Ashish Nanda

Das Narayandas

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">Idea in Brief</h4>
 <div class="ideainbrief-contents">
  <h5>The Challenge</h5>
  <p>Amid the pandemic and economic crisis, professional service firms are offering services and taking on clients they should never have considered, just to shore up billings.</p>
  <h5>The Problem</h5>
  <p>When a firm’s practices have a diffuse mix of clients and unclear strategic positioning, it weakens the firm’s market profile and leads to internal conflicts, particularly about the firm’s future direction.</p>
  <h5>The Solution</h5>
  <p>Practice leaders can use two tools—the <em>practice spectrum</em> and the <em>client portfolio matrix</em>—to make judicious decisions about clients and ensure that their firm has developed the right talent and capabilities to serve them.</p>
 </div>
</article-ideainbrief><p>When the going gets tough, companies often get desperate. So it should be no surprise that during the coronavirus pandemic and the concomitant economic crisis, professional service firms (PSFs) have been chasing after all kinds of business just to keep the lights on. We see this over and over: consultancies, law firms, accounting firms, and the like offering services and signing up clients they should never have considered. This approach to shoring up billings is perilous.</p>

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<p>During economic slowdowns, consulting, law, and accounting firms often start offering services and taking on clients they really shouldn&#8217;t, just to keep the lights on. This path is perilous. If a firm&#8217;s practices have a diffuse mix of clients and unclear strategic positioning, it will weaken the firm&#8217;s market profile and lead to internal conflicts, especially about the organization&#8217;s future direction.</p>
<p>This article presents two tools that professional service firms can use to manage their client mix and optimize their strategic position. The first is the <em>practice spectrum.</em> All practices fall on a continuum of sophistication that ranges from &#8220;commodity&#8221; to &#8220;rocket science.&#8221; Any position on this spectrum can be profitable, though the forces driving profits change as you move along it&#8212;as do the capabilities and skills required. Successful practices understand their true position on the spectrum and know which performance levers to pull.</p>
<p>The second tool is the <em>client portfolio matrix,</em> which separates clients into four categories on the basis of cost to serve and willingness to pay. Rather than spreading clients across all four, firms should focus their acquisition efforts and follow different relationship strategies for each type of client.</p>

What Professional Service Firms Must Do to Thrive

During economic slowdowns, consulting, law, and accounting firms often start offering services and taking on clients they really shouldn’t, just to keep the lights on. This path is perilous. If a firm’s practices have a diffuse mix of clients and unclear strategic positioning, it will weaken the firm’s market profile and lead to internal conflicts, especially about the organization’s future direction. This article presents two tools that professional service firms can use to manage their client mix and optimize their strategic position. The first is the practice spectrum. All practices fall on a continuum of sophistication that ranges from “commodity” to “rocket science.” Any position on this spectrum can be profitable, though the forces driving profits change as you move along it—as do the capabilities and skills required. Successful practices understand their true position on the spectrum and know which performance levers to pull. The second tool is the client portfolio matrix, which separates clients into four categories on the basis of cost to serve and willingness to pay. Rather than spreading clients across all four, firms should focus their acquisition efforts and follow different relationship strategies for each type of client.

What Professional Service Firms Must Do to Thrive

Summary.

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