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.
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: https://www.codexx.com/2015/innovating-professional-services-new-book/
