Professional Services

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A story of law firm re-engineering: people, processes & profit

Thursday, November 5th, 2015

by Alastair Ross, Director, Codexx

Introduction
Whilst the term ‘re-engineering’ is typically prefaced by the word ‘process’ as this is the key focus area, re-engineering in professional services firms is very much about people. Successful re-engineering requires partners, fee earners and support personnel to make changes in their beliefs, behaviours and working methods. No small challenge then! To help illustrate the people-side of re-engineering in professional service firms, I’m going to review two recent projects I performed for a medium-sized UK law firm operating across three offices over a 12 month period.

Getting started
Codexx was contracted to help the firm drive major improvements in the efficiency of service delivery. The sponsor for the programme was the Managing Partner. The programme commenced in summer 2013 with an ‘Opportunity Assessment’ where I worked with the firm to select the initial services for re-engineering. The selection criteria we used included the potential financial benefits achievable through re-engineering as well as the level of support and commitment from relevant partners. As this was the start of the programme, it was particularly important to pick two services with a good likelihood of success – as otherwise it would reduce internal support for subsequent projects. For the first wave, two services were selected: an insurance claims management service and a clinical negligence service. Both services were delivered in relatively high volume, at a fixed fee, to important clients. And neither service was profitable. A ‘partner champion’ for each service was selected and I worked with each of them to help prepare them for the re-engineering programme that we were to undertake. The methodology we used in this programme was the Codexx ‘Smarter Working’ re-engineering solution which we developed and have used with professional service firms over the last decade. This uses a phased approach (see diagram) with a high level of collaboration from the client and the work in the initial AS-IS and TO-BE phases performed in interactive workshops and client visits.

The importance of the partner champions in professional service re-engineering projects cannot be underestimated. They help set the importance of the project for the fee-earning team members who are continually challenged for time on the project with their chargeable work commitments. If the partner champion is less than committed, the team members will follow suit. In this programme both the partner champions proved to be both committed and effective – attending all the required workshops and leading the team in challenging existing ways of working and identifying opportunities for service improvements. Together we selected a core team for each of the services, comprising 3-4 lawyers and an administrator. I established the ‘Steering Committee’ comprising the Managing Partner, Finance & HR Directors and Department Heads, for progress reviews and key decision making (e.g. in project investments) during the programme. Then the workshops was scheduled and we kicked off the programme with the first ‘AS-IS’ workshop for each of the two services.

The AS-IS phase – capturing today’s situation and changing beliefs

There are three key objectives for the AS-IS phase:

1. To capture the operation of the service as it is today to provide a performance baseline;

2. To educate the core team in new ways of thinking and assessing service efficiency and value;

3. To get the core team to recognise and commit to the need for change.

To do this our workshops cover both analysis and training in Lean-based service analysis and improvement principles. Thus the team members are able to map the existing service and identify key wastes. I guided the team in profiling the value provided to clients and the service experience they receive. I then prepared them to visit a number of selected clients to get their views on the service provided by the firm and to identify service improvement opportunities. In parallel I worked with the partner champion and Finance department to gather financial performance information on the service to identify typical matter cost and the resulting profit margin. So at the conclusion of the AS-IS phase we had a rich, detailed picture of the existing performance and issues of the two services and a growing list of potential improvements, which the partner champions and I reported to the Steering Committee.

Equally important in this phase is the development of the team – both in the beliefs and capabilities of the individual members and the team’s effectiveness as a whole. Initially in these two projects there was more than a little doubt in the team members about the value of this programme. The most experienced and senior associate in the claims management team was frankly dubious that their working methods could be improved in any significant way. This is not an unusual reaction in our legal projects, as process-thinking is not common in law firms. Indeed a lot of the concepts and thinking that we introduce to the team – such as Lean thinking, waste identification, process mapping, service disaggregation and right-skilling – is new and indeed alien to most lawyers! As our approach is deliberately collaborative with the team members actively performing mapping and analysis, they each make a journey of self-discovery by using these techniques and seeing the results for themselves. This results in an important transformation of individual thinking and leads to a level of buy-in to the resulting changes that is far deeper and permanent than a consultant-enforced change.

That very much proved to be the case here, with the formerly resistant associate lawyer, obviously enlightened and energised following the AS-IS, then working in her spare time to outline a new ‘TO-BE’ process for performing the claims management service that would reduce the time required to perform the service by nearly 75%. This is an outstanding example of individual change. But it is not uncommon and I find that fee earners are generally surprised at the level of inefficiency that their process mapping and waste analysis reveals. So by the end of the AS-IS phase they certainly recognise the need and also the obvious scope for improvement. To capture the insights and energy that builds in this phase we start capturing a list of improvement opportunities in the first workshop and build it during the AS-IS phase. New ideas are allocated to team members who are responsible for providing an initial exploration and recommendation as to whether this idea should go forward and even be a ‘Quick Hit’ project (we implemented a number of these in the claims management project during the AS-IS phase). This further engages team members and also provides a useful first ‘filter’ on new ideas. To broaden engagement beyond the core teams we used a ‘Living Walls’ approach to share our findings with the rest of the fee earners working on the service – and get their feedback – using large paper charts pinned up in working areas

Some of the major challenges in the AS-IS phase in this programme were: Difficulty in getting accurate service cost data and issues of fee earners fitting in project work alongside their existing client workload. These are challenges typically experienced in most of our legal re-engineering projects.

