14
It’s the end of the professions as we know them (and I feel fine)
It’s the end of the professions as we know them(and I feel fine)
2
FOREWORDThe professions are facing unprecedented change.
The pace of disruption that has so dramatically impacted industries such as publishing, music, taxis and accommodation is now replicating in all professions.
While technology is playing an integral role in driving change, the reality for industries such as financial planning, accounting and the law is that the technology is only ever an enabler. The cause of the cannibalisation of the business model for incumbent firms is the complete abandonment of heritage thinking.
This means that the very things that make an incumbent, dominant market leader strong can in fact be their greatest weaknesses when facing a new solution provider who does not play by the rules.
The famous quote by Mark Twain arguably best captures the theme and explains why ‘only the paranoid will survive’ –
The best swordsman in the world does not need to fear the second best swordsman. The person for him to be afraid of is some ignorant antagonist who has never had a sword in his hand before, does not do the thing he ought to do and therefore the expert is not prepared for him, does not do what he ought to do and often the expert is then caught out and is ended on the spot.
The best swordsman in
the world does not need to fear the second best swordsman. The person for him to be afraid of is some ignorant antagonist who has never had a sword in his hand before, does not do the thing he ought to do and therefore the expert is not prepared for him, does not do what he ought to do and often the expert is then caught out and is ended on the spot.
32
The impact of what Chris Anderson famously coined ‘The Long Tail’ is across virtually every industry and the disruptive aspects of the technology ultimately evidence themselves in what Clayton Christensen describes as the ‘Innovator’s Dilemma’; which is perhaps more accurately named the ‘incumbent’s dilemma’.
The theory means that only very rarely can an incumbent firm embrace and leverage disruptive solutions. This is largely because in non-technology driven businesses, there is only so much space available. In contrast, where there is effectively unlimited space, as on the internet, there are potentially high quality goods at every juncture of the long tail.
Furthermore, given that quality is entirely subjective, what is often defined by an incumbent firm as ‘low quality’ will be seen by others in the marketplace as in fact at least ‘good enough’ – if not actually high quality.
Critically, the barriers to entry, in terms of getting a solution to market and then allowing the market to determine whether there is any value, are constantly decreasing.
Similarly, industries such as photography, media, transport and book publishing have been radically re-engineered because of the ability to self-publish electronic versions in the marketplace.
Many believe the professions are at the cusp of being similarly radically re-engineered. To pick only three examples, take some time to explore:
A. Financial planning disruptor Wealthfront (US) – see www.wealthfront.comB. Accounting game changer Xero (Australasian) – see www.xero.com.auC. Legal innovator Riverview (UK) – see www.riverviewlaw.com
Pace of change an issue for incumbent professional service providers
Generally, the four main areas where disruptors, innovators and incubators tend to focus their attention to the direct detriment of incumbents are:
A. unchallenged orthodoxies - the parts of a business model that have remained unchanged and are assumed by industry players to be non-negotiable
B. unappreciated trends - things that are happening in other unrelated industries that have not been embraced more widely
C. unleveraged competencies - a focus on what the business knows as opposed to what it does can create new value propositions
D. unarticulated needs – a focus on what Christensen refers to as asking ‘What job is to be done?’ (as opposed to ‘what products do we sell?’) For example, think about what Kodak’s journey may have been had they been in the ‘memory creation’, as opposed to ‘film sales’, business.
THE INCUMBENT’S DILEMMA
4
As Jack Welch has explained, firms are at significant and potentially irretrievable risk of failing when the rate of internal change is slower than the pace of external change. In other words, if incumbent firms are not cannibalising their own businesses, their competitors will be.
True incubators understand that plans for the future must simply be plans for learning. This means the key is to in fact plan to be wrong - and then learn how to be right as fast as possible.
A new solution must always be simple, reliable and convenient. It will always be delivered at lower margins - the profits will follow as market share is secured.
