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Posts Tagged ‘Professional Services’

International SAP Conference for Professional Services – October 2017

Monday, September 11th, 2017

How can Enterprise Systems like SAP enhance the performance of professional service firms? To help answer this question, SAP will be hosting their first international conference for Professional Services in Amsterdam on the 10-1th October 2017.

Alastair Ross, Director of Codexx, will be presenting on the 11th October in a special forum on ‘Driving Successful Innovation in Professional Service Firms’. His presentation will address key aspects such as:

  • Forces for and against change within professional services
  • The need for an holistic approach – People, process and IT
  • Establishing an environment for innovation
  • Re-engineering & automating services delivery – Key success factors.

Further information on the conference and presenters.

The Brexit cost challenge – an effective services response

Wednesday, March 22nd, 2017

 Stock trading monitor (black and white)

Brexit challenges both UK and non-UK businesses

Over the next decade, with economic challenges and potential tariff barriers post Brexit, both UK-based businesses and also those businesses exporting into the UK, will be facing uncertainty, pricing challenges and competitive pressures.

The impact on business services

The inevitable response of businesses tightening their budgets will impact the professional service firms which supply them with research, legal, accounting, consulting, design and other business services.

Professional service firms will need to respond in two ways: 1. Enhance their business value proposition – through innovation – so that customers are less price-sensitive and 2. Reduce costs where possible. This article focuses on how service firms can reduce costs through the intelligent targeting of waste.

Use a magnifying glass – not an axe – for cost reduction

Conventional approaches to cost reduction in professional service firms – sweeping the ‘axe’ of redundancies – risk cutting away core value-adding activities in the business along with any ‘fat’. A better approach is to apply the ‘magnifying glass’ to seek out wastes in service delivery and then eliminate them using Lean principles.

By reducing the costs associated with waste activities, cost reduction goals can be met without impacting the service and value delivered to clients. Indeed the opposite is typically the case – with a more streamlined and systematic way of working delivering a more responsive and consistent service to clients.

In our work with professional service firms over the last decade
we’ve found that service re-engineering typically reduces the cost
of service delivery by between 25-50% whilst maintaining service quality.

There are three key steps required in achieving waste elimination in service delivery:

  • Find wastes.
  • Remove wastes.
  • Stop wastes returning!

Find wastes

Wastes are activities that do not add value – and so professional time spent performing such work can be eliminated without impacting the service to the client – whilst reducing the cost of delivery. The key approaches that are effective in doing this are:

  • Find a Champion – a Partner or Manager to lead the work
  • Engage fee earners – who know how work is actually performed today
  • Understand the client requirements – what’s important to them, today’s service experience
  • Map the service – create a picture of the end-to-end service as it is today
  • Apply Lean techniques – to identify waste and inefficiency

Waste elimination means that service costs
can be reduced without lowering quality.

Remove wastes

The key steps to be followed in removing waste from a service are:

  • Re-engineer the service using a TO-BE design that provides a more efficient and controlled service – making use of procedures, templates and workflow.
  • This reduces service delivery costs in two ways: (1) Reducing the fee earner time required to perform the service and (2) Performing the work using a lower cost blend of personnel (i.e. work pushed down to more junior and less expensive personnel) or automating it. Our work on service re-engineering over the past decade has shown that typically 25-50% of this cost can be removed.
  • Maintain service quality by placing work elements at the skill level at which it can be performed at least to the same level of quality as before (through use of codification into procedures and templates and then personnel trained to these methods). In our experience service quality and responsiveness is actually improved post re-engineering.
  • Use the freed up personnel to perform other work (thus yielding cost avoidance) or made redundant (yielding cost reduction).
  • Generate new revenue using experienced personnel who have been freed up by re-engineering, to work on more complex and higher margin work – if the firm had opportunities which would have needed new hires to meet.

Stop wastes returning!

It is important in a people-based business to ensure that costs don’t ‘drift back’, especially into the delivery of fee earning work. This is why new working methods need to be supported by standardisation of repetitive work elements, making use of procedures and templates. Case Management and workflow systems can help ‘lock in’ new procedures. New metrics should be put in place to monitor time spent on matters by work element and fee earner type – to both ensure that target times are being met and also to support continuous improvement.