The TO-BE phase – designing a new service and new working methods
The objective of the TO-BE phase is to build on the learning from the AS-IS phase and design a new process, with a supporting organisation and IT, for delivering the service which is significantly more efficient (to yield cost savings) and provides higher value and a better experience for clients. In addition an implementation plan with supporting resourcing and business case are needed to validate the case for change.

To help in ‘framing’ the team’s TO-BE work, we typically use a ‘Vision workshop’ at the start of this phase with a number of partners and managers. We share the team’s AS-IS findings and work to develop a 3-5 year Vision for the service, with measurable targets. In this programme I ran a vision workshop for only one of the two services, where the multi-office and multi-partner operation of the service meant that it was valuable to share progress and likely changes to get partner input and eventual buy-in to support the partner champion.

In the TO-BE phase I worked with each team using a number of innovation tools and the existing ideas list to generate a number of ‘transformational concepts’ for the new service which we then mapped. This provided a blueprint for the new service which required much less time and cost to deliver whilst improving on the existing client service. The concepts were developed into transformation projects, making use of Codexx project definition templates, and an overall implementation plan and business case for change.

Interestingly, whilst at the start of the programme both teams were adamant that a new case management system was needed to enable major efficiency improvements, they did not eventually recommend this in the TO-BE phase. For by then it was clear that whilst the existing Case Management software was indeed old and ‘clunky’ the implementation of new case plans and templates to support the new TO-BE process would enable major improvements. So for now the old case management system would be ‘good enough’ – which improved the business case for these changes.

The major changes in the new TO-BE process for each service was an underlying process that was optimised to reduce required fee earner time, that was ‘right-skilled’ to push work down to the lowest skill level that it could be performed at with acceptable quality, that was ‘codified’ using templates and documented procedures that captured and deployed the ‘one best way’ approach for repetitive work elements, making use of Case Management to control workflow and deliver documents. Both services also changed the way in which experienced associates and partners were used in the service. Their time was reduced and focused on ‘up front’ matter strategy to guide fee earners rather than ‘back end’ review and checking of work already performed – to maximise their value and minimise fee earner inefficiencies. This freed up the most experienced (and expensive) fee earners to work on more complex work.

Overall the TO-BE for both services moved them from a rather informal working approach, where issues in resources and controls had led to variable (and expensive) outputs, to a more systematic working approach with improved resources and controls leading to more consistent outputs, at lower cost (see diagram below).

Implementation – changing behaviours and realising business benefits
The objective of the Implementation phase is to realise the TO-BE service by executing the defined transformation projects. Both programmes required the development and documentation of new templates, a ‘new process bible’ and updating the case management processes and screens (though keeping the existing case management system).

Implementation is always a challenge. The Managing Partner of one of our clients referred to it as ‘the grind of implementation’, which is an apt description. For the AS-IS and To-BE workshop phases of a re-engineering programme are ‘new and exciting’ with much collaboration. But in contrast, Implementation is more akin to ‘heads down’ and ‘get it done’ by project teams working on their own for much of the time – whilst team members also juggle a case load of work. It’s tough. We recognise this and particularly the challenge for time from client work. To help in this we provide a monthly progress review with the project leaders and partner champion, to keep at least a ‘monthly pulse’ of project work and to identify issues early. Despite this, we find that law firm projects typically slip and on this programme it was no different with most projects completing 8 weeks late. One key reason for this is that it is the core team members that typically lead the transformation projects and it is difficult to get their case load reduced during the implementation period (despite our recommendations) so they are typically very busy.

Our two programmes differed somewhat in their implementation experience. The claims management service was delivered from one office and thus is was easier and thus faster to get the required buy-in and implement the required changes. The clinical negligence service was delivered from teams and partners located across three offices. The partner champion thus had the added challenge of streamlining a service using fee earners who did not directly report to him, necessitating working to get the buy-in of other partners. In addition this service was more complex and thus required more work on process detailing and case management changes.

Continuous Improvement – locking in and extending improvements
I have been placing more emphasis on this phase in our re-engineering projects with law firms. This is because there is always the danger that the new methods and resulting improvements can fade away, as these islands of ‘new ways of working’ are surrounded by a large ocean of ‘business as usual’ in the rest of the firm…. So locking in new ways of working is key to retaining their benefits. But this is really not enough. For the reality is that there will continue to be downward pressure from clients on fees. So unless the firm wishes to suffer eroding margins, it needs to find further improvements over time.

So the objective of the Continuous Improvement phase is to lock in the existing improvements and establish a simple and ‘light touch’ system for identifying and implementing ongoing improvements that will further improve service and cost-effectiveness. Key elements that we put in place for these two services were a performance dashboard with monthly updates and at least a quarterly session involving team members to define improvement needs. One ongoing challenge is how best to reward fee earners delivering a fixed fee service and motivate them to further improve service efficiency – whilst their conventional targets and compensation are based on chargeable time… As part of these two programmes the firm recognised the need to develop new mechanisms for fee earner recognition based more on revenue and profit generated than on time recorded.

So what were the outcomes?
Both services have now been operating with the new methods for around 9 months at the time of writing. Compared to their operation prior to re-engineering, the claims management service has reduced costs by around 70% whilst maintaining service quality and improving reporting and billing quality. In addition, the firm has strengthened its relationship with the financial services client receiving the service, as the firm’s lean-based improvements were seen very positively by the client. The clinical negligence service has reduced costs by around 50% whilst improving service consistency and providing a faster service to its public sector client.