As the solution is generally only valued by the least profitable customers, a firm that chooses simply to listen to its best customers to identify new products essentially ignores all forms of disruptive innovation and, in turn, essentially ensures that it will fail the innovator’s (or incumbent’s) dilemma test.
Ultimately what this also means is that there is a very strong first mover advantage as the incumbent firms ignore the disruptive model until it is too late.
What the winners do
Winning firms understand that success ultimately depends on being:
• differentiated or unique;• of demonstrable value; and• delivered in a way that is difficult to replicate.
Sustaining innovations are generally as important as disruptive ones; the challenge is that both types require different visions, metrics and practices.
The disruptive business model requires funding, resource allocation and working environments that are significantly different from those of the traditional firm.
History doesn’t repeat; although it does rhyme
History shows the vast majority of traditional firms are unable to allocate resources away from the primary revenue source, because of their focus on short-term profitability and the need to avoid any perception that there is a ‘cannibalising’ of the core business model.
The key to a sustainable and successful business model is for a firm to be self-aware enough to know that unless they cannibalise their existing lines of revenue, competitors certainly will. Further, those competitors will have complete disregard for the ongoing profitability of the incumbent firms.
Primarily due to the embedded restraints of being a start-up, innovative firms find ways to do the things most important to creating new definitions of customer value. For example disruptive firms tend to:
• monetise ideas quickly;• minimise upfront cash expenses;• understand that a product in market is always better than a delay to launch in order to
ensure the quality is better - in other words, if you are not embarrassed by version 1 of the solution, you have launched too late. Who would ever dream of using an iPhone 1 now, even though 2007 is not that long ago?;
• recycle and reuse what they have immediate access to; and• understand that everything can look like a failure during the ‘middle part’.
54
We believe that there are a number of attributes shared by professional services providers that are acknowledged as innovators – or to coin a phrase, businesses that are ‘firms of the future - now’.
10 examples are listed below – five that are abandoned and five that are embraced.
Five things abandoned
1. Timesheets – with timesheets, all that is focused on is what is ‘chargeable’ – without timesheets, the focus is on what is valuable.
2. No leave policies – leave policies are a hangover from the industrial age – it is time to move on.
3. No individual budgets – while there will certainly be team goals, these are never broken down into individual monetary targets. Targets are aligned around performance in the eyes of customers. If a firm gets those right, everything else flows (including money).
4. No performance reviews – again, a very poor hangover from the industrial age.
5. No diversity goals – seeking to mandate minimum percentages of certain genders, cultures, religious beliefs or sexuality disguise much bigger problems with the underlying business model. While ‘leaning in’ is critical, it is diversity of thinking which is the key to success.
Five features embraced
1. Guaranteed fixed pricing – the definition of a competent service provider is someone who can devise a scope of work and provide an upfront fixed price that they are willing to refund in full if the customer is not satisfied with the performance.
2. ROWE (that is – a results only work environment) to learn more, see - https://en.wikipedia.org/wiki/ROWE.
3. Solution choreographed teams – analogous to the movie industry, disruptive firms are structured to allow them to work with whomever and on whatever terms are best to achieve the client’s objectives.
4. AAR – a concept developed by the US military, after action reviews are arguably the single most important learning tool for professional firms. To learn more, see – https://en.wikipedia.org/wiki/After-action_review.
5. Diversity of thought – when two people in business are constantly of the same opinion, one or more is irrelevant. Embracing diversity in every sense of the word ensures arbitrary, politically correct, percentages become irrelevant.
WHAT WILL THE CHANGES LOOK LIKE?
6
A key component of most disruptive solution creators is an agnostic approach to input delivery. That is, whether a component is provided by a human or technology, in sourced or outsourced, onshore or offshore is of itself irrelevant.
The critical question is what is the most effective combination of solutions to create the value proposition?