Conclusions

A waste-focused approach to reducing service costs in professional service firms is powerful in enabling services to be delivered at a lower cost and at least equal quality and service as before. This is not the case with the more typical people-focused redundancy approach – which can significantly impact clients through reduced service quality.

Lean-based cost reduction is a powerful approach
that is seldom used effectively in professional service firms.

One key reason for this is that few of these firms have ‘process-thinking’ in place to enable process-based improvement. This is changing with the increasingly competitive landscape for services and the accelerating use of IT and the internet for digital services delivery.

Firms should seize this approach and make it part
of their ‘transformation toolbox’ to enable a successful
response to the business challenges of Brexit.

New innovation videos

Tuesday, March 14th, 2017

Screen shot at beginningTwo new videos have been added to the our YouTube channel ‘Business Innovator’. The Business Innovator channel is our new channel for sharing innovation approaches and our professional experience with a wide community of businesses, change agents and students. Our videos will be intentionally short – to provide interest and insights within ‘bite-sized’ chunks.

The first new video introduces business innovation as a ‘journey to value’ and explains how innovation mastery comes from the application of an holistic and systematic approach to innovation within a business. Watch video here.

The second video looks at innovating service design and delivery in Professional Service firms and identifies 5 key success factors, based on Codexx project experience. Watch video here.

We hope you find them useful – and we look forward to your comments.

Let us know areas you would like us to cover in future videos.

Business as unusual – innovating professional services – 6

Monday, November 30th, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 6. Starting your innovation journey

Introduction

This is the sixth of a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms. This article focuses on the approaches for starting or enhancing an innovation programme. To read the first article in the series go here.

Beginning a journey of change

There are a number of ways for a professional service firm to become a measurably more innovative business. There is no one ‘best practice’ way for how a firm should make the journey to realising their own effective innovation system. For that is as much to do with the goals, culture and the leadership of the firm as anything else. However, there are three significantly different approaches that are worth reviewing, as one of them may very well fit with your own firm’s situation and culture. It is important to note that just as an innovation process is drawn as a straight line, but in reality is closer to a lump of spaghetti, so the execution of an innovation programme is rarely clean. Here are three different practical approaches for developing an improved innovation capability in an organisation:

1. Top down strategy

2. Emergent

3. Champion led 

 1. Top down strategy

This is in many ways the classic consultant-advocated approach to innovation, which is logical and structured, putting in place the required ‘infrastructure’ (i.e. process, training, metrics, resourcing etc.) and the conditions (i.e. leadership, cultural changes and new behaviours) – as described in the previous articles – to enable and sustain innovation.

Strengths: This approach will deliver the conditions required for effective and sustainable innovation.

Weaknesses: This approach requires resourcing and will take time to deliver results – the other approaches can be faster to yield initial benefits.

 2. Emergent

The emergent approach offers a pragmatic way to build or enhance a set of innovation capabilities. The trigger will be an existing event (typically external) such as tough business conditions driving the need for efficiency improvements to save cost; or a new requirement from a major client(s) for a dramatic change in a solution(s) value or price; or a business event such as a merger or acquisition.

Strengths: The innovation programme can piggyback on an existing change driver and enable more innovative behaviours and outcomes as a result. The existing change driver helps legitimise the need for innovation, so helps management push through the typical inhibitors to establishing innovation activities in a professional services firm. It can yield faster results than a ‘top down’ approach.

Weaknesses: It is unlikely to be sustainable beyond the short to medium term as the conditions for ongoing innovation have not been put in place and a ‘crisis-driven’ change programme can only run for so long.

3. Champion led

This is an opportunistic approach, which finds potential champions for innovation and then supports and resources them.

Strengths: This can be a fast and effective way for bringing new offerings to market. Individual champions are motivated to make their ideas a success. This can be a low resource approach, with little supporting infrastructure required, and only the matter of budget.

Weaknesses: Success depends on a few key individuals and if they fail to perform or they leave the organisation, then the innovation capability dies with them. This is not a system that leverages the capabilities of all the employees and is not sustainable in the long term. This approach is not uncommon in partner-based organisations when individual partners can be ‘given their head’ to take their ideas forward. Success is mixed however, typically with successes at least equalled by failures. And unless the budget is effectively allocated and controlled, a money-pit can be created….

