When It’s Time to Reinvent the Firm

by | Growth Strategy

At some point, the capability, service or consulting model that built your brand becomes commoditized, trite or simply out of fashion in the business world. You have stopped growing and redesigning your logo isn’t going to fix it. 

  • It happened to actuaries at the HR consulting firms when defined benefit plans were replaced by 401Ks.
  • It happened at accounting firms as regulated audit services became undistinguishable among Big 8, Big 5, and Big 4 firms.
  • It’s happening to research firms that are dependent on focus groups and are being superseded by social listening.
  • It’s happening to project management firms and lean six-sigma firms as companies hire in-house experts.
  • It is happening to lawyers who are holding on to billable hours.
  • It’s happening to VARs who rely on the sale of networks, desktop phones and other technologies since replaced by the cloud and BYOD.

McKinsey, Andersen, Hewitt and hundreds of other firms were not immune. Neither is yours. It is not a matter of if; it is a matter of when. The professional services industry is not unique in this regard. All businesses reach this place.

What distinguishes them is how professional services firms see, interpret and transcend what is happening.

First, partners see the end of an era.

They bemoan the golden days of “just picking up the phone when it rings” to get business. There are tales of lore about how in demand the firm and its partners were. This success brought prestige and power—both strong human emotional needs. They would not admit it, but many partners fear their shrinking relevance within the firm—not to mention their shrinking incomes and threatened lifestyles. It’s important to recognize the difference between dead and dying.

Actuaries at the HR firms knew that 401Ks would be the death knell for defined-benefit plans. Business clients wanted to offload the risk and costs of retirement benefits, employees wanted more control and portability. The market was clear and the actuaries saw the end coming. But, many knew that it would take years to wind down the industry. The smart firms began segmenting markets by geography, employee populations, firm cultures, industry regulations and other distinct segments to “milk” the decline. This allowed them to differentiate and gave them time to reinvent.

Second, partners interpret what is happening and its cause differently.

Accept that there will be deniers and naysayers. Like the climate change debate, there are two sides to the story with strong emotions and “facts” on both sides. A growing body of research demonstrates that when people’s convictions are firm, attempts to correct those views, with evidence, can make them firmer still.

It is important to recognize that people need time to transition through change. The death of an era is like the death of a family member, so people need to work through the stages of grief. My time as a consultant and, more importantly, as a Stephen Minister, has taught me that you cannot rush a person through the process. Each person goes through the experience at his/her own pace, oftentimes taking one step forward and two steps backward. What you can do is listen to them and give them time to process. If they cannot reach acceptance, you must move them out of the firm or risk their cancerous attitude affecting the broader health of the firm.

Finally, to transcend the change, the leadership team must come together, accept the situation for what it is and make some hard choices. The team must answer, “Where can our current capabilities address a client need that offers value to them and to us?”

Accounting firms moved into accounting technology and then broader consulting once they made the brand relevant in the space. The defined-benefit firms realigned around the new retirement models and moved into broader risk management. Lean Six Sigma firms have started moving into staffing and technology solutions.

As you assess new directions, there are four questions that need to be answered and aligned before you set sail.

  1. Do you have clarity on the growth opportunity (market, ideal client, solution, ROI potential)? The leadership must reach consensus and test the opportunity for viability.
  1. What is your plan to retrain, develop or purchase the core capabilities to attack the opportunity? Firms often think that making a brochure or hanging out a “shingle” is all it takes to enter a new market. Just because you want to sell to C-level executives, build a technology or become an outsourcing firm doesn’t mean that you have staff capable of doing so.
  1. Where does your brand stand in the mind of your new ideal client? If it is not relevant, what level of investment is it going to take to move it to the appropriate place? If you do not have “permission” to play in a market, you have to spend the resources to build it.
  1. What is it going to take to align your culture and your new direction? Cultures, like individuals, don’t change personalities much. They improve and can add a few new behaviors, but the proverbial tiger does not change its stripes. The only way to really change a culture is to kill all the leaders, layoff all the employees and start over. A little dramatic, don’t you agree? What is reasonable for your firm and its leaders?

Take away

A big change is coming to your firm.

No firm is immune from obsolescence and commodification. Denying the inevitable disruption of your business is an ostrich’s head in the sand. Firms reach the point of no return when partners do not see the change, refuse to change once they see the problem or cannot make strategic choices to move the firm toward new opportunities.

Life and work are so much better when we accept the laws of nature. When you reach that point in your firm’s life, open yourself up to opportunity.

Be prudent.


About the Author

Jeff McKay
Founder & CEO
Prudent Pedal

As a strategist and fractional CMO, Jeff helps firms set smart growth strategies in motion. He was the SVP of Marketing at Genworth Financial, the Global Marketing Leader at Hewitt Associates, and held senior roles at Towers Perrin and Andersen. Learn more.

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