The debate in relation to offshoring (being one form of outsourcing) has raged for years, and is arguably likely to remain contentious. Two observations worth considering are:
1. If your firm is looking to offshore to wage arbitrage, you have missed the point;2. Your firm is offshoring every time you send an email.
If the View Legal platform is used as a case study example, it is clear that, like most businesses, our success essentially depends on a network of specialists. As you would expect of a law firm, we have an agreement with each service provider that receives personal client information which requires that they comply with Australian privacy legislation.
Our entire firm is virtual, however in relation to our outsourced solutions, a summary of our virtual team currently (noting it sometimes changes on a weekly basis) is as follows:
A. We have lawyers based in the Philippines, regional Queensland, India, South Africa, Sydney, Melbourne and across Southeast Queensland.
B. Our IT team has contributors in the Brisbane CBD, various locations throughout India and suburban Sydney, together with cloud supported services throughout the USA and other confidential locations.
C. Our marketing and collateral providers are sourced from various locations throughout Europe, USA, Canada, New Zealand, the Philippines and Australia.
D. One of our favourite social media consultants currently assists from suburban Brisbane, other than when she is travelling in locations such as France, Spain, Italy, Greece, the UK, France and Germany.
E. One of our research consultants currently works out of Argentina.
F. We have copy editors based in New South Wales, Victoria, Queensland, the US and the UK.
G. We have administrative and accounting support from assistants in the Philippines, New Zealand, Canada, Pakistan and Sweden.
H. Our primary word processing provider, who has been a critical part of our success, even in the years prior to View Legal launching, is based in India.
As the popularity of platforms such as Upwork (see - www.upwork.com) and Fiverr (see – www.fiverr.com) continues to grow, we suspect the only certainty for our business is in fact the same certainty for all professional firms – that is our international footprint will continue to grow.
This said, it is important to note that the growth of our international team has been matched by the growth of our Australian based team.
In our firm, all team members enjoy flexibility around their work arrangements and work remotely, with access to physical office space on a needs basis only.
OUTSOURCING
6
The number of differences between incumbent providers of professional services and the disruptive firms is probably limitless. 20 of what are arguably the most stark contrasts are summarised in the table below.
Adapted with permission of George Beaton, Beaton Capital, 2014. Significant inspiration also provided by VeraSage.
WHAT EXACTLY ARE THE DIFFERENCES?
Heritage View Firms of the now
Top single discipline legal talent Legal talent with skills in adjacent areas including process management, IT and customer service
Key metric – annual full equity partner draws Key metric – have we radically improved the ability to increase the value provided to customers
‘Own’ clients Are trusted to serve customers
Bill clients on hourly rates (or various, increasingly elaborate, permutations on the theme), cunningly branded ‘alternative fee arrangements’ or commissions and give no guarantee as to client satisfaction
Customers provided up front ‘SPS Guarantees’ – that is service and price satisfaction is guaranteed
Everything tracked on a timesheet. The longer something takes, the better.
No timesheets. Sophisticated project management tools used to help ensure customer expectations are exceeded.
Quality is defined by the firm Quality is defined by the customer
‘Impressive’ CBD office space, with ‘dominant’ fit outs The McKinsey model is embraced – that is, meet where best suits customers. No permanent CBD space retained.
Intellectual property is how we make money and should be guarded jealously
Intellectual property is how we create trust and should be shared freely
Professionals striving to deliver near-perfect technical excellence All service designed to be fit-for-purpose, aligning with collaboratively agreed customer objectives
Professionals expected to both find and produce work for clients Business development and production of work separated, leveraging technology and worldwide resources
Professionals focus on ‘is this billable’ for the firm Professionals focus on ‘is this valuable’ for the customer
Promotion of the personal brands of rainmakers Promotion of the firm brand
Use of sustaining technologies (i.e. Christensen‘s Innovator’s Dilemma) – ‘this is the only way’
Application of disruptive technologies (again Christensen) – the often used mantra is ‘there must be another, smarter, way’
‘Leveraging’ of full-time employees to do the bulk of the work serving clients
Flexible work practices that match supply with demand
Creation of a ‘tournament’ to motivate employees to strive to become equity partners
No tournament, focus on collaboration across entire team
Tight restriction of the number of equity owners All team members have access to equity returns
Structured or behave as a partnership Incorporated
Constant focus on the ‘need for diversity’ of gender Only focus on diversity of thought
Extensive management required of all professionals Team self-selected which allows self-management and a results only work environment
Revenue growth the #1 goal Exceeding customer expectations #1 goal
8
In his book, The Lawyer Bubble, Steven Harper details why the legal profession will struggle to reinvent any of the core aspects of their business model.