What does experience tell us?

I’ve worked with a number of professional service (and industrial) firms over the last ten years on innovation programmes and inidividual projects and researched many case studies in the writing of my recent book and other articles. What are the three most important lessons that I have learned?

  • It is difficult to start (or ramp-up) an innovation programme
  • It is even more difficult to sustain innovation programmes
  • You cannot underestimate the importance of committed leadership

As discussed in previous articles in this serious, innovation requires a different paradigm to the dominant one that is prevalent in professional service (and most) businesses – i.e. the focus on delivering today’s business. Establishing an innovation programme requires focus and resources pointed at developing tomorrow’s business. This is why leadership is critical to its success. AXA Insurance (Ireland), IBM, PWC, Allianz Insurance plc and the law firm RPC all provide examples of successful innovation programmes where the senior management personally championed and were active in the programmes.

But the starting of innovation programmes benefits from the ‘excitement of the new’ which can help gain initial support, resourcing and involvement. Existing innovation programmes do not benefit from such enthusiasm, which is typically eroded over time, and it is often a struggle to maintain and progress them. These programmes must be kept fresh – through new focus themes, new champions, innovation competitions and rewards, for example.

But most importantly innovation must be embedded in the fabric of the firm – as part of ‘the way we work here’. This means strategy, budget, good people, time, management, measurement and rewards need to be allocated to innovation on an ongoing basis. In effect, professional service firms need to establish something similar in purpose (though not necessarily in structure) to the Research & Development (R&D) function that exists in industrial firms to enable an ongoing focus on innovation.

So what approach is best for taking innovation forward in your firm? My experience leads me to recommend a pragmatic approach that is the hybrid of the above:

  • Work to establish the required infrastructure – a system of innovation – whilst building involvement and gaining demonstrable results (thus maintaining management support and increasing employee buy-in).
  • Employ opportunistic approaches that make use of the energy and capabilities of key personnel acting as innovation champions.
  • Build on any ‘burning platforms’ that are available and help legitimise the need for the innovation programme.

In the final article of this series I will identify the typical challenges that firms face in seeking to improve their innovation capabilities and the approaches that are helpful in sustaining innovation into the longer term.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my new book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

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Business as unusual – innovating professional services – 5

Monday, November 16th, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 5. Innovating to increase client value

Introduction

This is the fifth of a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms. This article looks at how to enhance client value using innovation. To read the first article in the series go here.

Enhancing value – introducing the value table

In the previous article I discussed the opportunity for cost reduction in a firm’s internal processes or services. In this article I’m focusing on the opportunity to improve value to clients through enhanced or new services. In what ways can we improve value to clients? We can think of value of a table, as shown in Figure 1. Functionality is the surface, as this is what clients/customers wish to buy in the first place – they are buying a service or a product to meet some specific requirements they have. The functionality of the service offered has to at least meet their minimum requirements to be considered. The four legs of the table represent the four attributes of how that functionality is delivered: The price of the service; the time it takes to deliver the service or respond to customer requests; the quality of the service provided (whether corrective actions are needed to address errors or omissions); finally the user experience in the lifecycle of acquiring and using the service. Innovation in any of these five areas will increase value to clients.

The value table

Figure  1: The Table of Value (Source: Codexx)

 

Examples of value enhancement

Functionality

  • Improving the fit of the service with client needs
    This is effectively customization – it reduces the time and cost required by the client to tailor the service deliverables to their needs. This could be as simple as the structuring and format of reports to address different audiences, or to enable them to use reports or information directly with their own customers or suppliers. Much customization is achieved by adding additional cost and time, a better way is to achieve this is by what is called mass customization – using a modular service offering that can be configured to a customer’s requirements, with little additional time or cost.
  • Improving the functionality of the service
    This can be achieved by enhancing the existing functionality (for example by adding additional analysis or reporting) or by broadening the scope of the service offered.

