Republished with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.”
Research has shown that many jobs in the professional services field are prime candidates to become automated in the near future. In order to survive, the professional services industry must confront disruption and introduce new models in order to transform, Uschi Schreiber writes in this opinion piece. Schreiber is EY’s global vice chair for markets and chair of the global accounts committee, and is responsible for the organization’s globally integrated go-to-market approach.
In May, NPR launched an interactive tool that posed a question with deeply disruptive implications: Will your job be done by a machine?
The results among professional services employees were stark. According to the tool, which builds on research at Oxford University, there is nearly a 94% probability of some accounting and auditing jobs becoming automated in the next 20 years. For some tax preparation roles, this likelihood climbs to almost 99%. Many other (and non-related) industries saw similarly high estimates.
Professional services firms have long been seen as agents of change, being brought into organizations to disrupt entrenched ways. A few decades ago, for example, many consultants championed Japanese management principles — such as kaizen — that transformed how American automobiles were produced in Detroit and how fast-food restaurants prepared and sold hamburgers. But as the NPR results would suggest, the professional services industry itself must confront disruption and introduce new models in order to transform Twitter .
Transforming ourselves is not particularly new. To serve our clients undergoing or sparking disruption, we have to constantly adapt, accepting, responding to and shaping rather than ignoring disruption. The difference now is that these profound transitions are occurring much more quickly, and so we have to reinvent ourselves continually to match the dizzy timeframes of this age of innovation.
This chart ranks occupations according to their probability of becoming automated. Source: University of Oxford, via Bloomberg Visual Data
An Age of Unprecedented Disruption
Today, we see unprecedented disruption across all industries. Take a look at the turnover rate of the Fortune 1000 over the last 40 years, starting from 1973. By 1983, about one-third of these companies had fallen off the list. By 2013, 70% of the companies were replaced by new ones. This pace of change will continue to increase: only a third of today’s major corporations are expected to survive the next 25 years.
“To serve our clients undergoing or sparking disruption, we have to constantly adapt, accepting, responding to and shaping rather than ignoring disruption.”
These changes are driven by megatrends — disruptive global forces that have far-reaching, interrelated consequences for business, economies, industries, societies and individuals. Most of us fail to grasp just how profound these disruptions are; by themselves and combined, they are driving massive transformational shifts.
Obviously, the acceleration of digital capabilities is a leading disrupter — fueled by the convergence of social, mobile, cloud, big data, artificial intelligence and growing demand for “anytime-anywhere” access to information. Others include shifting global demographics; entrepreneurship and innovation, which are rapidly shrinking the gulf between mature and developing economies; and the migration of the economic centers of gravity from West to East and North to South.
The combined power of today’s megatrends affects all industries and demands that professional services firms respond — not just to the impacts on their clients, but also to how the trends affect them. This can include new competitors, subscription-based services, technology and analytics, new workforce dynamics and a growing need to leverage proven approaches quickly at lower costs.
In a sign of the times, Brigham Young University is now teaching technology systems for accounting developed by SAP and Oracle alongside traditional methods. And part of the value proposition of the payments company Square is that it allows people to manage their professional services business from their mobile devices.
As Harvard Business School professor Clayton Christensen put it, “If you are currently on the leadership team of a consultancy and you’re inclined to be sanguine about disruption, ask yourself: Is your firm changing (at least) as rapidly as your most demanding clients?”
That goes directly to the big point: How do we in professional services best disrupt ourselves? There are several key questions we need to ask.
1. What products and services do we need to build to serve our clients better?
Imagine products and services that deliver fully automated corporate tax returns or smart artificial intelligence (AI) applications that crawl through company databases to answer natural language queries from executives on performance.
To achieve that, financial consultants will need to build their organizations around asset-based or technology-driven intellectual property, data analytics working across clients, and their own portfolio of “ring-fenced” digital technology initiatives. We already see global firms investing heavily in offerings ranging from “iTunes-style” software repositories to cyber-security advisory practices.