His arguments in this regard apply to all professional firms that charge in a manner other than upfront guaranteed fixed pricing.
While a myriad of reasons are provided, perhaps the most compelling is the argument that universities across the Western world are responsible for educating professional service firm graduates, who specialise in areas rewarded by time billing or commissions (or both) such as:
A. long hours;B. rote learning;C. technology averse; and D. conformity to tradition.
The last point is particularly confronting as it suggests that graduates will not be motivated to challenge the traditional and the known due to the legacy and formality of the professions. This means that alternate ideas, such as bespoke service offering, alternative business models, offshoring, outsourcing and automation are not encouraged to be considered and explored.
Harper argues that any change to the incumbent professional firm business model from within the profession will require that the university system starts to reward students who are able to demonstrate more innovative attributes than those outlined above.
Equally as important is that the owners of the incumbent firms must themselves create a demand for this style of graduate.
Our experience is that the starting point on this road is to abandon the time billing model and price solely on an upfront fixed basis.
Arguably, the most commonly asked question about abandoning timesheets is how can fixed-pricing adapt when there is a significant change of work required?
At View Legal, our solution is driven by the depth of specialisation we have, meaning we can provide the fixed pricing early in the process and identify quickly when a pre-agreed scope is changing.
Where there is significant uncertainty in what might be required, we compartmentalise the process and price-scoping for each step before the work is performed. In situations where a substantial change in a previously agreed scope is required, we do not perform additional work unless the client agrees in advance to adjusted pricing for this additional work.
WHAT’S NEXT – BURNING TIMESHEETS (A CONCLUSION)
Arguably, the most commonly asked question about abandoning timesheets
is how can fixed-pricing adapt when there is a significant change of work required?
98
A transition to fixed, and ultimately value-based, pricing does however have multiple layers of consideration, including:
Parkinson’s Law is a serious challenge even without timesheets. Perhaps counterintuitively key performance metrics are often still time-related. This could be maintained with a new metric considering the duration between agreeing on a scope of work and delivering that scope to the client.
Communication both internally and with clients is vital. Many law firms exist because of Murphy’s Law, i.e. everything that can go wrong will go wrong. Successful fixed pricing almost entirely depends on carefully planning and agreeing on a defined scope. If there is a legitimate change to scope that could not have been identified at the start of a project, there must be real time communication within the team and immediate engagement with the client.
Centralisation of all team learnings in a logical and easily accessible manner is a critical discipline that should become automatic. A leading value-pricing thinker, Ron Baker founder of VeraSage, suggests using AARs (mentioned earlier in this white paper), to correct a manner of thinking, especially to maintain productive work in periods of change. Broadly, an AAR is a structured review process undertaken by the people involved in a
project that allows for the analysis of what happened, why it happened, and how it could be done better.
The Goldilocks Principle helps explain why many value-pricing firms offer the customer with alternatives in the level of service that is provided. The time-billing and commission based professions remain essentially the only industries, in the Western world, that do not empower their clients to choose service levels.
The Donkey Principle explains that the best performing professionals in a time-billing model are generally of least benefit in a fixed-price model – the impact of this culturally cannot be underestimated.
