The Robots Are Coming, But They’re Not the Only Professional Services Disruptor
The rapid development of Artificial Intelligence (AI) is both a business accelerator and a disruptor. Within the next two years, it is forecast that the market will be worth some $9.2 billion, more than double the size it was just three years ago.
Machine learning, cognitive computing, speech recognition and robotics will soon replace a number of functions undertaken by the professional service sector – ranging from legal discovery, environmental analysis and engineering. It is a fact that most aware professionals in the professional services sector openly acknowledge.
Even with this realisation there are a few CEO’s, managing partners and leaders in the professional services industries thinking about and making proactive changes to embrace AI and other technology disruptors. Most leaders in the sector are in at least some denial about this emerging threat of AI to their current fee base. Clients and GCs however are not – they know the landscape is changing and disruption is going to challenge the dominance of the large firms, opening opportunities for more efficiency and getting quality results for less spend. Professional services firms are clearly not immune to these disruptive forces across the sector.
Take Australia’s legal sector as an example. In the recent ECP Legal Managing Partner Survey, we found that while the vast majority of managing partners recognise the impact of technology and in particular the potential for AI, the majority are failing to do anything more than recognise it is coming. Only a small number of managing partners have started building their business strategies with an eye to the potential of technology disruptors, one of the three drivers that we believe will reshape the professional services industry within the next five years.
The data showed:
- 50% of managing partners surveyed believe technology changes challenging the traditional firm model as the biggest change in the near future
- 75% see AI in the profession as being a positive and an opportunity for the legal industry
- Only 15% of managing partners have AI as a key plank of the long term strategic and technological direction of their firms.
I suspect that this is no different in any other industry within the professional services sector, except perhaps for the IT sector which, as you would expect, is at the forefront of embracing technology as an industry disruptor and enabler. A good example of this is Crowd & Co, a tech company that is disrupting and at the same time enabling and enhancing the legal services industry. Crowd & Co offers a two-sided marketplace connecting general counsel with legal practitioners, but also offers AI and business analytics for the analysis of legal spend (a priority area for GCs), contract reviews, legal insurance products, practitioner reviews and a dashboard for financial analytics.
This new type of offering is not only addressing the technological changes that will disrupt and also enhance the professional services sector, but will also be one of the two other forces that we believe will significantly reshape the professional services sector over the next five years; people and consolidation.
In regard to people and the future workforce of the professional services sector – which is the strongest growing sector of the Australian economy – there needs to be a dramatic rethink by many if they are to survive.
The Psychology of Change
Many of the forecasts and psychological behaviours we are seeing suggest the sector will need to embrace more flexible work environments as labour becomes harder to find and Gen X and millennials demand more from their workplaces. These people are increasingly wanting more flexibility to pick and choose where and when and how they work. More flexible and more variable employment arrangements are on the rise globally and businesses need to adapt to this trend to attract and keep the best and the brightest in their workforce. According to the Intuit 2020 Report produced by Emergent Research, 25% to 30% of the current US workforce are contractors or “contingent” workers.
And then there is the move for professional services firms to restructure and take advantage of industry consolidation. We expect to see more businesses consolidating and repositioning, or merging with other similar businesses with the same specialisation or broadening their offerings with adjacent services. We are starting to see this shift, with the big behemoths in the sector, such as PwC, reshaping their offering to once again position themselves as a leading international first tier law firm and adding a new creative marketing services offering. They are helping clients gain insights into buyer behaviours and how they can tap technology through their analytics offerings.
Much has been said about professional services being ripe for disruption through technology – yet little has been done on that front, let alone much consideration given to the two other factors that will drive disruption across the sector.
The way the sector currently thinks about technology, structure and people needs to be completely overhauled unless it is happy to suffer the same fate currently being experienced by the Australian media which has been all but decimated by global tech giants.
If changes are not made now to embrace the disruption being driven by technology, consolidation and human psychology, we may well see even more insolvencies of professional services firms than we are already seeing.
And it will not be long before we see brands of the likes of Facebook and Google offering a suite of professional services disciplines. Already we are seeing them moving into this sector. Managing Partners and leaders in the professional services sector need to stay alive to the opportunities and challenges before them…….
Dr Stephen Moss is the founder and managing partner of Eaton Capital Partners and ECP Legal and a regular contributor to thought leadership across the professional services sector.