And as disruption leads clients to rethink their own purpose and business models, there is greater demand for professional services firms to move into strategy consulting. My own firm, EY, this year acquired data analytics firm C3 Business Solutions to support clients to move beyond basic data collection by providing a full life cycle of information management and advanced analytics around strategic goals.
2. What is our core model for talent?
Many professional services firms are large organizations with thousands of employees around the world. They recruit at scale for a specific skill mix, focus on retention and sell their brand and talent to clients.
“Obviously, the acceleration of digital capabilities is a leading disrupter — fueled by the convergence of social, mobile, cloud, big data, artificial intelligence and growing demand for ‘anytime-anywhere’ access to information.”
As geographic borders fade through emerging technologies, firms must increasingly tap into mobile talent across markets and regions — and ensure that staff members have a deep understanding of both local customs and global expectations.
Technology equally magnifies and complicates the importance of a global workforce by posing new challenges for historic staffing models. Cognitive AI is expected to replace 30% of business consulting resources by 2017. At the same time, new technologies enable firms to engage with a mix of “own” and “rented” talent that is mobile and diverse, and capable of rapid changes in skill mix. Cloud-based freelance management systems like Work Market, for example, offer managers nimbler ways to work with independent contractors and freelancers, as well as with clients.
On another front, as recruiting and retaining top talent becomes more competitive, firms must address the shifting needs of their workforces, especially the millennials among them. Compared to baby boomers, millennials, many with children, are almost twice as likely to have spouses or partners working full-time, too.
For a growing number of firms, that means focusing on “work-life integration” — encouraging flexible work arrangements, such as telecommuting, and compressed work weeks, along with a willingness to adapt daily schedules to give people what they need to succeed in both their careers and personal lives.
3. How can we leverage industry convergence as a competitive advantage?
With digital technologies quickly lowering the bar to convergence, Gartner predicts 75% of disruptive product innovation will be inspired from outside the innovators’ sector by 2016.
“Racecar driver Mario Andretti said it well: “If everything seems under control, you’re not going fast enough.”
To capitalize on this convergence, firms need to stress an approach that crosses sectors and service lines — including focusing on the client’s needs with both broad and specialist expertise, agility and no internal barriers to putting the right teams together. For instance, as the health care industry becomes more connected to daily life through the growth of mobile and social health apps and solutions, professional services firms will increasingly blend talent and insight from across multiple sectors to offer health industry-specific deliverables. The same principle will apply to other sectors, too.
To optimize convergence opportunities, we need to be as close as possible to our clients, more agile in how we organize our people, and explore beyond historical industry boundaries.
4. Finally, what do we need to own?
To meet the multi-faceted challenges of disruption to clients — including big, complex problems beyond the capacity of a single organization — firms must forge more alliances that reach beyond traditional segments.
As attested by a recent spate of announcements about joint business relationships between Big Four firms and the likes of Google and Microsoft, ecosystems of co-dependent organizations and individual operators increasingly appear to be the most productive way to move forward and access the right skill mix. For example, Wikistrat has brought an entirely different approach to solving clients’ problems: It crowdsources solutions through an online global network of more than 2,000 small and medium-sized businesses.
As these and many other examples make clear, our industry must answer some tough questions about what is essential to “own” and where we should consider building new ecosystems.
The Right Questions — and Answers
These are, of course, just a few of the questions that every firm should ask. Identifying the right questions is important: not only do better questions lead to better answers, they help deliver better results.
It is well worth our time — and crucial to our bottom line — to answer others, such as: Which parts of our firm are most vulnerable to disruptive change? What are some potential opportunities outside what we think of as our own industry boundaries? How do we capture and leverage innovation as the engine for change?
And, finally, there are the questions that should always top the list: At what speed do we need to act? Are we fast enough yet?
Racecar driver Mario Andretti said it well: “If everything seems under control, you’re not going fast enough.”
Publication does not imply endorsement of views by the World Economic Forum.
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Author: Uschi Schreiber is EY’s global vice chair for markets and chair of the global accounts committee.
Image: Robots are seen at at industrial trade fair. REUTERS/Morris Mac Matzen.