This significant cost reduction meant that both services are now providing a good level of profit to the firm. In addition, the fee earners in the teams working to the new methods have given a very positive feedback – a key reason being that they are finding the work less stressful than before – whilst delivering a better service at higher productivity. One team has used their process analysis experience to map and analyse a related support process which had performance issues. The firm subsequently commenced two more service re-engineering projects with Codexx.

Tags: Case study
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Business as unusual – innovating professional services – 4

Monday, October 26th, 2015

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

Tags: Innovation, Professional Services
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Business as unusual – innovating professional services – 3

Monday, October 5th, 2015

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).

Figure 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

Tags: Innovation, Professional Services
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Business as unusual – innovating professional services – 2

Monday, September 21st, 2015

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.

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

Tags: Innovation, innovation focus areas, Professional Services
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Business as unusual – innovating professional services

Monday, September 7th, 2015

by Alastair Ross, Director, Codexx Associates Ltd

Part 1. Setting the scene – when business as usual is not enough

Introduction

Increasingly in organizations, ‘business as usual’, the amalgam of existing thinking, value propositions and ways of working is not enough. What delivered commercial success in the past is not going to do so in the future, for the competitive environment is becoming more challenging – customers and clients increasingly want more for less, new competitors are arriving and technological advancement offers new forms of competition. The result is that businesses are seeing the need for increased levels of innovation to effectively compete.

All the above is now also true for professional service firms, many of whom have been relatively insulated from such commercial pressures due to their high-value offerings which were not easily replicated or automated and for some professions, such as law, enjoyed regulatory barriers to entry. But this is changing and innovation is moving up the agenda for management teams in these firms. This creates a major challenge for many firms with limited experience or capabilities in effective innovation.

Welcome to the first of a series of seven short articles on innovation in professional service firms. The objective of this series is to provide a foundation for partners, managers, and change leaders working in professional service firms on the opportunities, approaches and challenges for using innovation to improve their firm’s competitiveness. The series is based on my work on innovation and re-engineering projects with major UK and European professional services firms over the past ten years. The series will be published over the next three months with the planned contents as follows:

Part 1: Setting the scene – when business as usual is not enough

Part 2: Identifying innovation opportunities

Part 3: Establishing an effective system for innovation

Part 4: Innovating to reduce costs

Part 5: Innovating to increase value

Part 6: Starting your innovation journey

Part 7: Key challenges and sustaining innovation

So let’s get started:

Professional services – drivers for innovation

Professional service firms, such as lawyers, accountants and management consultants, are facing new challenges driven by fundamental trends, which have been accelerated by the economic weaknesses in western economies triggered by the 2008 financial crisis and resulting business downturn. These trends include:

Price-down pressures from clients seeking to reduce their supplier spend.
Deregulation (such as in the UK and Australian legal sectors) enabling new market entrants.
Service commoditization through the application of standardisation and IT.
Increasing competition from lower cost economies – such as India and China
New internet and mobile technology-enabled business models – such as Freelancer.com in IT and design services, Crunch.co.uk in accountancy and RocketLawyer.com in legal services

In response to these challenges, progressive firms are recognizing the need to innovate the services they provide and their ways of working. Such innovation enables them to reduce costs through more effective and efficient working and increases the value they provide to clients through new and enhanced services.

Let’s be clear on innovation

It’s important to have a clear view of innovation to help in developing the most effective approach to enabling and managing it. Defining innovation can become an almost religious debate for innovation consultants, who often end up excluding ‘normal’ business improvement activities. In my view, a more inclusive definition is of most use when seeking to manage innovation programmes within businesses. With this in mind I find the most effective definition is: ‘Innovation delivers value from ideas’. This definition includes small and large innovations and those conceived in your own business as well as those copied from others, i.e. that is new to you. To consider that innovation is only about ‘radical new ideas’ would lead to incremental improvements receiving insufficient focus within the business – and high engagement incremental improvement is very powerful (just ask Toyota who have built their business success on their Lean business model driving continuous improvement with high engagement of their workforce). A view that innovation only covers things that are ‘new to the world’ would drastically diminish the powerful benefits of adopting best practice methods proven elsewhere (aka ‘copy with pride’).

So innovation is about creating or using an idea and generating value from it (e.g. increased profitability). Successful exploitation of an idea is a key requirement for innovation. This is why innovation is more than just creativity – for many new ideas and inventions fail to deliver value and thus cannot be considered innovative. In the journey to realizing value from ideas, activities such as idea exploration, selection, development, implementation and learning are as important as creativity. And thus successful innovation within your firm needs the developers, the project managers and the trainers as much as the idea generators….

Institutional v Individual Innovation

In developing effective innovation within a firm it is vital to differentiate between ‘individual innovation’ and ‘institutional Innovation’. Many business professionals would claim that they innovate regularly in their work, in their methods or in what they deliver to clients. However, this type of innovation is primarily individual innovation. Such ‘innovation’ is personal, it is not codified or easily scalable (it may not even be valuable) across the wider organisation. Therefore the impact of such individual innovation is very limited in comparison to institutional innovation. Institutional innovation engages other personnel within the firm and outside it through codified, scaled and deployed innovations such as new or enhanced services, new ways of working and new strategies that deliver increased value. Institutional innovation may well start as individual innovation, but the lone innovator creates something that can be used by others and not just themselves, something that can be developed and deployed into an institutional innovation. For a firm to be effective in using innovation to improve its competitiveness, it must master institutional innovation. And in addition it must establish a systematic approach to effectively manage its innovation activities.