Price

  • Reducing the price of the service whilst maintaining key value elements
    Cost reduction in services (as discussed in the previous article) can enable firms to either increase their margins or improve their competitiveness through keener pricing of their services. Fixed fee service offerings allows firms to make this choice, hourly fee arrangements automatically give clients the benefits of efficiency improvements. Another way to enable price reduction is by removing some existing work elements that clients do not value or by getting clients to perform some of the lower added-value work themselves (an IKEA approach if you like). Thus it is key to understand the elements of value contained within your service and how clients perceive their relative importance.
  • Providing a new pricing model
    Clients are increasingly seeking budget certainty and thus defined price arrangements from firms – for example fixed fees or yearly fees – are increasingly relevant. ‘Performance-based’ pricing is always interesting to discuss, but more difficult to implement (often requiring complex metrics) and will only really succeed if there is the basis of an open and trusting relationship between client and supplier.

Quality

  • Improving the quality of the work delivered by services
    This ensures that clients do not waste time and cost correcting or accommodating errors resulting from the supplied service. Quality means the performance against defined performance metrics (in services these are typically captured in Service Level Agreements (SLAs). It’s key that quality measures reflect what is truly important to clients, as there is a cost to measure, meet and report on these measures. Ongoing process management and innovation is key to good quality – and this is an area many professional service firms are weak in, so the cost of meeting quality targets can be high (i.e. measurement, rework, re-training and reporting).

Time

  • Improving the speed and responsiveness of services
    This provides clients with service deliverables faster and is important for time-sensitive work (e.g. Due Diligence work). Service mapping and Lean approaches can be used to identify opportunities for reducing the elapsed time on activities and reducing any inherent delays. The use of self-service approaches using internet portals can also be effective in enabling clients to work at their own speed (and also reduces the potential for wasted time by fee earners).

Experience

  • Improving the service experience for clients
    This makes the service easier and less stressful for client users. Improvements in experience need to be focused on key service touch points with clients and addressing any issues at these touch points. The overall service goal should be to delight not simply satisfy clients – as merely satisfied clients are always at risk of defection to rivals.

Really understanding client needs

To enable ongoing successful value-based innovation, a firm needs to gain deep insight into its clients’ businesses, to understand how they work, what their customers want and their key challenges. Once the landscape of a client’s business is truly understood, then the firm is well placed to identify opportunities for innovation. Engaging clients in this journey in a collaborative approach is an effective way of identifying and testing new innovations and building a valued and trusted relationship in the process.

In the next article I will show how firms can start or accelerate their innovation programme.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my new book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

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Business as unusual – innovating professional services – 4

Monday, October 26th, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 4. Innovating to reduce process and service costs

Introduction

This is the fourth of a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms. This article discusses the opportunities for applying innovation to reduce the cost of operating internal support processes and external processes (i.e. services). To read the first article in the series go here.

The importance of process innovation

Processes and services are the most common opportunity areas for innovation in professional services firms (see reference study here). Business processes are the way work gets done in an organization and services deliver value to clients using internal and external processes. Therefore there are major opportunities for innovation in these areas. Of course process innovation has a long history from the industrial world, emanating in work study and Taylorism in the early 20th century and being re-energised by the emergence of Lean thinking (based on the Toyota Production System) in the mid-1980s and Business Process Re-engineering in the early 1990s. Some would call such process innovation ‘business improvement’ rather than innovation. I find it more effective to consider this as part of an innovation programme – as it meets the criteria of innovation, i.e. converting ideas to value (e.g. improved efficiency). By including process innovation as part of the firm’s innovation programme, common resources and management methods can be applied.

In my experience in working with professional service firms, there is major opportunity for significant cost reduction through process innovation, because process thinking and management are typically absent in these firms – unlike industrial organisations. The application of process innovation methods such as Lean and Re-engineering can yield significant reductions in the direct costs of operating a process. This is achieved through a combination of the following approaches:

  • Making services and processes visible, using process mapping
  • Eliminating waste steps (such as checking and rework)
  • Defining standard process elements based on best practices to reduce the costs of unnecessary variation from the optimum
  • Improving adherence to defined processes using procedures and training
  • Automating process stages or workflow
  • Perform process stages using lower cost personnel

In my work with professional service firms (particularly law firms) over the last decade on such process innovation, clients have achieved reductions in the direct costs of performing services of between 25-50% (and as high as 75% on one occasion). This level of cost reduction enables a firm to significantly improve its competitiveness. However, there is a challenge. If existing services are charged on an hourly-rate basis, then all the efficiency benefits will be given to clients, either as less hours required per matter and/or lower hourly charges. To avoid this and enable a firm to determine how much to keep (as increased margins) and how much to give away (as price reductions), it needs to introduce fixed fees for the service. This is typically welcomed by clients as improving price certainty at a time of increased budget pressures. But firms then need to apply new disciplines for delivery management to ensure that fee earners can work to the required cost targets to ensure profitability targets for services are met.

