Digital and AI are major opportunities for professional services firms. They can turn a multi-local business into a global platform that elevates the level playing field and marginalizes competitors who failed to understand the new rules of the game, or simply can’t keep up. Many professional services firms are still the aggregation of local franchises only loosely tied together by marketing and corporate propaganda. Local leaders or partners retain most of the decision rights to drive the business even if it is at the expense of creating firm-wide synergies.
This, of course, results in being more nimble to assess local market conditions, adjust value propositions and drive short term performance. But it is also a powerful barrier to realize the promise of a digital transformation because everything in the career of local leaders or partners screams that they should pay just enough lip service to the corporate crew and focus on their local clients which will keep them safe as long as their business does okay. So it is hardly surprising that in many digital transformations, even years into implementation, one can still observe how the fragmentation of the legacy operating model is replicated in the digital space, a huge missed opportunity. This includes inconsistent technology choices, redundant digital solutions, local businesses silently opting out of firm-wide decisions, regional Chief Digital positions being created with a separate agenda, best practices not being shared, etc. It sounds insane, and yet it happens again and again, even in relatively small firms ironically. In short, fragmentation is the enemy.
The first thing, of course, is to determine who is best placed in your organization to introduce new capabilities, build a portfolio of digital solutions and drive each of the layers of your digital transformation, the ‘now, next and new’ time horizons introduced in my first two articles. Then the challenge is to ensure that the spearheads can create momentum in the wider organization to make a real difference to the top line and/or the bottom line.
As discussed in my previous article, the first horizon is all about the ‘job to be done’. Digital is an enabler to reach new levels of productivity to serve clients better, faster, cheaper. The ‘job to be done’ is either a piece of engineering design, project management or cost management in engineering firms, or a transaction, a litigation or a compliance job in law firms to name just a few. So logically in horizon 1, you want to empower and allocate resources to the people in your organization that are accountable for the continuous improvement of these core services. The challenge is that in many firms either these roles simply don’t exist at firm level, or they are not quite set up for success (irrespective of digital and AI by the way) because too much is expected of their ‘influencing skills’ whilst they are not empowered enough by their leadership to break silos across geographies. So before you start pumping resources into your horizon 1 digital transformation, you first need to assess whether you have the right roles defined, with the right firm-wide mandate to drive common ways of working and the right people to lead your service excellence thrust. This will save you a lot of time, money and gray hair!
In the second horizon, the name of the game is client empathy and intimacy to uncover unmet needs and address them with digital solutions. So there you want to build your digital factory as close as possible to your clients, but not any clients. You want to be close to early adopters that will be willing to openly share their requirements, test early prototypes and co-create to build compelling digital solutions. The most common pitfall I have observed is to create the digital factory close to the corporate headquarters because horizon 2 is the somewhat more exciting and visible part of the digital transformation which a lot of firms like to label with fancy names and brag about. Yet, early adopter clients are not always located where the corporate centre is. The digital factory tends then to become more of a ‘show room’ or a ‘badge of honor’ rather than a place genuinely focussed on new product creation. For example, both in engineering and legal services, a lot of the bigger firms and their headquarters are in America, yet for various reasons early adopters in both markets tend to be in Europe, especially in the UK, or in the Middle East (the market has matured a lot in America in the last few years though). A final point, the product manager will be the key role in horizon 2 and he/she will be dependent on the maturity of the sector or market teams in which he/she will operate. In many law firms and engineering firms, the primary organizational dimension is still the service line, and the sector/market teams are often underdeveloped, underfunded and sometimes even a mere overlay. This is a major weakness to drive a successful horizon 2 transformation because if you are focussed too much on selling horses, the chances you come up with the idea of creating a car are pretty slim even if that is what your clients really need.
Finally in the third horizon, you want the firm to be attractive for the start-up community in which you will create a portfolio of minority equity stakes, and again it is not necessarily where the biggest part of your business, your headquarters or your largest clients are. The key role here will be the investment manager to drive deal origination and manage portfolio companies. He/She will need to work very closely with service and sector leaders to realize synergies both ways: on the one hand to accelerate start-ups by offering access to clients, domain knowledge or technical support, and on the other hand to help the core business expand its addressable market and differentiate from other incumbents.
The three key roles I introduced in this article, i.e. the service excellence lead, the product manager and the investment manager will need to work closely with clients and/or client facing colleagues, and with each other. It sounds simple on paper but in practice this is hard work for digital specialists in horizons 1, 2 & 3 and domain experts from the core business to literally find each other and deliver meaningful outcomes. It takes the right leadership and incentives to make it work. Having a powerful vision truly owned by leadership and middle management helps to make sure that all layers are aiming at the same firm-wide Big Hairy Audacious Goal (also known as BHAG), but it is not enough! Domain experts, be it lawyers, tax advisors, project managers, engineers or quantity surveyors, are billable and it is both unfair and ineffective to expect them to contribute to the digital transformation on the their ‘magic time’ (i.e. unbillable hours). This means practically that if 20-30% of your budget is not earmarked to pay for the time of your domain experts, you are fooling yourself and probably building “cheaper” solutions that will fail miserably during the adoption phase because they are out of touch. Equally important is the access to clients, I am always amazed to see how difficult it is to convince middle management or partners to have conversations with “their” clients about digital innovation, and how enthusiastically clients, especially early adopters and younger professionals, respond when offered to explore their needs and co-create digital and AI solutions.
In summary, I often hear that a lot of digital transformations fail and there is probably a lot of truth in this but it is not a curse. There are very recognisable root causes for weak execution, it often stems from a lack of awareness that the fragmentation of the legacy operating model works against the digital transformation. The good news is that it can be addressed by empowering three key transformation roles, putting your money and your client relationships where your mouth is and turning up the volume on your leadership story to align and focus the talent in your organization on one single uplifting long term vision. I will come back in more details on this latter point in my next article: ‘winning hearts and minds’.
