The Innovation Generation

The secret to client and services expansion
by David Hofferberth and Jeanne Urich, SPI Research

0911 1

The pressure is on to perform in professional services. The industry overflows with highly competitive, “alpha males,” who continue to plan, sell, execute and collect as efficiently as possible. The problem is competition always lurks right around the corner. Leading firms dedicate departments to look for the “next big services thing”. As such, services innovation becomes a critical driver of future performance.

Is service innovation really needed?

In manufacturing, innovation is core to the development of new technologies and products. The past five years have seen innovations such as iPods, iPads and other “smart” devices, which have revolutionized how people communicate and collaborate in both business and socially.

In services, innovation is not quite as noticeable, yet it’s critical to the growth of all markets. Even in times when the economy slows, professional services (PS) executives must spend the necessary effort and capital to innovate and develop new service offerings.

Did you know?

The fastest talkers and typists can only talk or type 150 words per minute. Visual perception is 10 times faster than verbal. Every minute, 35 hours of video appear on Youtube. This amount of video equals over 176,000 full-length Hollywood releases every week.

So, what can happen in 35 hours?

  • A team can set the record for the longest soccer match in history.
  • Someone can drive non-stop from YouTube’s headquarters in San Bruno, CA to Chicago, IL.
  • You could fly over half-way around the world in a balloon.
  • If each member of your PS team delivers and bills 35 hours a week, every week, they will bill 1,820 hours per year and produce over $365K per person.

For cloud computing and web access, the 2011 view says:

  • 90 percent of applications will be services.
  • 90 percent of servers will be in the cloud.
  • 90 percent of accesses will be from mobile devices.
  • 2 billion people will be on the web in 2011.
  • One in every three people in the world will have Internet access.

What all of this means is that the world is moving faster and we have become an information-obsessed society. Information is flowing faster and faster with less and less control over who produces it, sees it or uses it.

If your products and services are being developed at the speed of speech, your organization is falling behind. Winners are learning how to harness the power of the internet, the cloud and social networks to drive innovation.

Where does innovation come from?

Ideas come from employees, partners and customers. What matters is the process of translating ideas into insanely great new services and products. Bringing ideas to reality requires discovery, design and delivery. Most service organizations don’t spend enough on discovery and spend too much on design and delivery.

What is the secret for growth?

SPI Research’s 2011 Professional Services Maturity™ Benchmark showed the fastest growing firms did so by expanding. They added new clients and new services. SPI segmented the benchmark of 214 service organizations surveyed into two groups: 1) those with year over year revenue growth, versus 2) those with shrinking or flat year over year revenue.

The analysis shows that growing firms derived more revenue from new clients (38 percent of total revenue) and new services (40 percent of total revenue) than the organizations that weren’t growing. The no-growth organizations — on average — derived 31 percent of their revenue from new clients and only 28 percent of their revenue from new services.

A key takeaway is that both growing firms and not growing firms develop new clients and new services, but growing firms have a much higher percentage of new services and new clients. Obviously, new services open the market to a broader base of potential clients, and lead to market expansion. Adding new service lines each year allows firms to gain a larger share of wallet from existing clients as well.

How does your organization innovate?

Services innovation comes in many forms. Sometimes new services begin on the proverbial napkin, sometimes ideas begin in the shower, and sometimes harvesting and incubating new service ideas is part of an organization’s DNA.

It is important to discover reliable sources of ideas (clients, partners and employees) and quickly develop the most promising ones to the point of testing. If they make it through the test phase, they then must be refined into a repeatable service that solves a pervasive business problem and is profitable.

Sometimes innovation occurs in existing offerings, as clients continue to demand enhanced services that deliver value faster, cheaper and with higher quality. Other times, the service is considered breakthrough because it offers new insights or is packaged in a novel way that makes it easier to buy, sell and consume. With either service extensions or new services, a key ingredient is getting the word out so the client base can expand rapidly as organizations seek the benefits of the new service.

Regardless of how the new service came to be, SPI Research sees that many PS organizations share common characteristics for new service innovation and introduction, and take the following steps.

Develop a consistent innovation methodology

Services innovation is so critical to the market that many PS organizations have developed methodologies to bring new services to market efficiently and effectively. Many of these methodologies came from the manufacturing sector, where innovation and new product development has become more science than the art it is in professional services. The point is to create a process where firms can measure, monitor and evaluate new innovation on a regular basis, to harvest, package and promote the best ideas.

Develop a collaborative framework

A consistent methodology for services development makes up half of the game. The best ideas are always augmented when smart people collaboratively build on them. Very few individuals can think it all out in advance. The key to rapid and successful service development is collaboration and knowledge sharing for improvement and expansion.

Remember that tools don’t hurt

Replacing the days of “innovation by napkin” are web-based knowledge sharing, virtual white-boarding and chattering. People generate great ideas during thinking time, a time free of urgent task lists. But today’s innovators must quickly translate interesting concepts into practical applications so they can gain interest and momentum.

PS executives demand detailed service development plans with supporting information in the form of financials, schedules and visuals. For this reason, Microsoft Office coupled with SharePoint Server has emerged as a leading innovation platform combined with individual productivity tools such as Word, Excel, PowerPoint, Project and Visio.

But many other tools also help PS organizations create an infrastructure for more efficient innovation. Their importance lies in their ability to assimilate information in a way that fosters collaboration, ease of access and knowledge sharing.

Innovation in PS organizations

In the knowledge-based business of professional services, every employee has a responsibility to drive innovation. This exercise requires a great amount of brainstorming and collaboration, on both a local and global basis. This must be done to harvest and develop new ideas to drive a broader service portfolio and support a larger, global client base.

Innovation takes teamwork, which extends beyond the PS organization’s employees. Innovation comes from translating both the stated and unspoken voice of the customer into unique new business models and service offers.

It is important for the PS organization to institutionalize its innovative processes with an understanding that innovation does not always fit perfectly inside today’s frameworks. However, at a certain point, new innovations will only come to market when decision-makers have the tools and information necessary to evaluate these new services, and determine their relative value compared to other innovations in the service portfolio.