In addition to direct cost reduction, there is the opportunity to reduce indirect costs (i.e. overheads) that are applied to fee earner time. There are three major opportunity areas for indirect cost reduction for professional service firms:

  • Office costs – through reduction in footage costs (lower cost location) or less footage needed (‘hot-desking’ and mobile working).
  • Purchasing of external services and materials – through good procurement practices and effective commodity management, which have often been weak in professional services in comparison to industry.
  • Support costs (e.g. IT) – through internal efficiency improvements (using process analysis) or outsourcing.

Overall, professional service firms need to reduce the share of their overheads taken by office costs and increase the share taken by IT. The latter is increasingly core to the effective and efficient delivery of professional services, the former is not.

In the next article I will show how firms can utilize innovation to increase the value provided to clients through enhanced or new services.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my new book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

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Business as unusual – innovating professional services – 3

Monday, October 5th, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 3. Establishing an effective system of innovation

Introduction

This is the third of a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms.  This article outlines a systematic approach to enable, direct and manage innovation within a professional services firm. To read the first article in the series go here.

Innovation is not easy to do – especially in professional services

The focus of business organizations is to deliver the current value proposition using today’s resources & thinking. Innovation is about developing tomorrow’s business, be it new value propositions, different ways of working, new market positioning or a new business model. This requires new thinking and for people to step out of their current paradigms of working and to be capable of challenging what and how things are done. Doing this needs people and time and thus is a particular challenge in professional service firms where the people who best understand the business are fee earners – and thus not so readily available for (what is non-chargeable) work on innovation. Typical challenges in attempting innovation in professional service firms are illustrated by the quotes below (from past Codexx studies):

“We have ideas but we’re not good at making them happen.” Managing Partner, Law Firm

“Our culture and measures don’t really support innovation.” Manager, Business Services

“People don’t want to take risky ideas to the boss.” Partner, Management Consulting

“Not a coordinated approach to innovation.” Head of Knowledge Management, Law Firm

A system for innovation

Experience and academic research has shown that a systematic approach to innovation improves an organization’s likelihood of delivering successful and sustained innovation.  Such an innovation system is built on key practices across 7 areas (see Figure 1) which need to be put in place across the firm:

  • Leadership – Active support and encouragement from the top is key to establishing a supportive environment for innovation and also to focus the firm’s innovation efforts.
  • Strategy – A clear strategy is needed to provide context and priorities for innovation. The strategy will define where the firm will focus its innovation efforts with targets and supporting metrics.
  • Process – A structured and objective ideas management process is required to explore, select and implement the best ideas. This helps ensure that the firm focuses its limited resources on the best ideas, rather than ‘pet projects’.
  • Climate – A supportive culture and values are needed to establish an environment that promotes innovative behaviours. Key metrics in professional service firms, such as chargeable-time utilization, need to be complemented with other metrics that support innovation. Such metrics encourage employees and partners to make time for innovation and take the risk of proposing and championing new ideas.
  • Resources – People time, methods and money are needed to fuel innovation. In a professional services firm, making time available for fee earners to develop promising ideas is critical – as is recognizing and rewarding those who deliver innovation.
  • External Linkages – Effective links to the outside world, especially clients, for ideas and resources, is important for ensuring that the firm is focusing on market-relevant ideas. Engaging clients in innovation co-development also increases the likelihood of success and strengthens client relationships.
  • Learning – Capturing and sharing learning from innovation across the firm is key to increasing return from innovation activities – looking to where else a similar innovation can be applied and encouraging the ‘re-use’ of ideas. Process-based learning and improvement is also a competency that is fundamental to enabling continuous improvement, but is typically lacking in professional service firms (for more information on applying Knowledge Management to process improvement, see here).

