3 Major Forces Disrupting and Transforming the Professional Services Landscape Right Now
What factors are transforming the professional services industry? Discover top trends and what they mean for professional services firms.
The forces transforming today’s professional services landscape – are familiar ones.
We’re talking digitization, the shift toward data-first business strategies, our collective post-COVID recovery, and so on. You know, those same disruptive forces redefining all sectors from manufacturing and retail to healthcare and tech.
These disruptors may sound like old news, and in some ways, they are.
But, the reality is, things are changing at a break-neck pace – including how we tackle familiar sources of disruption and the ways that current conditions are forcing firms to rethink how they make decisions, work with colleagues and clients, and even their menu of service offerings and billing structures.
Below, we’ll dig into these market forces and what they mean for professional services firms moving forward.
1. Rapid Digitalization of Professional Services
Digitalization is exactly what it sounds like: the process of shifting from analog to digital. Over the past few decades, we’ve watched the impact of digitalization play out in real-time — just think of the countless ways that the internet, email, smartphones, and socials have made it faster and easier to share information, communicate, and complete basic tasks.
This idea isn’t news to anyone at this point. But – it’s important to understand that digitalization is a continuous process – one that, within the past few years, has started moving at an exponentially faster pace. And it’s that “rapid pace of change” that’s currently redefining the professional services industry as we know it.
The World Economic Forum published a report before “seismic disruption” shook up the industry (their words). But it clearly breaks down how PSFs might use digitization as a framework for delivering expertise and high-impact client outcomes at speed and scale by focusing on the following core themes:
- Business model transformation. Digitalization is forcing professional services firms to fundamentally transform existing business models. As an example, just look at legacy consulting. The one-size-fits-all model doesn’t cut it any more. Today’s firms are embracing new services and billing models designed for the digital world — and increasingly, tailored to individual client needs. Forrester’s 2022 Predictions includes an important statistic that underscores this point: roughly 80% of consumers view the world as all digital — there is no divide. Customers expect digital experiences to meet a certain standard — it doesn’t matter if you’re Amazon, Netflix, an IT provider, or a small accounting firm.
- Digital agility. Technology enables greater agility. Businesses are increasingly embracing tools that allow them to adapt to changing conditions. Professional services firms must move fast to accelerate digital transformation, build a unified data strategy, and lock down a competitive advantage. For example, IoT and real-time data streaming can help companies optimize their supply chains – enabling them to take action in the event disaster strikes or there’s a bottleneck that could cause delays.
- Intelligent automation. Expert insights are essential to the core business model of any professional services firm — and traditionally, those insights have been generated and delivered by actual humans. Advancements in AI analytics, machine learning, automation, etc. are increasingly supporting professionals on the job — reducing the cost to serve and enabling firms to deliver deeper expertise at speed and scale — without undermining the quality clients depend on. At the same time, business leaders should be aware of the ripple effect automation will have on employees and their firm’s core value proposition.
- Empowering talent. Digitalization also unlocks new opportunity to empower employees to leverage new technologies to enhance the client experience and engage customers in new ways. Firms are also able to source talent with some help from AI solutions, while cloud-based collaboration tools mean they’re not limited to hiring local candidates. Again, business leaders will need to prepare employees to make the most of the latest tech and provide ongoing support and training.
“Digitalization” shouldn’t inspire dread. While these changes might seem like a lot to take on at once, they represent a path toward agility, adaptability, and long-term resilience. That is, if you have the right mechanisms in place to drive real-time action.
2. Mounting Pressures Force Firms to Invest in Becoming Truly Data-Driven
For professional service firms – insights are the most important part of your entire strategy. After all, your job is literally about helping others through the use of insights, expertise, and relevant data.
Firms are increasingly recognizing that their ability to capture new opportunities and maximize profits hinges on their data strategy – which requires a unified data ecosystem – and accessible insights for all.
According to a recent Workday report, it seems that firms are taking this concept of unity seriously. Researchers found that CFOs now play a central role in actively creating business value – with 40% driving new business models and revising financial strategies on a holistic level.
IT, the C-suite, the middle-managers, and the front-line workers must all work together as a coordinated unit — under one strategy, language, and data ecosystem that ensures individual contributions support the big-picture game plan. For example, finance teams must be able to draw on information from the entire business – projects, operations, sales, marketing, HR, along with external sources that put internal data in context – in order to make decisions quickly.