Key items for management’s innovation agenda

When a firm is seeking to significantly enhance its innovation capabilities, there are some key questions that need to be answered by the management team such as:

Where should we focus our innovation activities?
What’s slowing or preventing innovation today?
How do we select the best ideas, develop and implement them?
Who should get involved?
How do we resource innovation?
How do we encourage and reward participation?

I intend to guide readers in answering these questions in this series of articles.

In the next article I will show how firms can identify key opportunity areas for innovation in their firm by considering their key ‘dimensions for innovation’ and give examples of this in multiple professional service sectors.

References and further reading

Tags: . service innovation
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Driving process innovation – the role of Knowledge Management

Tuesday, August 25th, 2015

Process 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

Tags: knowledge management, process innovation, Professional Services
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Speaking at ‘5 Great Minds’

Monday, June 15th, 2015

Alastair Ross, Director of Codexx, spoke at the Chartered Institute of Marketing’s Levitt Group on Friday 12th June 2015 at their ‘5 Great Minds’ event held in Regent’s University in London for senior marketing professionals.

His presentation was entitled ‘Innovating Professional Services – transforming value and efficiency’. His session introduced the ‘Why?’, ‘What?’ and ‘How?’ of improving competitiveness through innovation in professional service firms. The event also introduced Alastair’s new book ‘Innovating professional services’. To see a copy of the event brochure, click.

Tags: Innovating professional services, Marketing
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Innovation in professional services – why, what and how?

Wednesday, May 20th, 2015

There are approximately 450,000 professionals working in businesses that come under the banner of ‘professional services’ in the UK alone. Within this group are lawyers, accountants, management consultants, IT specialists, architects and other professionals who provide services to businesses and individuals based on knowledge, expertise and intellectual property. In the USA there are about 400,000 practising lawyers and over 1 million accountants. Professional Services alone is reported to generate more than US$ 3 trillion in revenue globally and in the UK the sector employs almost 12% of the workforce and accounts for 8% of national output.*

So this is a key business sector and also one that is facing major challenges to both its business model and its operating methods from a combination of globalisation, regulatory changes, client demands and the impact of the internet and Information Technology. These challenges are driving progressive firms to respond through innovation in how they operate and the value they provide to their clients.

Responding with innovation
Many professional service firms would like to improve their innovation capability, but often do not know where to start or how to establish and sustain a culture for innovation. Some sectors such as law have enjoyed long term stability and have not needed to significantly innovate, but this is changing due to the new business pressures. This short article identifies some of the key approaches required for effective innovation in professional services and some of the common challenges encountered. It is based on our consulting experience with professional service firms over the past 10 years, together with insight from our academic partners.

Figure 1: Innovation – the farming of ideas

What is innovation?

Much time and effort can be spent arguing about what is and is not innovation. Whilst there is no ‘correct’ answer, it is key that there is a common definition and understanding across an organisation. In our experience the most effective definition is that innovation is anything that is ‘new to you’. This means that innovation includes incremental improvement as well as radical innovation. It also includes methods already in use elsewhere, (even within other parts of your business) that are adopted in your business. Whilst radical innovation gets the headlines, it is the much less glamorous regular small improvements that make up 95% of innovation ideas and can be massively powerful (witness Toyota’s rise to be the global automotive leader based on 50 years of Lean (i.e. incremental) improvement).

This inclusive definition of innovation is the most useful to business management who wish to establish a culture and system of innovation. Recognising the power of a high number of small ideas is at least as important as seeking the very few ‘game changing’ innovations.

At its simplest, innovation is about generating ideas and converting the best ideas to value for the business. We can consider a farming analogy for innovation (Figure 1), where an effective system and supportive environment are required to grow and harvest the best ideas. It is important to recognise that creativity alone is not innovation. Creative ideas that are not implemented do not result in innovation.

Figure 2: Dimensions of Innovation (Source: ‘Innovating professional services – transforming value and efficiency’ by Alastair Ross, published May 2015, Gower)

Where to innovate?

Firms have finite resources and need to best apply these resources, especially when it comes to innovation. But how should firms apply these resources when it comes to innovation—where should they focus? A useful model for innovation is one of ‘Innovation Dimensions’ as shown in Figure 2. This considers four ’dimensions’ where firms can innovate—where they choose to do so depends on their strategy and current practices. At the centre or ‘zero point’ of the circle a business is not innovating. It can innovate in any of the four dimensions—at a low (incremental) level or a high (radical) level:

Process
A common area for business innovation is innovation in business processes which govern the ways of working. This has much potential in professional service firms where process definition and management can be lacking. Process innovation is an excellent way of engaging employees to come up with ideas for incremental improvements in their working methods. Bigger step change innovation can be driven through a re-engineering approach. Process innovation can involve waste reduction, reorganisation and ‘right-skilling’ of the personnel performing the process and the application of IT. The example in the model is of the insurance company QBE who applied 6-sigma improvement methodologies to process improvements in their business.
Offering
Innovation can also be applied in the services provided to clients, either to improve existing services or create new ones. In the model, the example given is of the law firm Mills & Reeve who developed an iPhone App for their Divorce.co.uk offering. We have worked extensively with major UK law firms to help them re-engineer services such as Due Diligence, Employment Tribunals and Inquests to increase value and service to clients and reduce cost of delivery.
Market position
Another way of innovating can be in the repositioning of the firm’s value proposition in the marketplace. To take advantage of deregulation in the UK legal market, the major UK law firm DLA Piper jointly set up a new vehicle, ‘LawVest’ to enable investments in new fixed price services for mid-sized businesses.
Paradigm
The last innovation dimension is the hardest to exploit as it is quite simply the reinvention of the firm’s business model. The example given is that of IBM, who from the early 1990s, over a decade, transformed their business away from one based primarily on hardware to one based on software and services. The internet provides a powerful vehicle for firms seeking to develop new business models, enabling on-line services, with global reach and at substantially lower cost than personal services. Examples of new internet-enabled professional service businesses include crunch.com for online accountancy and freelancer.com for software and design solutions.

