There seems to be a subtle yet inevitable change coming in the professional services agency. Corporita’s consulting team was working the last few months on a research project to identify the changes occurring in this field. The research also identified the types of businesses that are accepting this change and the unanswered questions related to these changes.
Business Model Mapping
To begin this internal pilot research, a Business Model Mapping tool that developed by our team was used to map out specific elements such as value proposition, risk management, revenue and cost models, engagement management, and resources deployment and management. This identified the core areas where the change could occur. Accordingly, business models were aiming for clients to get quicker results, lowering their risk, increasing the specialization of the services provided, changing the profit formula, market development and network increases. Each of these changes could be minimal, moderate or fundamental based on the type of the services provided.
The research teams conducted interviews and send a short structured survey to clients and other professional service providers using different networking platforms and used the answers received and the results of the completed questionnaires to compile the findings.
Findings on Current Business Models
Questions about both the current business model and the new model adopted by the agency or the company were asked. One of the things that became clear through this study was that many agencies and service providers confirmed reaching good results by changing their old business models. Many providers put a limited emphasis on how their business model distinguish them from the competition, especially in the highly regulated fields, and attributed their success to other factors. Surprisingly, a small portion of the interviewees considered that their model could survive without a change in the business structure in the coming five years. This was mainly for long-term planning, and professionals seemed satisfied with their short-term gains based on their current business model.
More questions were asked to a number of professional service providers about the trends that affected their businesses. One of the highlights of these questions was how differently public and private sector businesses responded to these questions. The most prominent direction was that clients demand faster results, which kept appearing in more than 90% of the received answers. Coming in second were the increasingly sophisticated demands of clients. The third significant trend was the impact of increasing technological advancements.
Based on the study and the trends it can be detected are:
- Increasing specialization.
- Increasing market segmentation
- Lateral collaboration and alliances between complementing services
- Client’s demands for fast results.
- Client involvement and participation
As for the scoring of business models, some changes stand out more than others. Service providers now focus on achieving faster results and reaping low-hanging fruits and involve their clients responding to the client’s demands for more participation. They also collaborate more with other professionals and increase their network of qualified providers for cross-promoting efforts. However, the business model consisted on service providers still physically present at their client’s location instead of online dealings is still valid and in demand and also how revenue is generated, which means the vast majority is still using the hourly fee system instead of bundled service packages.
The emerging business models
Hence, the primary business models have emerged.
The collaborative model
In this model, the service provider focuses creating a collaborative process that either involves the client and their teams or other external parties. In this model, service providers tap into their network for specific elements of their value proposition, which impacts the variable costs associated with the service provided.
The Continues model
Service providers incorporate new tools or pre-packaged service offerings and shifting from a project-based model to long-term commitment. By doing so, service providers are able to generate a continues flow of recurring revenue by serving a limited number of clients on a continues basis through a bundled service offering or a broad base of clients through a subscription model. In this model, physical visits might be limited, and the bulk of engagements with clients is done via emails or other online tools.
The Virtual Model
In this model, the provision of service is made solely via the internet using advanced communication means. This model was detected in those agencies that are not location-specific. Some creative service providers adopt this model utilizing the current advances in technology. The main advantages of this model are low fixed and variable costs and the high flexibility the professional experience.
The Hybrid Model
Mixing different models was detected as an emerging business model. The hybrid model allows service providers benefit from different models, lower their costs, increase their value proposition and also gain some flexibility.
The future of business models in the service sector
For the near future, however, several questions come to minds such as the impact on organizational structure, team development and culture and the existing client relationships. This is further proof that the landscape of service businesses is indeed changing.