The firm of the future

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Courtesy of a Tweet from @tomhood and others, I came across this 7 minute podcast featuring Ron Baker of the Verasage Institute that talks about the ‘firm of the future.’ Rather than bang the ‘billable hour is dead’ drum, Ron takes an alternative look at what professional firms should look like. He argues that instead of the old revenue driven model that equates to ‘people power x efficiency x hourly rate,’ the firm of the future looks to profitability as its driver. This equates to intellectual capital x effectiveness x price.

Ron then goes on to define each of these elements. His discussion around intellectual capital is interesting because he talks about intellectual capital being incapable of ownership except by those that have it – it is personal. Hence the fear that many firms have when staff walk out the door that they’re taking their IC, or as I would prefer to view it, intellectual property or IP, with them. Ron expands the notion of IC to include structural capital that equates to the physical location that firms deploy along with the knowledge management assets they use to hold IC. His last component is social capital which he describes as the environment in which professionals work such as their membership of ICAEW/CIMA/ACCA/AICPA, networks etc. Again, this last piece, socialcapital si something that Ron believes is individually owned.

He then talks about effectiveness as distinguished from efficiency, arguing that efficiency alone cannot differentiate the firm. In his world, effectiveness is all about a firm’s ability to provide thought leadership in topic specific areas or niches.

Finally, Ron mentions price but doesn’t expand on the topic. That’s a pity. I’m not convinced that price is a useful multiplier when it comes to profitability. It is an obvious determinant of profitability but is not the whole story.

Each of these elements is capable of much discussion but in providing this short summary of how he sees the firm of the future, Ron is laying down the foundation for building those new styles of firm.

Crucially, Ron lays to rest the Taylorian ‘time and motion’ idea that what professionals do can be equated to physical objects like the output of an automotive factory. There is an argument that says you can view an element of the firm in this manner and set yourself up accordingly. I know of firms that have done so very successfully such as SJD. But of itself, that will never deliver optimal results for everyone.

For those that look at this blog for tech signposts, then Ron’s ideas around social capital should hold considerable interest.

Tagged as: Intellectual property, Ron Baker