How can professional service firms use innovation to maintain competitive advantage?

I have just finished reading the latest edition of the Chartered Institute of Marketing magazine The Marketer. In this month’s edition Paul Sloane, who has a regular column on innovation (read his blogs at, wrote about how to create innovation within your organisation and the ‘In Depth’ article focused on how innovation is crucial to survival in today’s hostile business environment.

These articles prompted me to think about the application of innovation within the Professional Services sector.

We most commonly think of innovation-led businesses as being in fast-moving, highly technical sectors such as Pharmaceuticals and Biotechnology or Software and Computer Services. Professional Services on the whole have not fully embraced innovation and many might argue that they don’t need to be so innovative as there will always be a demand for their services.

However, Professional Service firms are routinely faced with the challenge of differentiating themselves in an increasingly crowded market with more demanding commercial and private clients. UK law firms have the additional threat of deregulation enabled by the Legal Services Bill, which will open up the market for new entrants and new law firm business models in 2011.

How relevant is innovation within Professional Services?

Whilst there might be a limit on how innovative Professional Service firms can be with their core products (you can’t change the law for instance) there are many other ways in which firms can adapt to improve the client experience and their internal efficiency. For example:

  • Service delivery: Back in the late 1990’s Magic Circle law firms, Linklaters and Clifford Chance, introduced online legal services with their Blue Flag and Next Law products respectively. At the time this was a major step change for the delivery of legal services but online services are now commonplace and there are even providers who just offer online legal services (Cleardocs for example).

Quality Solicitors announced in November this year that it plans to open a number of its new legal branches in shopping centres (see my blog post on this here) which changes the way in which individuals access legal services.

  • Pricing: Traditionally those in the Professional Services sector have charged fees on an hourly basis. However, with increased commoditisation of services, ever cost-conscious clients and changes to the ways in which services are delivered there is a need to be more innovative in pricing.

Capped fees, retained/contingency services, blended rates and volume discounts are all possible alternative fee structures which have been introduced by some firms.

  • Internal processes: Digital dictation and electronic filing are just two examples of technological applications which have improved efficiency within those Professional Service firms which have adopted them.

Firms need to be alert to technological advancements which might reduce their admin burden or enable them to operate with fewer staff.  Greater efficiency should ultimately lead to competitive advantage and higher profitability.

How do Professional Service firms achieve innovation?

To unearth innovative ideas from within, Professional Service firms can adopt the following practices:

  • Facilitate some slack: One of the main hindrances to ‘out of the box’ thinking within Professional Service firms is the fee earning target culture. Fee earners are constantly under pressure to hit their time recording or billing targets which doesn’t allow space to explore ideas or to just stand back and take stock.

This is a perennial problem for many Professional Service firms but firms should seek to allocate their staff some time for thinking about problems, contributing to brainstorming sessions and carrying out research.

  • Engage support staff: Support staff are often seen as the under dog in many Professional Service organisations and as such their opinion is undervalued. Support staff generally know the internal workings of the firm very well, often have frequent contact with clients and are more likely than their fee earners to have experienced working in other firms.

Inevitably they might well have some very valid suggestions and ideas. A firm needs to create a culture where support staff feel valued enough to contribute and share these ideas.

  • Seek feedback from clients: Paul Sloane began his article “Wherever there is pain there is a need for innovation. So if you want to create new products or services look for the pain points.”

Survey your clients to identify their ‘pain points’, which you can seek to resolve with a new method of service delivery, a new pricing structure or a new product for example.

  • Recognise and reward: Firms need to actively encourage staff (partners, fee earners and support staff) to contribute ideas and introduce some form of reward or recognition for those that do.

To conclude, innovation is as relevant to the Professional Services sector as it is to the Pharmaceuticals and Biotechnology sector. The Professional Services culture might not be one which naturally engenders creativity and new ideas but those firms which actively seek to innovate stand to gain greater competitive advantage and an increasing share of the market.

Have you got any examples of innovation in Professional Services (good or bad) which you would like to share? Please comment below.