Issues in Professional-Service Firm Management

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Last week, I covered people, customer and quality issues in professional-service firm management. This week, I conlude with a discussion of innovation, technology, organization and leadership.

Innovation. As I see it, there are two, competing positions on innovation in professional-service firms:

- The professional service firm as conservative and professional to a fault in providing client service.

- The professional-service firm as an agent provocateur, a challenger of cherished beliefs.

Most professional-service providers do useful work. But all too few manage to stir the pot. Worse yet, any number fail even to try to stir it.

The Boston Consulting Group (BCG) got the drop on McKinsey & Co. in the 1970s by having a sharp point of view about successful and unsuccessful business strategy. McKinsey, by contrast, was ``thorough.''

The Boston Consulting Group regularly took important sales from McKinsey for a time - and was considered by recruits to be far more interesting. McKinsey's service fanaticism prevailed in the long haul but only after it fought back by somewhat sharpening its research skills. (Boston Consulting Group, after stumbling in the early 1980s, is emphasizing a new, vital perspective on business strategy - and I expect it to once again give McKinsey fits.)

Ogilvy & Mather of old was both ideologue and master of customer-service excellence. But now, young ad agencies arguably are more creative and interesting, amid market conditions that cry out for more creativity.

Even accountants can be provocateurs. Arthur Andersen was. But today, top software houses such as Lotus have shined in accounting innovation. Among other things, I repeatedly chide Big Eight firms for surrendering spreadsheet innovation to software nerds. Likewise, upstart Drexel Burnham, not Brown Brothers Harriman, for better or worse, created the junk-bond renaissance, igniting the most significant capital-market revolution this century.

There is a trade-off between creative needling and emphasizing client-service excellence at all costs. It's analogous to the battle between Apple and IBM. At issue: to be mainly interesting or mainly meticulous.

Obviously, a successful outfit in any industry must be quite a bit of both. Nonetheless, many of the old, big professional-service firms have gotten as stodgy as their old, big clients.

Success may accrue for a while to those who side-step this trade-off. But irrelevance and decline await firms that over-emphasize client-service excellence at the expense of having something interesting to say.

Technology. Professional-service firms are not just advisors. In our information-intense world, they are full-scale partners in information-collection and -manipulation networks that are coming to dominate both the service and manufacturing sectors. …