Additionally, we’re starting to see more firms accept the fact that they can’t go it alone.
Forrester predicts that third-party collaboration, partnerships, and mutual trust will have an outsized impact on firms’ long-term success – and the value they bring to clients.
Deloitte’s 2022 Tech Trends came to that same conclusion. Analysts found that, increasingly, orgs are coming together to tackle common data-related challenges, develop new business models, and fast-track innovation.
Data sharing and collaboration between organizations is gaining more traction in part, because there are tighter protections in place that let them share some data, while keeping the sensitive stuff secure. That means that different groups can work together without constantly looking over their shoulders – and hopefully, avoid that sense of distrust that often prevents or delays major discoveries and innovations that benefit humanity.
Ultimately, the advantage lies in finding new connections between seemingly disparate data points – then using those unique perspectives to create value for your clients.
3. Workforce Strategies Need to Change
From relationship-building and recruiting to billing, culture, and the use of new technologies, workforce strategies across the entire organization are changing in big ways to cope with the impact of disruption.
While every organization is different, we’ve highlighted three focus areas that stand to deliver the biggest impact.
Technology Must Become a True Partner
Deloitte analysts advise firms to strike a balance between talent and technology.
It should be a symbiotic relationship.
Tech enables new, better ways of working, while the talent leverages technology in the right ways to create better customer experiences, improve process efficiency, and boost the bottom line.
Let’s be real, in some cases, AI is replacing traditional expertise. It’s lowered the barriers to entry in a space that, until recently, was only accessible to a select group of professionals.
That said, the widespread democratization of the professional services industry doesn’t eliminate the need for deep specialists. It’s just that those experts need to start thinking more strategically — using technology to put their knowledge in context with the big picture to deliver better outcomes for their clients.
Ultimately, business leaders will need to help their professionals embrace new technologies like predictive modeling, AI-powered resource optimization, prescriptive insights — and more importantly, put in the hard work of changing the collective mindset.
Billing Models and Performance Metrics Must Align With a Changing Reality
Finally, the massive wave of disruption has also created this need for organizations to rethink how they measure success and reward top performers.
In part, that means abandoning old ways of measuring productivity. So, instead of rewarding people for logging a certain number of hours, looking busy, or talking a lot in meetings, firms are focusing more on outcomes. What have they achieved for the business and their clients?
Workforce strategies also need to align with profit margins – billable hours, recruiting, retention. For example, a firm might realize that the way they offer raises or award bonuses are no longer sustainable due to their long-term impact on the bottom line. Instead, they might shift their focus toward driving efficiencies by streamlining back-end processes or investing in tools that enable professionals to drive better outcomes or serve more clients.
Remote-Hybrid Collaboration Needs to Get Better
Finally, we’re starting to see organizations step it up on the remote work front – at least in terms of how they use virtual collaboration tools to support different types of interactions.
Microsoft’s 2022 Work Trends report recognizes that building relationships and a strong culture remains a challenge for remote and hybrid work and that people are still spending too much time in meetings.
There’s also still this “push-pull” happening between proponents of remote, flexible work and those pushing for a return to the status quo. The Microsoft report notes that empowering employees with the flexibility they want – along with the right tools stands to improve relationships with colleagues and clients and boost productivity.
But – orgs also need to weigh factors like generational differences, personality differences, calls for more flexibility, and so on against their personal preferences and the boilerplate rationale for dragging everyone back.
It’s also really important to note that remote collaboration tools don’t just support “WFH,” they enable employees to engage with clients in new ways, collaborate with colleagues and partners distributed across the globe, and capture new insights that can be used to generate even more value. So, whether or not firms are all-in on supporting remote teams, they will still need to invest in these solutions to support digital-first clients (not to mention ensure they’re prepared for the next climate disaster, power outage, or global pandemic).
Final Thoughts
At a glance, the biggest transformation drivers within the professional services industry seem to be more of the same. You know, mounting pressure to unify systems, operationalize data, and move faster and faster. And, also – the COVID stuff: new business models and ways of working and the technologies that support them.
That said, the strategies have gotten way more sophisticated. Particularly for professional services firms, which were already dealing with serious challenges re: maximizing billable hours, managing complex projects, etc.
Velosio helps professional services firms transform operations, tear down silos, and drive long-term profitability. Contact us today to learn more about our services and industry-specific solutions.