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Published 21 September 2012 06:30, Updated 21 September 2012 11:39
Some authorities estimate up to 70 per cent of the work of professional services firms is already commoditised. New business models are under-cutting and out-performing these firms. Photo: Regis Martin
Around 1900 when advances in knowledge and specialisation led to the adoption of occupational licensing in the United States, members of a profession approached the state governor to lobby for legislation that would license their profession. As each occupation was becoming more complex and specialised, it was becoming ever harder to guarantee quality of professional service.
In their petitions, the professionals urged that incompetents and charlatans be eliminated by licensure so that the citizens would be better served and protected. When questioned whether the professionals were truly concerned with advancing the people’s health and rights or whether they were more interested in monopolising their discipline and minimising competition to keep prices high, the professionals’ spokesman admitted honestly “a little of each”.
This story epitomises the challenges facing contemporary professions. Nothing much has changed in either the business- (law, engineering, accountancy, etc.) or health-related (medicine, pharmacy, physiotherapy, etc.) professions. And it doesn’t matter whether you are in private practice or employed by a corporation or government, professionalism is a universal and enduring concept.
Being a professional requires a combination of knowledge, skills, trustworthiness, altruism and commitment to a career of service to others. Specialised knowledge and skill give professionals power over their clients. Balancing the use of this power for individual and public good, while meeting their own needs, obliges professionals to behave ethically. This power also attracts government regulation – to prevent its harmful use – and provides much of the raison d’être for professional associations – to foster its beneficial use.
The irony, perhaps death knell, for large professional services firms is that much of what they do for clients today is no longer a true professional service. The essence of being a professional is giving independent advice in the client’s best interests. It is not the provision of service per se. In today’s world we speak about the commoditisation of professional services. What we are actually referring to are those things that do not require professional qualifications and licensure. I refer to work by paraprofessionals and to work that is now done by computers and decision-making algorithms. In law it’s legal process outsourcing (less than 10 years old and already a billion dollar global industry); in consulting engineering it’s outsourcing and CAD; and in accountancy it’s outsourcing and algorithms. And, soon it’s going to be crowd sourcing in all professions as clients seek solutions to many of their needs from those with superior value propositions wherever in the world they may be.
Some authorities estimate that up to 70 per cent of the work of professional services firms is already commoditised. New business models are undercutting and outperforming these firms. As a result, their traditional service offerings are being unbundled and soon many firms will start to feel unloved and abandoned by their clients. Bet-the-company and mission-critical solutions are always going to be sourced from the best available practitioners. Would you seek advice and assistance for your brain tumour from someone other than the best neurosurgeon to whom you can get access? Of course not, but those who do not have “brain tumours” are looking elsewhere.
If professional services firms want to preserve their “little bit of each” status, in other words enjoy practising their profession profitably, then major re-thinking and re-invention of their business models are necessary. This theme will pervade my First Among Equals blog.
George Beaton is Executive Chairman of Beaton Research & Consulting and a Partner in Beaton Capital, firms dedicated to professional services.