George Beaton Columnist

George is the founder and executive chairman of Beaton Research + Consulting, which provides advisory, performance improvement and trouble-shooting services to professional services firms. George's management experience includes executive director roles in advisory, consulting, communications and marketing research firms.

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It’s time for professional service firms to rethink business models

Published 18 April 2013 00:46, Updated 18 April 2013 09:12

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Around 1900 in the United States, members of a profession lobbied for the licensing of their members. In their opinion, advances in knowledge were making it harder to guarantee quality of professional service. They urged that “incompetents and charlatans” be eliminated by licensure in order to protect citizens.

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 in order to keep prices high, their spokesman admitted to “a little of each”.

This story epitomises the challenges facing members of the contemporary professions. Nothing much has changed in either the business (law, engineering, accountancy, etc.) or health-related (medicine, pharmacy, physiotherapy, etc.) professions. Being a professional requires a combination of knowledge, skills, trustworthiness, altruism and commitment to a career of service to others. Specialised knowledge and skill gives professionals power over their clients. Balancing the use of this power for individual and public good, while meeting their own professional and financial 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 service firms is that much of what they do for clients is no longer the true work of a professional. Giving advice is not the same as the provision of service, especially when it is commoditised. I am referring to those things that do not require professional qualifications and licensure, but can be carried out by paraprofessionals, computers and decision-making algorithms. In law, it is legal process outsourcing (less than 10 years old and already more than a billion dollar global industry); in consulting engineering, it’s outsourcing and CAD; and in accountancy, it’s outsourcing and algorithms.

And very 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. Some authorities estimate up to 70 per cent of the work of professional service 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 will start to feel abandoned by their clients.

Bet-the-company and mission-critical services are always going to be sourced from the best available professional practitioners. Would you seek advice and assistance for your brain tumour from someone other than the best neurosurgeon? Of course not, but those who do not have brain tumours are looking elsewhere.

If professional service firms want to preserve their “little bit of each” status, in other words, enjoy practising their profession profitably, then major reinvention of their business models is necessary.

George Beaton is executive chairman of Beaton Research + Consulting and a partner in Beaton Capital, firms dedicated to professional services.

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