A system for innovation
If you want to have effective and ongoing innovation in your business, you have to proactively establish the conditions for it. Research and experience has shown time and time again that effective and sustainable innovation requires an holistic and systematic approach to innovation. This approach weaves together the threads of a number of key practices to create a strong and rich fabric of innovation capabilities. Exploiting these capabilities leads to long term superior performance. Best practice innovation thus requires an integrated system, (Figure 3) which is comprises seven key practice areas:

Figure 3: The innovation system (Source: Codexx)

Leadership – Active support and encouragement from the top is key to innovation
Strategy – A clear business strategy is required to provide context and priorities for innovation
Process – A structured process to generate, explore, select and implement the best new ideas is key
Climate – The organisation’s culture and values can either energize or emasculate innovation
Resources – People time, methods, money and other resources are needed for innovation
Learning – Capturing and sharing learning across the organisation is key to effective innovation
External Linkages – No organisation is an island – ideas & resources from outside are key ingredients

The ‘Innovation System’ model is an effective way for a business to think about and develop their innovation system. We have helped a number of businesses improve their innovation system by using our ‘Foundations for Innovation’ (F4i) solution to assess their current innovation capabilities against 60 best practices underlying the innovation system model.

Innovation challenges in professional services—the ‘Top 6’
Innovation is difficult —for the simple reason that it is easier for any organization to continue ‘business as usual’ than to change. And innovation is about making change. Organizations that are effective at innovation are able to embed a culture that encourages ongoing change. So, many of the challenges that face professional service firms in innovation, apply to all businesses. But focusing on those common challenges that professional service firms face in our experience, together with comments made by professional service clients:

1. Poor supportive culture for innovation

“There is lip service to innovation at senior levels due to the difficulty of making the required cultural change.” Partner, Law Firm
“People don’t want to take risky ideas to the boss.” Partner, Management Consultancy
Many firms effectively discourage innovation through a combination of leadership behaviours, organisational ‘norms’ (e.g. “more of the same has worked well for us for 20 years so why change?”) and resistance to change dominating the firm’s culture. A key challenge for professional service firms is that fee earners typically only value time that is chargeable, and therefore are disinclined to invest time in other activities (e.g. innovation) which will not be valued in their performance appraisal or bonus.

2. Limited understanding of client needs

“We’ve been in our functional silos too long and they’re too deep.” Manager, Business Services
“Our new offering was less successful as it took too long and had not enough client involvement.” Managing Partner, Law Firm

Engaging clients early in the development of a new product/service is an effective way of increasing the chance that the new offering will bring value to clients. Many new ideas come from firm’s clients or from an insight gained into a client’s business. This is why deep understanding of clients’ businesses is key to effective product/service innovation. However, many firms have a transactional relationship with clients and do not invest enough time and energy to understand their business challenges and so identify innovation opportunities

3. Insufficient resourcing for innovation

“Time is a big issue – we’re a cog of labour.” Partner, Law Firm
“Carving out real time for innovation instead of chargeable work is a major challenge.” Partner, Management Consultancy

The key resource required for innovation in a professional service firm is time – particularly the time of fee earners and key support personnel. Time is needed to reflect on the business, to gain insight from clients, to analyse existing methods and brainstorm new ones, to develop, implement and deploy new solutions. Few professional service firms have established dedicated ‘innovation teams’ armed with methods and budget who can be used to support innovation projects. Once an idea has traction, the other resource barrier that typically emerges is IT resourcing.

4. Poor innovation process

“By the time you get through all the bureaucracy the system will be obsolete or the idea will be dead.” Employee, Insurance
A core foundation for effective innovation is a robust process that links ideas with delivered value (e.g. a new or improved product/service, a new way of working or a new pricing model). This process must guide idea development, selection and investment using appropriate criteria, and monitor and support development and implementation. Whilst an innovation/new product development process is common in the industrial sector, it is less so in professional services. Its absence means that innovation ideas from employees can struggle to be heard and in comparison poor quality ideas can be pushed through if championed by a Partner or senior manager.

5. Ineffective execution
“People want to practice their legal skills. It’s seen as de-skilling them to ask them to be a project manager.”

There is a distinct difference between creativity and innovation. Creativity may be required at the start of the innovation process (even if it is simply to borrow an idea from another sector), but it has no value without execution. Firms can be guilty of under-resourcing implementation – for new products this can include insufficient resourcing for marketing and selling the new offering. The ‘long slog’ of implementation can be less attractive for employees and managers than attending a few brainstorming workshops to generate new ideas…. Implementation needs to be a recognised critical part of a firm’s innovation process and resourced accordingly.

6. Resistance to systemization of work

“Current performance measures penalise efficiency and delegation.” Head of Knowledge Management, Law Firm
“Resistance is from middle management – senior management is supportive.”

A key innovation opportunity for professional service firms is in dramatically improving their cost performance by streamlining services and internal processes and ‘right-skilling’ work – with significant amounts of repetitive work being moved to lower skilled personnel, automated or outsourced. The use of ‘Standard Operating Procedures’ together with IT-enabled workflow means that work can be performed at a similar level of quality as before but at much lower cost. This frees up experienced personnel to take on higher value work and also to have time to spend on innovation and business development.

