One of the questions I have been pondering for awhile is the future direction of professional services--doctors, lawyers, Indian chiefs, accountants, consultants, PR etc. Part of my interest in the subject is, of course, due to the fact that I earn much of my living providing strategy and financial services.
The trends I see which concern me are the following:
- So much information is now easily available on the web that potential clients have access to high quality free services, templates and sample documents
- So much of professional services can be outsourced using technology to lower labor cost countries, such as tax return preparation, reading diagnostic images, preparing standard legal documents,etc.
- IT technology is developing so quickly that in five years an entire audit or SEC filing could be automated through APIs such that the professional may only be required for signing
Effectively technology is reducing or replacing the value added in professional services. Professional judgment has been automated away in many services for all but the most complex tasks. So what is the professional service provider to do?
- Do not rely on state and federal licensing requirements to protect your market. If the client is not inclined to sue for malpractice if there is a problem, then why cannot an attorney in India prepare all the documents for a property acquisition.
- Realize that competition for the complex transactions that cannot be automated (M&A, IRS audits, etc.) will increase and probably drive down pricing; also note that the definition of complex is changing as people routinely go to Caracas or Bombay for plastic surgery and organ transplants.
- Expect clients to have fully researched an issue before they consult you because high quality information is so plentiful on the web; the requirement for depth of expertise is going to increase significantly.
- Realize that the "market" has changed to be basically the world; inquiries from Russia or India and even Africa are no longer just crackpots or con men; every year now I see 2-3 good looking financings that come in through this blog and if I had expertise in Russian or Indian capital markets I would have considered them seriously.
None of the four comments above answer the all important question of how to establish a sustainable competitive advantage in these new market conditions. What I would do if I was McKinsey or Deloitte & Touche or any other professional services firm is the following:
- Integrate lower cost people and technology as a standard part of all services and constantly be working to add services that can be done through this lower cost infrastructure; essentially professional services needs to follow Porter's low cost strategy
- Be investing in the development of the technology that replaces or enhances your services, e.g. Deloitte should be building the software to totally automate an audit with the target of no human involvement and possibly develop a bigger business in software than auditing. Hedge fund use of sophisticated computer trading models might be another example.
- Focus the business on the most complex problems, e.g. building a data network for a business' locations throughout Latin America or due diligence for a multi-country acquisition or ransoming kidnap victims. The growth of litigation support for audit firms would be an example. The more complex the problem the less likely it is to be replaced by low cost workers or technology.