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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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P-95 Introduction to Firm of the Future
Ed Kless
@edkless
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
Firm of the Future SymposiumAugust 20-21 in Irvine, CA
What is a Business Model?
How your firm creates value for and captures value from customers.
“Disruptive threats come inherently
not from new technology but
from new business models.”
Andy Grove, Founder, Intel
PSF
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
Four Defenses of Timesheets
1) Pricing
2) Productivity
3) Cost accounting
4) Project management
Professional Knowledge Firm
Profit =Capital
management X Effectiveness XPricing on Purpose
Professional Knowledge Firm
Profit = Capital management
X Effectiveness X Pricing on Purpose
↑ ↑ ↑ ↑
Two Business Models
From Revenue to Profit
Cost
Price
Value
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
From Capacityto 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 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
From Efficiency to Effectiveness
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
What you can measure you can
manage
––The McKinsey maxim
“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
KPIs: The Big Three
• HSDs
• Turn around time
• Value Gap
From Cost-plusto Value-led
“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
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
A 1% increase change in, yields
- Fixed Costs + Revenue - Variable costs
+ Price0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2.7%3.7%
7.3%
11.0%
1.5%2.5%
4.6%
7.1%
McKinsey AT Kearny
The Smile Curve
Ed’s IT Smile Curve
A Tale of Two Theories
The Labor Theory of Value
The Subjective Theory of Value
COST-LED PRICING
PRICE-LED COSTING
Customer Value Price Cost Service
Service Cost Price Value Customer
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)
Five Ts to Offering Options
1) Terms
2) Technology
3) Timing
4) Talent
5) Training
Behavioral Economics
Anchoring
Baron Joseph von Neinbach’s Model
WA HF PF
C
B
A
Develop Choices
E D SC •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
“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
“The customer never buys a product. By definition the
customer buys the satisfaction of a want. He
buys value.”
Peter Drucker
Your Feedback Is Important to Us!
• Completing a session survey is fast and easy: Complete the survey on your mobile phone, laptop, or tabletthrough 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
Contact Information• Presenter Contact Information:
– Ed Kless– ed.kless@sage.com– 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
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