There are numerous other impacts for professional firms moving away from the dominant time-billing and commission based business models. Many suggest that the most important lesson is the depth of cultural change because what timesheets do (even when fixed pricing) is create a focus solely on what is billable. Without timesheets, the focus is solely on what is valuable.
This one concept can have an impact on every part of a professional services business. Increasingly clients understand this, and are allocating expectations and their spending to purchasing understood value.
Without timesheets, the focus is solely on what is valuable.
This one concept can have an impact on every part of a professional services business. Increasingly clients understand this, and are allocating expectations and their spending to purchasing understood value.
10
Tinder is not an app that will likely feature on many handheld devices for readers of this white paper (see - https://www.gotinder.com/).
This said, Tinder’s historical ‘swipe right for yes; swipe left for no’ has become ubiquitous.
Our experience is that for all professional service firms, it is likely that ‘gamification’ will be the single biggest opportunity for reengineering the business model.
One simple case study example in this regard relates to the 7 smart phone and tablet apps developed by View (on both Apple and Android).
Each app is Tinder inspired – that is it adopts the ‘swipe right/swipe left’ approach to narrow down some of the broad areas that might be relevant in relation to a range of estate planning related topics.
Each app then generates a free white paper or template legal document. The ‘Tinder-ised’ apps by View are as follows -
1. Estate Planning;
2. Self Managed Superannuation Funds;
3. Estate Admin;
4. Business Succession;
5. Memorandum of Directions;
6. Directors Duties;
7. Binding Death Benefit Nominations.
All 7 of the apps can be downloaded at - http://viewlegal.com.au/download-our-latest-apps/
WHAT’S AFTER WHAT’S NEXT? – GAMIFICATION (A POSTSCRIPT)
1110
FURTHER LEARNINGThe thinkers and books referenced in this white paper are set out below.
1. ‘Only the Paranoid Survive’ by Andrew Grove.
2. ‘The Future of the Professions’ by Richard Susskind and Daniel Susskind.
3. ‘The Lean Start Up’ by Eric Ries.
4. ‘Lean in’ by Sheryl Sandberg.
5. ‘The Innovators Dilemma’ by Clayton Christensen.
6. ‘The Long Tail’ by Chris Anderson.
7. ‘Firm of the Future’ by Paul Dunn and Ron Baker.
8. ‘The Lawyer Bubble’ by Steven Harper.
9. ‘Parkinson’s Law’ by C Northcote Parkinson.
10. ‘Implementing Value Pricing’ by Ron Baker.
Matthew Burgess0403 209 977 • [email protected]
Matthew Burgess co-founded specialist firm View Legal in 2014, having been a lawyer and partner of one of Australia’s leading independent law firms for over 17 years.
Matthew’s passion is helping clients successfully achieve their goals.
Matthew specialises in trusts, tax, estate and succession planning, providing strategic advice to business owners and high net worth individuals, and has been recognised in the ‘Best Lawyers’ list since 2014 in relation to trusts and estates and either personally or as part of View since 2015 in ‘Doyles’ in relation to taxation.
While a significant focus of Matthew’s practice is on small to medium enterprises and private business owners, the growth in this area in recent years has meant that he also regularly works on transactions with listed companies.
In part leveraging off the skills he has developed working in the SME market space, Matthew has been the catalyst in developing a number of innovative legal products for advisers and their clients; including establishing Australia’s first virtual law firm.
Matthew presents for many industry associations, accounting firms, financial advisers and commercial businesses, often speaking to the ‘www’ theme (why the wealthy win).
Building on the lessons Matthew has taken while personally advising a significant percentage of the members of Australia’s unofficial ‘Rich List’ for the last decade, Matthew wrote the business book ‘The Dream Enabler’. The principles explained in this book were applied in founding View.
In early 2006 he gave away the family television (effectively replicating for his children the TV free upbringing he had). In his new found spare time, Matthew started publishing a collection of illustrated children’s stories. These books are in addition to his published law related books, including ‘Inside Stories’ – the consolidated book of legal blog posts since 2010.