However, the flip side of this benefit is that these personnel will in the short term lose a significant amount of their work. This can create concerns about their long-term future and short-term compensation. Long-serving employees may also consider that the ‘professionalism’ of their firm is threatened by the use of semi-skilled employees now performing their work. But as I have said a number of times to legal partners – if they decide to buy a Porsche, they will expect high quality and high performance. But they will not expect that it will be built by the CEO of Porsche! They accept that it will be built by a semi-skilled worker on a production line, but following processes and procedures codified from the experience of the firm’s engineers…. This lesson equally applies to professional service firms. A key paradigm change for professionals is in separating their role into the two elements of design and delivery. A professional may bring more value to their firm by using their time to codify their expertise and supporting the design of new working methods) to enable it to be delivered by others or via an automated system) rather than delivering it themselves.

Getting started

Developing an effective capability for innovation is important in professional service firms as they seek to retain their competitiveness in an increasingly challenging global marketplace. Firms can learn from other sectors, but will need to ‘tune’ established methods for the services world.

Codexx has helped professional service firms improve their innovation activities in a number of ways, including:

Assessment of firms’ innovation health against our F4i innovation best practice model and developing an improvement strategy.
Training – of managers and employees in innovation approaches and methods.
Establishing key elements of an innovation system (such as a strategy, processes, resourcing).
Developing department/sector strategies using Strategic Road-Mapping to align innovation activities with market strategies.
Running user/customer/client collaborative studies to determine opportunities for value innovation.
Re-engineering existing services (and internal support processes) to improve efficiency and value.
Supporting the design and development of new service offerings.

We have seen that such approaches can yield major benefits for firms both in terms of increasing service value, reducing cost and giving the organisation increased competencies for subsequent innovation. The reality is that for many (most?) professional service firms, establishing effective innovation will be challenging, yet rewarding and ultimately necessary for growth in the new business environment.

For more information contact Codexx.

*This article draws upon materials in the book ‘Innovating professional services – transforming value and efficiency’ by Alastair Ross, Director of Codexx, published on the 8th May 2015 by Gower. For more information and online discount click here.

Tags: Innovating professional services - transforming value and efficiency
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From benchmarking to best practice sharing

Tuesday, May 5th, 2015

by Alastair Ross and Martyn Luscombe

The term ‘benchmarking’ originally emanated from the practices of cobblers, measuring people’s feet on a bench to make a pattern for a shoe. It was appropriated by business in the 1980s when progressive companies began to formally ‘benchmark’ themselves against each other. Its purpose was to drive business improvement based on identification of superior practices in other organisations. Xerox was the first major business to popularise it and since then it has become a core tool in the business improvement toolkit. Whilst benchmarking can be a very effective tool in catalysing and focusing improvement, it can also be easy to misuse, with the result that the not insignificant resources required can fail to yield usable improvements.

Codexx has gained significant experience in benchmarking programmes since it was established in 2002 and our consultants have additional benchmarking experience gained from their work with previous employers such as IBM, Philips and Cranfield School of Management. Our experience includes the benchmarking of manufacturing practices and performance, supply chain management, R&D, general business innovation and law firm innovation. This experience has given us a good feel for both the strengths and weaknesses of benchmarking as a whole. In this short article we want to share some of the key lessons we have learned and our recommendations on how to best to use benchmarking methods in your own improvement programmes.

To help in establishing a framework for assessing the use of benchmarking, it is important to recognise that in practice ‘benchmarking’ covers a wide range of approaches, each with their strengths and weaknesses. We have divided benchmarking into three distinct types and evaluated each on their merits based on our experience in applying them:

Quantitative benchmarking
Quantitative practice assessments
Qualitative practice assessments

In practice, many benchmarking assessments will be a hybrid of two or more types to suit specific requirements. A key success factor in benchmarking is not to lose sight of the goal. In benchmarking the goal is to be able to use the assessment findings in a practical way to catalyse, focus and effectively execute changes in business practices which will yield performance improvement. The benchmarking findings (the ‘score’) should never be seen as an end in itself – although, in our experience, that can all too easily happen as managers use the findings simply to validate a past or planned action, rather than to use it to drive improvement.

1. Quantitative benchmarking

This type of benchmarking can be considered as the ‘classic’ benchmarking with its focus on comparing the selected business against a defined set of performance metrics and comparing the results with a database of other businesses on an anonymous basis.

Sometimes benchmarking exercises make the mistake of focusing solely on performance metrics, and only part of the story is revealed. By also comparing business practices in an objective way (e.g. through the use of maturity grids) a more valuable assessment can be performed helping to answer the ‘why?’ as well as the ‘what?’ of the scoring. For example, if a manufacturing company is shown to have high inventories compared to the average in its sector, weak practice scoring in the use of lean practices and the use of large production batches would explain this poor performance and give management a list of areas for improvement.

A good example of this type of benchmarking is the Probe manufacturing benchmarking tool. This was developed by IBM Consulting and London Business School in 1992 as an objective way of assessing a manufacturing operation against world class standards. It was based on a model of World Class Manufacturing that drew heavily on lean thinking. The benchmarking tool provided numerical scoring based on practice maturity and measurable performance achievements, and grew to a database of over 2000 manufacturing sites. Codexx has been a licensed user of the Probe manufacturing benchmarking tool since 2002 and we have used Probe for multi-factory benchmarking on a regular basis.

