Firm of the Future      Media and Analysts                                        Ed KlessSenior Director, Partner Develop...
What is a Business Model? How your firm createsvalue for customers, and how you monetize that          value.
“Disruptive threats comeinherently not    from new   technologybut from new     Andy Grove, Founder,    business          ...
Peter Drucker “The customer never buys a   product. By definition thecustomer buys the satisfaction  of a want. He buys va...
Experience CurveUndifferentiated Differentiated                                                                           ...
Professional Service Firm
Four Assertions  1) Growth without profit is perilous  2) Nonrival assets have more leverage than     rival assets  3) Eff...
Four Defenses of Timesheets1) Pricing2) Productivity3) Cost accounting4) Project management
Professional Knowledge Firm              Professional Knowledge Firm               Capital                            Pric...
Two Business Models              Professional Knowledge Firm               Capital                            Pricing onPr...
From Revenue   to Profit
The Market Share Myth     Richard Miniter
$40,000$35,000$30,000$25,000$20,000$15,000 $10,000                  Value  $5,000      Price      $0   Cost
Baker’s LawBad customers drive out    good customers
From Capacity  to Capital
Four Forms of Capital• Financial• Intellectual• Structural• Social
Rival Asset     Non-Rival Asset
How Knowledge Workers are Unique• They own the means of production• Firms need them more than they need firms—  balance ha...
From Efficiencyto Effectiveness
The Antithesis of Efficiency•   Continuing education•   Knowledge management/CKO•   Total Quality Service (Ritz-Carlton)• ...
What you canmeasure you can   manage.  The McKinsey Maxim
“The only way to look into the  future is use theories sinceconclusive data is only available        about the past.”     ...
The Big Three• HSDs• Turn around time• Value Gap
Value Gap
From Cost-plus to Value-led
Warren Buffet“The single most important decision in evaluating  a business is pricing power. If you’ve got thepower to rai...
The 5 Cs of Value • Comprehend the key value drivers for   customers • Create value for customers • Communicate the value ...
A 1% increase change in, yields12.0%                                              11.0%10.0%8.0%                          ...
The Smile Curve
Ed’s IT Smile Curve
A Tale of Two Theories      The Labor Theory of Value      The Subjective Theory of Value
Salaries + Overhead + DNI        Expected Hours       = Hourly RatePrecise, but precisely wrong
Cost-led PricingService    Cost   Price   Value     CustomerCustomer    Value    Price   Cost    Service             Value...
Eight Steps to Pricing on Purpose ①   Conversation with customer ②   Pricing the customer, not the services ③   Developing...
Five Ts to Offering Options  1)   Terms  2)   Technology  3)   Timing  4)   Talent  5)   Training
Baron Joseph    von Neinbach’s Model     WA HF PFCBA
Behavioral Economics
CharlesRevson, Founder, Revlon“When it leaves thefactory, it’s lipstick. Butwhen it crosses the counterin the department s...
Firm of the Future - Media Edition
Firm of the Future - Media Edition
Firm of the Future - Media Edition
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Firm of the Future - Media Edition

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I believe a professionals will be more successful and create more value for their customers if they begin to view themselves as professional knowledge firms rather then professional service firms.

This presentation for media and industry analysts is an adapted version of the Firm of the Future Symposium that I deliver with the VeraSage Institute's founder, Ron Baker.

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  • *Because of the psychology of anchoring, the more you ask for the more you get.*This has been demonstrated in almost 50 years of experiments by behavioral psychologist, many of which are featured in the new book, Priceless.
  • Firm of the Future - Media Edition