1300 843 900 • [email protected] • viewlegal.com.au
Book order form View Legal books
The View team has invested over a number of years to develop a significant amount of adviser centric content.
A core focus in this regard has been the publication of books.
Inspired by one of our heroes, Dr Seuss, all books have covers colour-coded to help identify the genre.
In particular:
Orange covers are ‘reference guides’. These books provide practically focused content, often sourced from material originally created to improve the skill set of View team members.
Black covers are ‘workbooks’. These books again provide practically focused content, however, are designed to be actively ‘consumed’ by readers; invariably, there is space deliberately set aside for note taking by the reader.
White books are ‘technical’. These publications are focused solely on providing deep technical content. In all cases, while there will be practical examples, there is a deliberate emphasis on legislative provisions and important court decisions. In most instances, the content will be equivalent to publication standard for organisations such as the Tax Institute of Australia, Thomson Reuters Weekly Tax Bulletin and LexisNexis.
Please tick book/s you wish to order
☐
Estate Planning War Stories – Reference Guide
$29.95 including postage (also available as an ebook)
☐
Inside Stories – collection of blog posts (Reference Guide)
$60.00 including postage (also available as an ebook)
☐
Laws for Life – Reference Guide
(ebook only publication)
Free ☐
The Dream Enabler – Reference Guide
$30.00 including postage (also available as an ebook)
☐
Adviser Tools Reference Guide
(ebook only publication)
Free ☐
Inside Stories 2018 (ebook only publication)
$9.95
☐
40 Forms of Trusts – Workbook
$29.95 including postage (also available as an ebook)
☐
The Dream Enabler – Workbook
$30.00 including postage (also available as an ebook)
☐
Probate and Estate Administration Workbook
$29.95 including postage (also available as an ebook)
☐
The Science of Sales -Workbook
$29.95 including postage (also available as an ebook)
☐
Post Death Testamentary Trusts
$29. 95 including postage (also available as an ebook)
☐
The Dream Enabler
$60.00 including postage (also available as an ebook)
1300 843 900 • [email protected] • viewlegal.com.au
Book order form View Legal books
Customer details
Name
Postal address
Payment to be made by - Direct Credit to National Australia Bank Account
BSB: 084004 Account No: 84-589-9839
Please quote ‘Book order – [insert name]’ in the subject line.
Credit Card (*Please note we do not accept American Express. Please send details to [email protected]):
Name on card
Card number
Expiry date CCV
Card Type* ☐ VISA ☐ MasterCard
Total amount to charge $
View Legal Pty Ltd ABN 39 168 702 707 This receipt is treated as a Tax Invoice, GST included.
Please retain a copy for your tax records
☐
The Seven Foundations of Business Succession
$60.00 including postage (also available as an ebook)
☐
The Six Foundations of Taxation of Trusts
$135.00 including postage (also available as an ebook)
☐
The Seven Key Aspects of Testamentary Trusts
$60.00 including postage (also available as an ebook)
☐
The Nine Foundations of Asset Protection (also available as an ebook)
$60.00
☐
The Five Foundations of SMSFs
$60.00 including postage (also available as an ebook) ☐
The Nine Steps to a Complete Estate Plan
$60.00 including postage (also available as an ebook)
☐
Five Essential Estate Planning Articles (ebook only publication)
$60.00 ☐
101 Tips for Staying Young and Foolish
Hardcover $50.00 including postage
Paper back $35.00 including postage (also available as an ebook)
☐
Bad Dad (and other Musing)
Hardcover $50.00 including postage
Paper back $35.00 including postage (also available as an ebook)
☐
Laws for Life
Hardcover $50.00 including postage
Paper back $35.00 including postage (also available as an ebook)
☐
101 Lawyer Jokes
$20.00 including postage (also available as an ebook) ☐
101 Accountant Jokes
$20.00 including postage (also available as an ebook)
