Introduction to Firm of the Future


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This session will be dedicated to the possibility that a professional organization can be run more effectively when it becomes a knowledge firm rather than a service firm. Creating such an organization is hard work and not for everyone. It requires us to think differently than we have in the past about what it is that we do. You are hereby invited to open a dialogue on a different model for creating and capturing value in a professional firm. We will explore two business models: the firm of the past and the firm of the future. We will also begin a conversation about the four transformations that need to occur in order for firm to make the transition successfully. This session will be led by Ed Kless, Sage senior director of partner development and strategy, who will facilitate this session.

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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.
  • *Have you ever noticed how at stores like Prada, the item featured in the main window is usually carries an extravagant price. *Among pricing professionals, this is called an anchor.*The anchor is for sale, but it’s OK if no one buys it.
  • Introduction to Firm of the Future

    1. 1. P-95 Introduction to Firm of the Future Ed Kless @edkless
    2. 2. CPE Credit • In order to receive CPE credit for this session, you must be present for the entire session. – Session Code: P-95 – Recommended CPE Credit = 1.5 – Delivery Method = Group Live – Field of Study = Specialized Knowledge and Applications • Visit the Sage Summit Connect kiosks to enter CPE credit during the conference. #SageSummit
    3. 3. Firm of the Future Symposium August 20-21 in Irvine, CA
    4. 4. What is a Business Model? How your firm creates value for and captures value from customers.
    5. 5. ―Disruptive threats come inherently not from new technology but from new business models.‖ Andy Grove, Founder, Intel
    6. 6. PSF
    7. 7. Four Assertions 1) Growth without profit is perilous 2) Nonrival assets = 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 created by PKFs
    8. 8. Four Defenses of Timesheets 1) Pricing 2) Productivity 3) Cost accounting 4) Project management
    9. 9. Professional Knowledge Firm Profit = Capital management X Effectiveness X Pricing on Purpose
    10. 10. Professional Knowledge Firm Profit = Capital management X Effectiveness X Pricing on Purpose ↑ ↑ ↑ ↑ Two Business Models
    11. 11. From Revenue to Profit
    12. 12. $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 Cost Price Value
    13. 13. From Capacity to Capital
    14. 14. Four Forms of Capital • Financial • Intellectual • Structural • Social
    15. 15. Rival Asset Non-Rival Asset
    16. 16. 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
    17. 17. From Efficiency to Effectiveness
    18. 18. 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
    19. 19. What you can measure you can manage ––The McKinsey maxim
    20. 20. “The only way to look into the future is use theories since conclusive data is only available about the past.” –-Clayton Christensen, et. al. Seeing What’s Next
    21. 21. KPIs: The Big Three • HSDs • Turn around time • Value Gap
    22. 22. From Cost-plus to Value-led
    23. 23. “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” Warren Buffet
    24. 24. 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
    25. 25. A 1% increase change in, yields 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% - Fixed Costs + Revenue - Variable costs + Price 2.7% 3.7% 7.3% 11.0% 1.5% 2.5% 4.6% 7.1% McKinsey AT Kearny
    26. 26. The Smile Curve
    27. 27. Ed’s IT Smile Curve
    28. 28. A Tale of Two Theories The Labor Theory of Value The Subjective Theory of Value
    29. 29. COST-LED PRICING PRICE-LED COSTING Customer Value Price Cost Service Service Cost Price Value Customer
    30. 30. 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 For scope creep, utilize Change Requests ⑧ Perform After Action Reviews (AAR)
    31. 31. Five Ts to Offering Options 1) Terms 2) Technology 3) Timing 4) Talent 5) Training
    32. 32. Behavioral Economics
    33. 33. Anchoring
    34. 34. Baron Joseph von Neinbach’s Model WA HF PF C B A
    35. 35. Develop Choices E D S C •B+ •RQA •B+ •Convert… •Integrate… •1 hour •4 SR B •A+ •BPR •SRC •A + •Provide… •Develop… •4 hour •2 SR A •PC •NA •SoF •Install… •Educate… •8 hour •1 SR
    36. 36. “When it leaves the factory, it’s lipstick. But when it crosses the counter in the department store, it’s hope.” Charles Revson Founder, Revlon
    37. 37. “The customer never buys a product. By definition the customer buys the satisfaction of a want. He buys value.” Peter Drucker
    38. 38. Your Feedback Is Important to Us! • Completing a session survey is fast and easy: Complete the survey on your mobile phone, laptop, or tablet through the Sage Summit mobile app. – IOS, Blackberry, or Android users may download the app from the at the App Store by searching ―Sage Summit‖ • Remember each completed survey is another entry for one of several daily prize drawings, including an Apple iPad! • Your feedback helps us improve future sessions and presentation techniques. • Session code for this session: P-95 #SageSummit
    39. 39. Contact Information • Presenter Contact Information: – Ed Kless – – Twitter hashtag @edkless • Follow us @Sage_Summit – Use the official Sage Summit hashtag: #SageSummit • Don’t forget to use the Sage Summit mobile or web app for all your conference needs. Thank you for your participation. #SageSummit