement to professionals to
innovate? In most firms there is no alignment with innovation and compensation. You
will never have innovation unless you allocate some time and reward to making it
happen.
Professional service firms usually do not have "skunk works" or a process for
innovation. A skunk works is a project developed by a small and loosely structured
group of people who research and develop a project primarily for the sake of
radical innovation. The term originated with Lockheed's World War II Skunk
Works project. Since professional service firms make their money servicing clients,
there is little or no time, let alone reward, for professionals to devote themselves to nonbillable activities. Even firm management is not always properly rewarded.
Often firm leadership does not see the value of innovation. The theory is, “Aren't we
successful now, so what do we have to change?" Leadership in the major accounting
firm, law firms and consulting firms see this issue differently and are constantly looking
for ways to innovate. While they can spend more time and more resources than smaller
firms, it does not mean that smaller firms can ignore this issue completely.
Professional service firms normally do not have a culture of innovation. 3M, for
example, promotes itself as having a culture of innovation. And, their new products
speak for themselves. 3M's business model is to foster organic growth by inventing new
products that previously did not exist. This business model has led not only to new
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com
products, but also the creation of new industries, such as coated abrasives, pressure
sensitive tapes, non-woven respirators and fluoromaterials.
CPA and Law firms generally are not good at implementing new services or products. It
is not that they lack ideas; it's that they are not good at making them happen. You don't
have to look far to understand why. Just re-read the above bulleted points. In addition, a
new product/service roll out can take several years to be successful. Most small and
mid-size firms either do not have the resources or the patience to wait that long or make
the long term investment that would be needed.
Innovation in professional service firms usually requires existing or potential client
involvement since any new firm offering needs to bring value to their existing clients or
to a new client segment. Firms that have been successful in developing innovate
services/products often get their initial ideas from clients.
All Is Not Lost
If you are a small or mid-size firm there is still hope. Innovation does not mean that you
need to develop a brand new product such as 3M's "Post-It." It doesn't mean that you
have to invest millions of dollars into a Skunk Works. Here are some practical and
hands-on things you can do.
1.
Think of innovation as a new service/product that will bring additional value to
your clients. The easiest way to find out what those services/products might be is to
spend some time with your clients in order to gain a better insight into their businesses.
This is the easiest and cheapest way to create a new service. You can do this by meeting
with clients one-on-one or by bringing a small group of clients together. Either way you
are going to come away with a better understanding of your clients' needs.
2.
Don't take a shotgun approach to innovation. The more new services you try to
create, the fewer you will really implement. Focus on what makes sense for your clients
and for your resources.
3.
Make sure you allocate sufficient time and resources to the endeavor. In any
business it is important to have some unstructured time. It is only then that you can
become creative and think about new ways of doing things. Recently I was in an
accounting firm that had a small office size area with bean bags on the floor. This was
for staff and partners to relax and think.
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com
4.
Also you will want to tie some aspect of the innovation team's compensation to
the successful implementation of the new service/product.
5.
Remove internal barriers. For example don't let a department head stop the
process because he/she is afraid of it. Have an internal approval process in place so that
non-threatening innovations can just be implemented by the team, while more complex
ones need management backing and approval.
6.
If you discover a service/product that your clients need and you don't currently
offer, think of different ways to provide it. You can outsource to another vendor. You can
merge with a firm that provides it, or you can create it yourself. I think the last option is
the riskiest and sometimes the most costly.
Finally, don't be intimidated by the thought of innovation. Just think of it as creating
better and different ways to provide value to your clients. There can only be one largest
firm in any market by definition, but that does not stop every firm from striving to be
effective at innovation.
August Aquila is an internationally known speaker, consultant and writer.
He is CEO of AQUILA Global Advisors. He is also the co-author of "Compensation as a
Strategic Asset" and "Client at the Core."
August can be reached at [email protected] or 1-952-930-1295. For
more information see www.aquilaadvisors.com