 

Innovation system diagramFigure 1: The Innovation System Model (Source: Codexx)

Assessing your firm against the innovation system model

To help firms in establishing and developing their innovation system, Codexx uses an assessment approach called ‘Foundations for Innovation’ (F4i for short) that reviews 60 key practices that make up the 7 areas of the innovation system. Codexx has used F4i with law firms, insurance companies, business consultancies as well as industrial organisations. But as an initial start you can simply consider how effectively your firm supports innovation across the 7 areas defined above and what improvements are needed.

The overall innovation system will only be as strong as its weakest link. I have worked with professional service firms who established innovation processes, defined an innovation strategy and dedicated some personnel time for innovation, but the lack of a supportive innovation climate (non-chargeable time was not valued or rewarded) and indifferent leadership (other than a couple of partner champions, the board was lukewarm in support) meant that few ideas were generated to go into the innovation process and even fewer were progressed along it. A firm’s management needs to be committed to innovation if it is to establish a supportive system that enables effective and sustained innovation – rather than an occasional ‘get lucky’ approach.

In the next article I will show how firms can utilize innovation to reduce the costs of their business processes.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my new book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

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Business as unusual – innovating professional services – 2

Monday, September 21st, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 2. Identifying innovation opportunities

Introduction

This is the second of a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms. This article helps answer the question ‘Where should we innovate?’ To read the first article in the series go here.

The need for focus

A key question for a firm’s management team is where to focus its innovation efforts. Far too many firms take an unfocused, unstructured, ‘laissez faire’ approach, resulting in time and money being wasted in projects that have poor value, failing to invest in projects that have much higher potential value and spreading investment and resources too thinly across the firm on too many projects. As a business development director of a major UK law firm put it “In practice we can have a lot of ‘crappy’ projects going on.” To avoid such a wasteful situation, a firm needs to have a systematic approach to framing and then developing innovation opportunities followed by an objective way of evaluating and selecting the resulting proposals. I will tackle the first requirement in this article and the latter in the next article on establishing an innovation system.

Your innovation dimensions

A useful model to help with this focus, based on academic research, is the ‘Dimensions of Innovation’ model. This models all the potential areas that an organisation can innovate in as four major ‘dimensions’ (see Figure 1). The centre of the circle represents the ‘Do Nothing’ state (i.e. no innovation). An organisation can then innovate in any number of the dimensions – the further out the circle is pushed, the higher the degree of innovation. Thus a small radius represents Do Better incremental innovation; the largest radius represents Do Different radical innovation.

I have used model this with legal, insurance, engineering and consulting clients over the past decade and I have found it to be a very useful tool, as it provides a single page view of innovation possibilities within a business. This helps facilitate discussion around existing innovation activities and highlights future opportunity areas that have not been well explored. As such, this provides a useful structure against which existing and proposed innovation activity can be mapped and reviewed.

 

Dimensions model of innovation

Figure 1: Dimensions of Innovation (Source: Frances and Bessant, adapted by Codexx)

 

Let me build on the four dimensions and give some examples of innovation in each dimension:

1. Product innovation

This type of innovation lies in providing a new or enhanced value proposition to clients through the improvement of existing service products or the development of new services. In professional services, this can come from efficiency improvement through process innovation – resulting in ‘Do Better’ innovation of an existing service – improving the client service experience or providing a lower priced offering. It can also come through client-focused innovation, which can result in a new or ‘Do Different’ service – for example a web-based offering or a new pricing model (e.g. fixed fee or risk-sharing). For many professional service sectors, clients increasingly want price certainty and fixed price offerings provide this but also enable firms to keep the benefits of cost reduced services as improved margin.

Example: Mills & Reeve, a major UK law firm, facing significant pricing pressures in its inquest service from budget-constrained public sector clients, developed a web-enabled tailored inquest service for NHS clients offering a menu of pricing options including fixed fees. This new service utilized significant efficiency improvements and was adopted by a number of UK hospital trusts.

