Alastair is president at Huddle.
The professional service industry — any third-party consultancy or support service that helps businesses operate better — is massive. In the United States the professional service industry is comprised of almost 20 million people, which is roughly 13 percent of the total American workforce. Those 13 percent are in grave danger, finding themselves jobless in as little as 10 years.
The latest job reports from the Bureau of Labor Statistics show that the American services industry is currently thriving, but starting to come under extreme threat. Burgeoning new markets overseas, which used to support industrial economies, are transitioning into service-based economies. That flood of new (oftentimes extremely inexpensive) labor means incredible new competition for almost every aspect of the service industry, including professionals like lawyers and paralegals, accountants, and business consultants.
At the same time, businesses and pro service professionals around the world face an even greater common threat: replacement. The rise of Artificial Intelligence (AI) and automation mean that professional service businesses don’t only have to worry about human competitors; they have to worry about machines as well. Today, algorithms help people solve their business problems. Software like QuickBooks and Xero attract customers who third-party accountants used to own exclusively, without anyone (or rather, anything) to contest them. And there is a program in the works that can instantly analyze the legitimacy of a legal claim. You can already see the impact of automation at work in other industries like administration and executive assistance, for example, x.ai’s says that its product — a robotic assistant called Amy — can fully replace a real human aid.
The professional services sector will face an onslaught of new competition, and when it does, service-based businesses need to be able to set themselves apart and prove their value – or die trying.
The calm before the storm
To get an idea of how quickly the professional service businesses can shift from complacency into chaos, look no further than the disintegrating world of European tax audit firms. In 2014, in the wake of a series of public fraud claims, the European Union instituted a mandatory audit firm rotation rule, which mandated that all European companies switch to a different firm every ten years. Instead of doubling down to compete on the quality of their products and services, audit firms have responded by lowering their fees. This has created an environment where competition is based on price, not quality of work. The results have been ugly, and it is only a matter of time before new competition from overseas and technology swoops in that can win on price, maybe even quality.
That experience of sudden, constant competition isn’t something that will stay limited to auditors. As technology advances and the world shifts, every professional services business will be put under the microscope by its clients and forced to distinguish itself. Unfortunately, the fields where differentiation is most critical can also be the ones that are hardest to showcase. Often there aren’t metrics to point to, and firms can’t compete with algorithms in terms on price.
To be truly successful in the new marketplace, businesses need to find new ways to set their services apart to save themselves.
Keeping the services industry relevant with new rules
One of the biggest value-adds that any professional service can offer is its knowledge—industry expertise, experience and understanding of your clients themselves are hugely important, and aren’t something that other players can easily replicate. That said, knowledge at firms can easily become siloed if resources are limited. Even the smallest companies these days often need to operate globally, so having access to knowledge from all over the world is also a massive asset, lending firms provide extremely valuable insight that competitive alternatives might lack. One way to diversify knowledge is to alter corporate structure; for example, Grant Thorton UK moved to a shared enterprise format to give voice to all of its employees. Firms should also take a closer look at software to engage and interact with remote teams and leverage their expertise as well, without relying on workflow-slowing email back-and-forth.
Another way professional services firms can distinguish themselves is to highlight their creativity. Creative contributions can’t be outsourced, automated or devalued. A company’s creativity will always be a powerful leveraging point with clients. Finding the creative areas where a firm’s creativity flourishes and how to showcase that creativity can be a huge boon. For example, this might mean hiring diversely, providing creative resources, or even acquiring a whole new company, like PricewaterhouseCoopers did last year. Creativity is one of the few assets that is completely irreplaceable, and therefore priceless.
Most importantly, service-based companies must learn to dissolve the wall between themselves and their clients. Good service experiences ultimately boil down to relationships—they’re what make or break any new client engagement. The single most important factor for developing those relationships is communication and transparency. By opening channels of communication through consistent collaboration, firms can break down the barrier between themselves and their client, becoming less of a commoditized service provider and more of a trusted partner.
Businesses today are deeply concerned with maintaining accountability (and with good reason, as illustrated by the fraud behind the European rotation). If companies can offer clients clear insight into what you’re working on, you can win their confidence and retain their business. Some companies grow closer with their clients by working on projects in conjunction. Others partner on new initiatives or share joint resources. Whatever a company can do to bring themselves closer to their client is a step closer to becoming indispensable to them.
When business is going well, it’s easy to sit back and be complacent. But truly successful organizations are constantly evolving, with an eye to how things might change in the future. Professional services are incredibly nuanced. They add indispensable value. And the more they can clearly demonstrate this, the more they’ll thrive — even in the face of a more competitive environment.