    1. 1. Firm of the Future Media and Analysts Ed KlessSenior Director, Partner Development and Strategy ed.kless@sage.com @edkless
    2. 2. What is a Business Model? How your firm createsvalue for customers, and how you monetize that value.
    3. 3. “Disruptive threats comeinherently not from new technologybut from new Andy Grove, Founder, business Intel models.”
    4. 4. Peter Drucker “The customer never buys a product. By definition thecustomer buys the satisfaction of a want. He buys value.”
    5. 5. Experience CurveUndifferentiated Differentiated Provide knowledge Perform Services Make products Extract Commodities Market Pricing Premium
    6. 6. Professional Service Firm
    7. 7. Four Assertions 1) Growth without profit is perilous 2) Nonrival assets have more leverage than rival assets 3) Effectiveness is always and everywhere more important than efficiency 4) Value-led pricing is superior to cost-plus pricing for capturing value
    8. 8. Four Defenses of Timesheets1) Pricing2) Productivity3) Cost accounting4) Project management
    9. 9. Professional Knowledge Firm Professional Knowledge Firm Capital Pricing onProfit = X Effectiveness X management Purpose
    10. 10. Two Business Models Professional Knowledge Firm Capital Pricing onProfit = X Effectiveness X management Purpose ↑ ↑ ↑ ↑
    11. 11. From Revenue to Profit
    12. 12. The Market Share Myth Richard Miniter
    13. 13. $40,000$35,000$30,000$25,000$20,000$15,000 $10,000 Value $5,000 Price $0 Cost
    14. 14. Baker’s LawBad customers drive out good customers
    15. 15. From Capacity to Capital
    16. 16. Four Forms of Capital• Financial• Intellectual• Structural• Social
    17. 17. Rival Asset Non-Rival Asset
    18. 18. How Knowledge Workers are Unique• They own the means of production• Firms need them more than they need firms— balance has shifted• Office is their servant, not their master• Effectiveness is far more important than efficiency• Judgments are more important than measurements• Ultimately, they are volunteers
    19. 19. From Efficiencyto Effectiveness
    20. 20. The Antithesis of Efficiency• Continuing education• Knowledge management/CKO• Total Quality Service (Ritz-Carlton)• Mentoring and coaching• Networking• Business development• Social media• Pricing on purpose
    21. 21. What you canmeasure you can manage. The McKinsey Maxim
    22. 22. “The only way to look into the future is use theories sinceconclusive data is only available about the past.” Clayton Christensen
    23. 23. The Big Three• HSDs• Turn around time• Value Gap
    24. 24. Value Gap
    25. 25. From Cost-plus to Value-led
    26. 26. Warren Buffet“The single most important decision in evaluating a business is pricing power. If you’ve got thepower to raise prices without losing business to acompetitor, you’ve got a very good business. And if you have to have a prayer session beforeraising the price by 10 percent, then you’ve got a terrible business.”
    27. 27. The 5 Cs of Value • Comprehend the key value drivers for customers • Create value for customers • Communicate the value that you create • Convince customers that they must pay for value • Capture value with effective price strategies
    28. 28. A 1% increase change in, yields12.0% 11.0%10.0%8.0% 7.3% 7.1%6.0% 4.6% 3.7%4.0% 2.7% 2.5% 1.5%2.0%0.0% - Fixed Costs + Revenue - Variable + Price costs McKinsey AT Kearny
    29. 29. The Smile Curve
    30. 30. Ed’s IT Smile Curve
    31. 31. A Tale of Two Theories The Labor Theory of Value The Subjective Theory of Value
    32. 32. Salaries + Overhead + DNI Expected Hours = Hourly RatePrecise, but precisely wrong
    33. 33. Cost-led PricingService Cost Price Value CustomerCustomer Value Price Cost Service Value-led Pricing
    34. 34. Eight Steps to Pricing on Purpose ① Conversation with customer ② Pricing the customer, not the services ③ Developing and pricing options ④ Present options to customer ⑤ Option selected codified into an FPA ⑥ Proper project management ⑦ Utilize change requests ⑧ Perform after action reviews (AAR)
    35. 35. Five Ts to Offering Options 1) Terms 2) Technology 3) Timing 4) Talent 5) Training
    36. 36. Baron Joseph von Neinbach’s Model WA HF PFCBA
    37. 37. Behavioral Economics
    38. 38. CharlesRevson, Founder, Revlon“When it leaves thefactory, it’s lipstick. Butwhen it crosses the counterin the department store, it’shope.”

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