2. Process innovation

Process innovation covers the application of new ways of performing work – this can be new methods, new skills, new technology (e.g. IT) or organizational changes. This innovation can be applied to internal administrative processes (such as Bid Management, Billing or Client Inception) or chargeable services (such as Due Diligence, Project Delivery, Accounting Audit or Claims Management). It uses analysis of existing ways of working and the application of improvement techniques, such as Lean, to redesign processes to reduce cost and rework, speed up the service and improve quality. Key improvement opportunities include the application of standard procedures and documents for repetitive work elements, IT applications such as workflow management and internal and external collaboration solutions and the ‘right-skilling’ of work tasks.

This is a major opportunity area in most professional service firms, as processes typically are not well defined, standardized and have simply evolved over time. Employees typically have sufficient know-how to deliver a service but not know-why as to why it is performed in the way it is. This lack of insight is well captured by a manager in a major insurance company discussing current working methods: “A lot of what people are doing they don’t understand why, because it was done in the past.” So true insight is required to develop ‘Do Different’ process innovation – the innovation team need to ‘peel back’ existing services to their fundamentals and identify and challenge requirements and assumptions. There are a number of tools that can be used to help do this, (Codexx utilise a number of them in its Catalyst and Ideation workshops), one of the simplest is the ‘Five Whys?’ method developed in Toyota. 

In professional services, the line between product and process innovation is blurred, as the redesign of services typically will require process innovation. However some process innovation, such as in cost reduction, may be opaque to clients as there will be no change in the resulting service value or experience.

Example: Allianz Insurance plc in the UK established weekly/bi-weekly team-based problem-solving to reduce cost and improve efficiency across their business and help to establish a more innovative working culture.

3. Market Position innovation

This is where innovation occurs in the positioning of the firm in the market. This can be achieved by the firm entering an existing market in which the firm had not previously competed; establishing a new market, or by changing the nature of its competitive position in an existing market (for example by significant change in its price/value proposition).

Example: The major international law firm DLA Piper, took advantage of UK deregulation of the legal market to launch a new legal vehicle LawVest. One of its first offerings was RiverView Law, a new business providing fixed price legal services, targeting small businesses and based on a lower cost legal organisation and defined processes. This enabled the firm to take advantage of market changes in a way that did not conflict with its existing ‘large client’ high-value brand.

4. Business Model innovation

A firm’s business model defines how it creates and delivers value to its clients – in essence how it makes money. The business model consists of three fundamental parts:

1. The value proposition
2. How the firm develops and delivers the value proposition
3. The firm’s mechanisms for selecting and serving its clients.

Business model innovation can be in any of these three areas. This is big, often ‘bet the firm’ innovation and is thus the rarest and most challenging type of business innovation. New entrants into existing markets often bring a new business model with them: RocketLawyer provides fixed fee legal ‘products’ via the web to small and mid-sized businesses; Crunch.co.uk provides web-based accounting services, also focusing on small and medium sized businesses; Freelancer.com provides an online market place to link over 16 million freelancers in IT and design services with customers.

Example: In 1991 IBM made a strategic decision to become ‘a world-class services company’ moving away from its hardware focus. At that time less than 10% of its revenue was from non-maintenance services. By 2001, services accounted for 41% of revenue and this was more than 60% by 2011. This transformation in its business model required a 10 year journey involving changes in strategy, culture, resources, organization, processes and offerings.

 

In the next article I will show how firms can establish a system for innovation that provides the key practices to support and direct innovation activities.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my new book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

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Driving process innovation – the role of Knowledge Management

Tuesday, August 25th, 2015

13Process innovation – be it in internal support processes or client-facing services is a key opportunity area for professional services firms such as lawyers, accountants and management consultants to transform their efficiency and the value they provide clients. This is typically a challenge for these firms as process thinking and process management are not present to the same degree that they are in industrial businesses.