An excellent example of a company that has successfully applied best practices benchmarking and improvement is Grundfos, the leading global pump manufacturer with factories in Europe, America and Asia and headquartered in Denmark. Grundfos started using best practice benchmarking using PROBE in 1996 to assess the practices and performance in its factories. This identified gaps with best practices including the need to utilise Lean manufacturing approaches. Grundfos commenced implementation of lean manufacturing techniques across their factories from 1997 and continued regular PROBE benchmarking supported by Codexx. In parallel it used EFQM to drive overall Business Excellence. Grundfos Denmark won the EFQM award in 2006. In the PROBE benchmarking assessment in 2008, their Danish factories scored at a world class practice level. The result has been clear improvement in key performance indicators such as on-time delivery, inventory turns and quality.

Figure 1: Example of practice v performance scatter for PROBE manufacturing benchmarking

Strengths

Uses a structured approach and provides quantified comparisons with other organisations on an anonymous basis.
The large database of businesses that have been benchmarked against the defined practices and performance provides an authoritative comparison.
This can be a cost-effective approach – the license or consulting fee required will be less than the total cost of a ‘do it yourself’ approach.
The benchmarking exercise can be performed without visiting other companies so does not require much time.

Weaknesses

The underlying model that the benchmark is based on is key to its relevance and its makeup should be clear to participants. It is all too easy for this to be complex and opaque and therefore unclear as to the validity and relevance of the final scoring.
Performance benchmarking alone does not provide easily actionable improvements. An effective Quantitative Benchmarking tool will cover both practice and performance.
The scope of the benchmark and the practice and performance areas covered are pre-defined by the benchmarking model and there is little or no room for flexibility.
Valid comparison is based on the assumption that all participating organisations define the compared metrics in the same way. It is up to the benchmarking assessors to ensure this is the case and if participating businesses are self-assessed, this cannot be guaranteed. The danger is that if the metric is ‘apples’, some organisations will actually be measuring ‘pears’… And this can easily be done. For example one global engineering company found that each of its international subsidiaries had different ways of measuring ‘on time delivery’; so a benchmarking performance question that asked for ‘on time delivery performance’ could get a high variety of %results from across this company even if they actually had identical performance…

2. Quantitative practice assessments

This benchmarking approach uses a defined framework of key practices with levels of maturity, i.e. from weak to strong practices. It is used when there is an absence of a large database of companies which have been assessed against these practices, so quantitative benchmarking is not feasible. Typically this would be because the nature or scope of the practice area is not wide enough to have merited academic or consulting study and the development of a benchmarking programme. This approach suits niche assessments of specialist areas, where a structured comparison against best practices is required. The lack of a database of comparative data means that the process must involve a number of like-minded organisations, all seeking to learn how to improve performance in the area involved.

Codexx used this approach to help a client perform benchmarking of production maintenance practices as part of a re-engineering programme for maintenance across 8 factories. The objectives of the benchmarking were:

1. To help ‘open the eyes’ of the maintenance managers to better practices in other maintenance organisations – and thus encourage change.
2. To provide a quantifiable comparison of practices and some key performance metrics with organisations with measurably better maintenance operations to provide a set of improvement targets.
3. To provide examples of improved practices which could be transferable to their business.
4. To learn about each company’s ‘journey’ to their current maintenance practices and benefit from their learning.

We initially looked to use a commercially available benchmarking tool for this work, but we found no tool that was broad enough to meet the client needs (most were focused on specific aspects of maintenance such as cost). We therefore developed an assessment framework built around a skeleton provided by the ISO 9001 8 principles of quality management. On this skeleton we added maintenance-specific practices and performances and developed this assessment model collaboratively with the client’s re-engineering team of maintenance managers – with whom we were already working. This approach was used to benchmark five other European companies, using 1 day visits – attended by the majority of the maintenance managers – supported by prior data sharing and preparation. Each participating firm was provided with an assessment report and overall scoring – it was important to ensure that each participating company gained value from the exercise. The assessment approach provided much insight to the maintenance managers and was used to develop improvement projects as part of the re-engineering programme. The scoring also provided a measurable set of practice and performance targets that were used over a three year period to measure re-engineering progress, with 6-12 month self-assessments against the framework (more information).

Figure 2: Extract from F4i showing questions on innovation practice maturity.

Another example of this approach is in the development of the Foundations for Innovation (F4i) assessment tool by Codexx in 2006. This was born our of our recognition of a lack of a cohesive tool for assessing an organisation’s innovation ‘health’ in a cohesive and objective way. F4i was developed with the support of Imperial College Business School to bring academic rigour to the development of the assessment tool. Based on an academically validated model of innovation, it used 60 key innovation practices and performance metrics to enable a quantitative assessment of innovation in a business (see figures 2 & 3). We have used F4i in innovation assessments of industrial and service organisations across Europe, USA and China. F4i does not have a large database of companies – we focus primarily on how participating organisations score against the defined practices and more importantly in the underlying reasons for weak practices. We took a similar approach in the development of an innovation assessment for the legal sector, building on our experience of working with major UK law firms in innovation since 2005. We used this to perform a study of innovation in 35 UK and German law firms, together with the business schools of Exeter and Leipzig universities (more information).

Strengths

The assessment framework can be tailored precisely to the specific needs of the organisation (or group of companies) involved.
The assessment approach can again be tailored as required.
Learning is gained from the visits to other organisations.

