2023 is already proving to be a pivotal year for law firms. Continued headwinds from economic volatility and geopolitical uncertainty are macro forces that firms have faced before. But now, with the rapid acceleration of emerging technologies and a workforce forever changed by the pandemic, opportunities to gain a competitive edge are both more abundant and more complex. Leading the charge are legal CIOs who are helping their firms understand and embrace technologies to drive better insights, support more data-informed decision making, enable modern collaboration, and provide better service to clients.
For today’s professional services and capital markets firms, migration to more advanced digital operations is no longer an option; it’s table stakes.
Leading firms across legal, accounting, consulting, investment banking, and private capital markets are leveraging technology in truly transformative ways — empowering their professionals, exploring new business models, and gaining a competitive edge along the way.
Technology is now a REVENUE driver for consulting firms: 50% of all consulting services will contain digital products by 2025 – and 30% of firms believe that more than half of their revenue already depends on their tech stack.
This is also reflected in the rising tech investments by professional services firms – which 72% of firms focus on their front office and front-to-back integrations.
“Our industry is based on trust and growth – and facing the challenge of attracting fantastic talent. Your article demonstrates the relevance of technology in that context”, says Christian Rast, Global Head of Technology & Knowledge at KPMG in reference to my latest article published in Harvard Business manager together with my co-authors Prof. Dr. Markus Kreutzer (EBS Universität für Wirtschaft und Recht) and Stephan Kaufmann (Workday).
Technology is moving to the center of attention across professional and business services – and firms are spending more and more, not just absolutely but also relative to their revenue. If solely treated as a cost position, it becomes a race to the bottom. Instead, if considered a revenue driver and managed as an integral part of your firm’s P&L, technology paves the way for new business models, growth, and profitability.
As of today, it is quite unlikely that professional services firms will dial back on their technology investments – instead, we even see increasing technology investments in order to keep up with a faster evolving competitive landscape. Gartner predicts an annual growth of 5 to 15% for the technology spend of professional services firms – even factoring in the steadily decreasing unit costs for many technologies (e.g., storage, processing, etc.). As firms work through the selection, implementation and adoption of more and more systems and tools, it is obvious that there is barely a true alternative to a “cloud first” strategy.
Something stirs underneath the surface of professional services. Last year, KPMG surveyed hundreds of leaders and managers across professional services firms globally on their use of technology and the signs for change. A significant 48% reported they expected major or radical change across their business and offered services within the next three years. A percentage that is incredibly telling for an industry with high growth and profitability, yet very little change to its traditional business model over previous decades. So, what is driving the change?
Professional Services Firms are currently facing questions such as:
– How to best solve our clients‘ issue in the COVID19 crisis?
– How can we deliver in virtual or fully digital setups?
– How to design or adapt solutions for the emerging recession?
– How to adapt our solution portfolio and firm for the new normal?
Tackling these challenging topics in virtual design thinking workshops is not just necessary and one of the only few options available at the moment – it may turn out to be surprisingly effective and efficient.
For 2020 we expect the pace of Digital Transformation and client-centric innovation to increase a lot across ProfessionalServices, especially legal, consulting, accounting and marketing services.
Leaders and managers need to be able to prioritize innovation efforts strategically and demonstrate to their fellow partners the continued need for investment, the returns and the strategic progress within the specific environment and portfolio situation of their firm.
The signs for a major economic downturn are clearly starting to show across several industries – and in professional services. Structural short-falls that have so far been covered by a thriving economy are now being revealed. This recession may hence become the catalyst of the long foreseen true “disruption” to lawyers, consultants, accountants and tax advisors.
Can you bend that way? Revisiting the Ambidextrous Organization for Managing Innovative Professional Services today
„Success in the past always becomes enshrined in the present by the over-valuation of the policies and attitudes which accompanied that success“. Finding the right updated and best fit organizational guardrails for innovation must be a key focus for professional service leaders. A key concept to achieve this: Ambidexterity. Let’s take a look at it …
The innovation engine of many firms seems to lack power… and the future readiness of many firms appears questionable. Why is that? After all, there is no lack of talent, analytical and strategic capabilities or money in this highly profitable industry.