A key foundation for effective process management is in establishing a framework for process management, process performance monitoring and improvement. The Knowledge Management (KM) function within a professional services firm can have a key role in enabling this to happen. Alastair Ross, Director of Codexx, has recently had a series of two articles on this important topic published by the KM Institute on their website. The links to the articles are below:

Part 1 – Driving process innovation

Part 2 – the role of Knowledge Management

The power of mapping – for professional services

Monday, May 13th, 2013

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Process mapping has been around for many years – indeed it has been part of Work Study activities in industrial businesses for a good 50 years. The emergence of Lean thinking in the West in the mid 1980s created a resurgence of interest with the focus on ‘Value Stream Mapping’ to identify and eliminate waste activities as part of a Lean transformation. The ability of process mapping to draw a clear picture of how a complex series of tasks (such as the process from receipt of an order through manufacturing to delivery of a product) is performed has proven to be very powerful. Process mapping achieves the following:

  • Makes a process visible – showing the detailed steps of how it is performed
  • Involves those who perform the work – to produce a realistic picture
  • Is easily readable – much more so than a text-based document
  • Is an effective way to engage personnel to identify wastes in the process
  • Provides a good base for developing and the improved process
  • Is a key part of Lean or Process Re-engineering
  • Gives a good foundation for automating the process using workflow or other software

Mapping professional services
But process mapping had little use or impact in Professional Service firms until comparatively recently. Why is this? Simply because process thinking is not applied in most professional service firms. The culture in professional service firms is practitioner-focused and typically does not see the service provided as ‘a process’. However this is changing due to increasing competitive pressures over the last 5 years. Firms are under increasing financial pressures driven by price-focused clients and alternative providers (some enabled by deregulation as in the UK legal market; some by the internet and others by globalisation). They are having to improve their efficiency – ‘doing more with less’.

‘Doing more with less’ has often been a synonym for redundancies rather than any systematic approach to improve efficiency. Indeed an unstructured approach to redundancies in a service organization can backfire with service quality being impacted and professional morale lowered.

Process mapping makes the invisible, visible
A first powerful step to improving efficiency is looking at how work is performed today and to determine what improvements in efficiency could be made. This is the so-called ‘AS-IS’ phase of a re-engineering programme. In our re-engineering work with major UK professional service firms, the process mapping stage is a key element in giving a shared view of how things are done today. This is especially important in a professional service environment as the process (be it a client service or a back-office activity such as client inception or billing) is not immediately visible. In a factory a process can be viewed by simply walking across the shop-floor. However a tour through a law, accounting or consulting firm’s offices will not unearth much evidence of processes among the employees, desks, computers and (usually) lots of paper. Process mapping makes the ‘invisible’ processes in professional service firms visible. Once processes are visible they can be analysed and improved. So mapping is a key foundation for improvement.

Keep it simple
Effective process mapping is performed collaboratively using paper and pen  – rather than computer – as this enables easy collaboration. Effective mapping requires the involvement of representatives of those personnel who perform the process/service being mapped. The objective of the ‘AS-IS’ mapping is to capture the process as it is actually performed today. In a service environment it is important to identify key tasks, who performs them and the amount of chargeable and elapsed time consumed. It is also important to include those routinely performed activities which represent waste – such as delays, reviews, corrections, duplication and different methods used by teams and offices. Once the paper-based model has been completed, it can be captured by digital photo or better still converted into a software-based model using a tool such as Microsoft Visio – this enables easier modification, distribution, review and archive.

Realising the value from your  process maps
Process maps have little value  unless they are put to work to support improvement activities – such as a Re-engineering or Lean programme. Ways of using process maps in your improvement activities include:

  • Analysing them to identify and quantify waste activities
  • Quantify the time required for tasks to set ‘target times’ for work elements
  • Identify the documents & templates used within the process – to enable standardisation
  • Displaying maps in work areas, to engage other personnel and get their ideas & comments
  • Use the AS-IS map as the base to develop the improved TO-BE process
  • Use the TO-BE map for configuring workflow or case management software

Mapping brings real benefits
We have used process mapping with a number of professional service firms covering processes such as: Bid to Bill, Client Inception, Matter Management, Probate, Commercial Property Purchase, Insurance Claims, Inquests, Employment Tribunals and Commercial Due Diligence. This mapping has been a key foundation for a re-engineering or Lean programme. These programmes have delivered the following benefits:

  • Enabled direct cost reduction of between 20-40%
  • Supported the development of new client services
  • Enabled collaborative improvement with clients
  • Provided a foundation for implementation of case management systems

Process mapping is a powerful tool for business improvement and professional service firms need to add it to their improvement capabilities.

For further information on how you could use process mapping or re-engineering within your firm contact us at www.codexx.com

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