Weaknesses

It is typically a more expensive approach to benchmarking than Type 1 as all the costs of development usually have to be borne by the lead partner(s).
There needs to be mutual value in the assessment for each participant and the lead organisation needs to recruit the involvement of others and typically cover the costs of the framework, travel to the other companies and in the scoring and reporting.
The limited number of participants results in a limited data set which restricts the ability to identify and validate relationships between practice and performance. Findings are thus more indicative than anything.
A custom assessment framework needs to be developed for the benchmarking exercise by one of the parties involved in the assessment or by a supporting consultant.

Figure 3: Example of ‘traffic light’ scoring against overall F4i innovation model.

3. Qualitative practice assessments

This final type of ‘benchmarking’ is comparatively unstructured and primarily produces a qualitative assessment. One could argue that this is what normally happens in ad hoc and unstructured visits to other companies. Such informal benchmarking is sometimes referred to as ‘industrial tourism’ where the lack of any objective or structure to the visit results in limited value and few actionable outcomes. We are not advocating this approach. Structured qualitative practice assessment does have objectives and an assessment framework but it is deliberately loose. Codexx have facilitated a number of such assessments in a practice sharing programme on manufacturing technology areas, between a major Scandinavian and German manufacturers where there was mutual interest in a specific area of production technology development and the companies did not compete directly in their customer markets but were mutual users of each other’s products. Our approach to these assessments was to develop an overall practice framework (again based around the ISO’s 8 principles of quality management) and develop specific practices around this framework in collaboration with the two companies. An assessment visit programme was arranged and the framework used to scope and focus discussions. Key findings from the assessment were documented for each company.

Strengths

Suitable for use in highly specific business areas where an existing benchmarking tool is unlikely to be available.
Learning is gained from the visits to other organisations.
The flexible framework enables practice sharing visits and discussions to accommodate discussion and evaluation of thinking, methods and experience which emerge as of value to participants, and would not easily be accommodated in a tight prescriptive assessment format. Basically ‘best practices’ in this area are not well defined or understood and so the assessment approach needs to accommodate emergent practices that have proved to be of value to at least one of the participating organisations.

Weaknesses

Requires participants to each have areas of practice which are perceived to be progressive by other partners, so each participant can learn from the assessment – not just teach the other participants. This means that pre-work is typically required to engage participants and establish the potential for a mutually beneficial practice sharing arrangement.
There is a danger that the assessment will be so flexible and loose that it becomes difficult to make objective comparisons to enable effective learning for participants.
Again one party needs to take the lead in such a practice sharing programme.

Final Words

Benchmarking is a proven way to compare an organisation’s effectiveness with others and do this in a way that provides objective findings that can be used to catalyse business improvement. However, sometimes traditional benchmarking can be expensive, too ‘one size fits all’ and its scoring opaque to participants.

Less formal methods, based around ‘practice sharing’ can be effective at achieving the required objectives of catalysing improvement – without the ‘heaviness’ of typical benchmarking – and enabling a more personalised fit to the requirements of the participants.

Overall, it is key that, whatever benchmarking approach is used, participants do not lose sight of the ultimate aims of the activity: to catalyse and focus improvement activities.

Tags: assessment, benchmarking, best practice assessment
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Innovating professional services – new book

Friday, April 17th, 2015

Professional Service firms are facing major challenges in an increasingly global market. Whilst the professional services sector is diverse, consisting of accountants, lawyers, management consultants, architects, insurance providers and other businesses that provide services based on leveraging intellectual capital, they face many common challenges:

Deregulation of local markets enabling the entry of new competitors
Clients are demanding ‘more for less’
New competitors based on internet-enabled business models
Competitors exploiting methods such as Lean to improve their cost competitiveness
How best to serve a global market – and to respond to global competitors

How do firms respond to these challenges? One key approach is in utilising innovation to improve competitiveness. Progressive firms are seeking to increase the value they provide to clients – through new and enhanced services and improved service experience for example. They are also seeking to improve their efficiency of doing business – and thus improve their price competitiveness.

Alastair Ross, Director of Codexx, has utilised Codexx experience gained over the last decade in consulting to professional service firms in innovation and re-engineering to write a practical guide to change agents in professional service firms seeking to exploit innovation within their organisation.

The book provides a detailed introduction into key innovation and re-engineering techniques, such a client value profiling, process mapping, waste elimination and change management. There is a strong pragmatic approach to dealing with the typical challenges encountered in driving major service innovation and culture change. The book features extensive case studies in legal, insurance, financial and business services.

‘Innovating Professional Services: Transforming Value and Efficiency’ by Alastair Ross was published by Gower on 8th May 2015.

For more information on the book go to: here

To purchase an e-book version from Amazon, go to: here

Posted in Codexx News, Innovation, Law, Professional Services, Uncategorized | No Comments »

New Stuff

Archive for the ‘Professional Services’ Category

Part 4. Innovating to reduce process and service costs

Introduction

The importance of process innovation

References and further reading

Part 3. Establishing an effective system of innovation

Introduction

Innovation is not easy to do – especially in professional services

A system for innovation

Assessing your firm against the innovation system model

References and further reading

Part 2. Identifying innovation opportunities

Introduction

The need for focus

Your innovation dimensions

1. Product innovation

2. Process innovation

3. Market Position innovation

4. Business Model innovation

References and further reading

Part 1. Setting the scene – when business as usual is not enough

Introduction

Professional services – drivers for innovation

Let’s be clear on innovation

Institutional v Individual Innovation

Key items for management’s innovation agenda

References and further reading

About New Stuff

Knowledge