Data, process, and culture will unlock innovation for disruptors

I recently attended the excellent Tech & Innovation Professional Services leaders summit. There was so much excellent discussion across the two days, and I really enjoyed chairing a session around embedding the product management mindset into professional services firms. It was also great to be there for the launch of the new exciting Alternative Insights free community site, which I am excited to be involved with. A set of clear themes emerged from the two days, and one of them was absolutely the shift that is happening towards productisation, driven by data. I have written previously about the trend towards productisation and the centrality of data but really saw the combination of those through many of the panel sessions. On a related point, there is also a new book coming out on building the data-driven law firm, which I was delighted to contribute to.

For those that couldn't be there I wanted to draw out some of the themes in this brief article and perhaps make some additional linkages. As the excellent chair of the first day Libby Jackson said at the outset,

"There is an increasing focus on digitisation which has increased over the last year and firms are thinking more about products and productisation, and the people and skills that are needed to achieve this."

The first panel session where delegates heard from people such as Harry Gaskell of EY, Andrew Mcmanus of Eversheds, Kerry Westland of Addleshaws and Nick Wright of CBRE was really thought-provoking and demonstrated a range of perspectives across different professional services firms. It also however demonstrated the strong commonality around the strength of data being the unifying factor which is starting to drive transformation. Perhaps the most thought-provoking comment was that EY are considering offering free corporate tax returns in return for client data use. Having invested heavily in tax technology over the years they have driven real process efficiency to the point that they see the day that the cost of producing corporate tax returns will be negligible.

Do you wait for commoditisation to happen or do you run towards it and change the value model before others can?

Productising in this way is so smart as it would allow EY to unlock new value through data which others who have not invested in the productisation stage will arguably not be able to access. This could really change the market and leave some struggling to catch up.

The other key theme emerging was the need for a clear innovation process, driven by the goals of the organisation. Harry talked about the need for type 1 and type 2 innovation, and the EY progression from experimenting to a more systematised model. Andrew talked about the use of idea generation platforms and how to work effectively with an IT function where the contrast between innovation models and control models can cause friction. Kerry talked about the use of technology to drive innovation and the lego approach to building it out, from storage to knowledge, collaboration, workflow, automation, to analytics and on to AI. Finally Nick talked about the people dimension and the "muddled middle" creating the challenge, those between the inspiring leadership at the top and the next gen tech-focused generation at the bottom.

The innovation process and the challenges that come with it was a constant theme throughout other sessions such as one with managing partners (mix of Big Four, law and consultants) and then the following day with a panel around the theme of whether to incubate, accelerate, collaborate or acquire. Perhaps the most interesting comment was by Greg Smith, partner of Arthur D Little, saying that their managing partner had announced at a recent conference that he fully expected half of the innovation initiatives to fail. This embracing of failure, essential to really push innovation, feels rare in professional services and so stood out for many as pioneering. Greg also talked about the challenge as not being one of generating ideas but rather how you distill them through a proper framework. There was also some great discussion around putting yourself into the mindset of a VC when you approach ideas and being relentless on focusing on the market opportunity, the competition and the profitability. The other interesting discussion, as part of thinking more strategically, was around how and when you should be building offerings yourself, with Greg commenting that,

"Buy for competitive parity, build for competitive advantage."

Related to this point around innovation processes, innovation benchmark findings that came out from Spiranti after the event showed that over 50% of firms are being held back by having no innovation process currently (clearly not those that presented!). For an article I have written on the findings from the benchmarking of 70 firms see here. If you are interested in how your firm sits against the benchmark there is also a bespoke innovation lab event available.

In addition to themes around data and innovation process, the other clear theme that emerged was the importance of culture and within this the war for talent. Perhaps some of the most interesting discussion was where senior leaders debated on the challenges of how to reward genuine innovation that moves the needle for an organisation, where a bonus is not enough and organisational structure means that you can't exactly award shares. It's interesting that some firms are still stuck at the ideas box stage when giving out some M&S vouchers is about as good as it gets. Perhaps that sums up the huge spectrum of firms' innovation positioning given that even these "ideas box" firms are more advanced than many.

What was genuinely interesting though was hearing from the next generation of innovators, the trainees and associates across the different firms. It was here that I saw the genuine challenge to the partnership structure in how to retain talent to drive innovation. This generation that has so much to offer, the so-called "digital natives", pretty much all said that partnership wasn't necessarily something they aspired to. For me, this was the big takeaway; that this generation, that will drive so much of the innovation, has a different value set and will perhaps cause more positive disruption for professional services operating models than any particular technology.

Finally, the theme of disruption was for me perhaps the most thought-provoking in terms of where we are heading. Derek Southall gave a great presentation on LegalTech and the trends and what resonated with me was the comment that much of what is now emerging from startups is due to law firms not moving towards productisation fast enough. There were also a couple of excellent presentations from Richard Punt and John Croft helped to frame the macro challenges. Between them they talked about some of the trends in law and both touched on the changes in consumption patterns and use of technology driving more productised solutions. Richard talked about the big disruption being the unlocking of new value through talent, capital and technology. As John said with reference to following where the investment has been going as an indicator of future disruption,

"Last year investment in legaltech went up 700% but we are not yet feeling it."

Perhaps what was interesting was that discussion of technology didn't emerge as a separate theme in my view but rather, correctly, as an enabler of the broader themes. Perhaps this signals the start of a shift that has been needed for some time where we are not led by the discussion on technology, but rather by the client challenges and the processes and culture needed to meet these challenges. However, the comment that stood out most across the whole conference for me was from Andy Baldwin, saying that EY are investing $1.8B in technology. It does make you wonder how smaller players will possibly compete with that scale of investment. Finally, a closing comment that stuck with me was that of Justin Anderson, who chaired the second day and closed by referencing the famous quote,

"Software is eating the world."