Health CareLegalProfessional Services

Why’s it so Hard? Innovation Management in Professional Services Firms

professional innovation management


Transforming ourselves is not particularly new. To serve our clients, we have to constantly adapt, accepting, responding to and shaping rather than ignoring disruption.

This quote is from a recent Wharton (University of Pennsylvania) article on disruption and professional services innovation.

What defines a professional service?

Professional service firms (PSFs) are firms “whose primary assets are a highly educated professional workforce and whose outputs are intangible services encoded with complex knowledge” (Greenwood, Li, Prakash, and Deephouse, 2005). They are by definition knowledge-intensive, and typically have decentralized decision-making structures and low administrative intensity (Mintzberg, 1980; Van de Ven and Delbecq, 1974). Examples are consultancies, hospitals, engineering and law firms. However, these types of firms are not particularly known for their innovativeness in their trades or in society.

From this definition, you can see the rub. Professional services firms are distinctly different from their product innovation counterparts. Distinct aspects of innovation management in professional service firms make it challenging to bring innovations to life. These challenging aspects include:

  • Balancing the future (by spending resources on innovation) with today (which requires billables to survive)
  • Lack of training in innovation or management
  • Innovation must come from subject matter experts and can’t be outsources to innovation teams
  • Inertia from top management
  • Loose hierarchies

Yet innovate they must or be lost in a sea of look-alike services competing solely on price, according to Bloomberg. In healthcare, innovation takes the form of mandates as part of the Affordable Care Act, medical tourism, the rise of medical clinics in pharmacies, and tele-surgery, according to one of the leading gurus on innovation, Clayton Christensen in his new book, The Innovator’s Prescription. Legal services firms face numerous challenges.

Innovation management in professional services takes some different twists and turns due to unique factors in these firms. Let’s take a look at each factor making it hard to develop and manage innovations in professional service firms and some solutions.

Innovation Management: Balancing the future and the present

Professional service firms subject matter experts must both run the firm and deliver the services. Taking too much time away from service delivery means forgoing profit today.

Many professional services firms not only don’t promote innovation, they actively discourage it by tying compensation and other rewards to billable hours. Taking time away from serving clients to develop innovations just isn’t good for your career or pocketbook.

Besides, employees may be reluctant to spend years developing and implementing an innovation because they don’t feel any connection to the firm and often move on before the innovation process is complete. Based on interviews, some even feel they’re giving away their own intellectual property without compensation.

Solution: You get what you measure; so develop measures and set goals based on innovative behaviors. Then communicate your commitment to innovation, measures you’ll use to assess innovation, and outline rewards for employees who move the innovation process forward.

For instance, you might tie compensation to involvement in the innovation process (at least in part). You might also provide intangible rewards like recognition to leaders in the innovation process.

Innovation management: Lack of innovation training

In product innovation, firms often have specialized R&D departments, laboratories, or even “skunk works” whose main focus is innovation (at least for a finite time frame). Employees have specialized training and expertise in innovation with processes in place for innovation management.

Professional services firms muddle through with lawyers, clinicians, consultants, and accountants who lack training or processes for innovation management, such as:

Solution: Any solution requires training tied to addressing these and other concerns in the innovation process.

Innovation management: harness subject matter experts

Involving your professional service providers gives you 2 advantages in innovation management:

  1. Brings together the folks who know what’s not working and can identify solution options.
  2. Garners buy-in for the solution. Since these same folks must implement any change, gaining initial buy-in speeds implementation.

Innovation management: inertia from top management

Often, top management are partners who’ve been with the firm the longest and who are likely most entrenched in the status quo. If I had a nickel for every time a clients told me, “that’s not how we do it around here” in response to my change recommendations, I could retire.

Top management might also feel concerned by changes within the organization; changes bringing uncertainty and breaking down patterns of behavior.

Solution: Train innovation leaders on how to position innovation as a win-win for the organization and employees. Teach them how to build a compelling business case for planned changes. It becomes increasingly harder to ignore innovations that provide high ROIs (return on investment).

Innovation management: loose hierarchies

In professional service organizations loose hierarchies mean you likely have a number of “bosses” and each has little to do with your day-to-day actions. As a physician, your “boss” isn’t going to second guess your diagnoses or treatment decisions. As a consultant, your “boss” likely has less to do with your actions than your client.

Thus, imperatives to innovation from those in management positions likely have little influence over your willingness to innovate or your progress toward innovation. Unless tied to the internal reward system, you just ignore such imperatives or pursue innovation on your own without reporting to those in the management hierarchy.

Innovation management in this context is nearly impossible. But, how does an organization innovate effectively without a workable innovation management process to help manage innovation and harness resources necessary to develop innovations?


  1. Set a culture of innovation and use non-coercive power and influence to achieve the aims of innovation management.
  2. Select innovation management tools that recognize the unique context inherent in professional services firms.
  3. Align rewards with innovation initiatives and strategic goals.
  4. Recognize innovators for their achievements and share learning from their failures without assigning blame.

Want to learn more about implementing an innovation management process?

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Organizing4Innovation is proud to offer the first innovation management approach that is dedicated exclusively to the professional services. For more information see