Many industries, from banking and insurance to retail, are undergoing a fundamental redefinition. In part because digital technologies are making it possible for new entrants to disrupt established markets. When this disruption is followed by changes in regulations, many incumbents find themselves having to redefine their business. You need to ask yourself: If these changes are impacting your clients, how will they impact your future business?
The market that was…
When I ask professionals how they stand out for their customers, most of their answers sound awfully similar. Do the following ring a bell?
- We have in-depth knowledge of the field and know our customers.
- We have the right strategy and the ability to execute it.
If these statements apply to your firm, fantastic! But they won’t help you compete any longer. Your clients are demanding more.
Take consulting, for example. Financial pressures have led clients to abandon the easy assumption that price is a proxy for quality. In the meantime, the scope of firms they can choose from has expanded, from super-specialist boutique firms to freelance consultants who offer their services at a fraction of the cost.
Even McKinsey is therefore pursuing innovation with impressive speed and vigor, as the market for traditional strategy-oriented consulting has steadily shrunk and is now down to a third of what it was 30 years ago.
What will your future hold?
Serving the disrupters
Instead of focusing just on your current clients, you could start to target the newcomers. But remember, you probably won’t be able to serve their needs using your current business model. These newcomers come with challenges you may not be used to in addition to financial constraints.
The only way to find out what they need and want, and how much they can afford, is by asking. A customer discovery process will help you understand what capabilities, assets and knowledge they find valuable.
Serving the incumbents
In the meantime, you don’t want to neglect your current clients. Think about how you can serve them better. When was the last time you asked them the same questions?
By the way, listening to clients is not easy—especially if they point to the weaknesses in what you are doing. It takes strength and courage not to answer, “Yes, but …”
Creating a new business model
After these customer interviews, you will have a better understanding of their needs and wants. But not a new business model or service. You will find that customer interviews often leave us with more questions than answers.
So what do you do, when their input generates more questions than answers?
Do what you can to get the answers!
But what happens when during these interviews you see an opportunity for a new service or business model? What do you do with such a new opportunity? You need time and effort, as well as diligence and a structured approach to follow these steps:
1. Draft a new service or business model and estimate how much your clients would be willing to pay.
How much value would you deliver and are your clients willing and able to pay your price? What are their alteranatives?
2. Define the possible return on investment of the opportunity.
If you can serve clients in this novel way, will you still be profitable?
3. Identify all the assumptions you’ve made in steps 1 and 2.
It helps to talk this step through with a colleague, as you will have probably made many more assumptions than you think.
4. Design experiments to test the most uncertain of these assumptions.
Of all these assumptions, which ones would be most damaging if untrue? What can you do to test them? Sometimes an experiment can be as simple as a series of interviews or a mini-survey.
5. Get approval for testing the most important assumption.
When interacting with clients (or patients), make certain that you aren’t violating a colleague’s trust or crossing ethical boundaries.
6. Execute the necessary experiment(s).
Be as precise as a scientist when it comes to executing experiments. Be aware of your biases when observing and don’t ignore serendipity.
7. Analyze results.
Decisions should be made on data, not hunches, guesses or gut feelings.
8. Decide whether to continue, stop or pivot.
Many ideas turn out to be not so good after all. The sooner you can dismiss bad and mediocre ideas, the more time you will have to find that one big breakthrough.
9. Repeat steps 4 to 8 until you are ready to implement your new service or business model.
If you go through this process you will soon understand why Edison once said, “Genius is one percent inspiration and ninety-nine percent perspiration.” Creating ideas and a new business development plan on canvas is fun and inspiring. Implementing them is another thing again. The plan or canvas is only the beginning when painting the future. Most of the hard work still needs to be done.
Organizing4Innovation is proud to offer the first innovation management approach that is dedicated exclusively to professional services organizations. For more see www.organizing4innovation.com