Managing Innovation Cases from the Services Industries (1988) / Chapter Skim
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Professional Services Firms and Information Technology: Ongoing Search for Sustained Competitive Advantage
Professional Services Firms and Information Technology: Ongoing Search for Sustained Competitive Advantage
Pages 175-194
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From page 175... ...
For example, much of the traditional wisdom regarding strategy and competitive advantage was developed for goods firms and does not seem to hold for PSFs. This paper will explore the nature of PSFs, especially in relation to the application of information technology for competitive advantage.
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From page 176... ...
INDUSTRY STRUCTURE ECONOMIES OF SCOPE Increasingly, a fundamental strategic theme is being sounded within PSFs, that is, the attempt to capture competitive advantage by broadening the scope of the enterprises's activities, using the leverage of economies of scope. Examples of this include the expansion of the Big Eight accounting firms into management consulting, the emergence of "one-stop" shopping for TABLE 2 Growth in Professional Services (percent)
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From page 177... ...
Many of these engineering firms believe that expansion into other areas will be facilitated by current experience. For example, CH2M Hill, a consulting engineering firm specializing in environmental design believes its experience in water and wastewater design gives the firm an advantage while competing for hazardous waste jobs.
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From page 178... ...
CL 10 5 O THOMAS H DOORLEY, ALISON GREGG, AND CHRISTOPHER GAGNON WATER HAZARDOUS SEWERAGE MANU- OTHER TRANS- POWER GENERAL SUPPLY WASTE FACTURER PORTATION BUILDING Project Categories FIGURE 1 TOP 500 design firms: billings distribution.
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From page 179... ...
Managers in many PSFs develop large-scale oriented strategies as if similar laws of economic behavior apply to them as well However, to date, absolute size or market share seem to have less inherent value in professional services industries than in others. For example, if large scale were of value, industry concentration rates would be high.
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From page 180... ...
The most profitable law firms in 1986 were ranked 11th and 29th in revenues. For example, there do not appear to be marketing advantages of scale in the accounting and auditing business.
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Whether to grow is a given. THE DIFFICULTY OF SUSTAINED GROWTH THE "HOT-HAND" EFFECT Another fundamental phenomenon operates that sheds light on the nature of professional services, namely, the "hot-hand" effect.
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From page 183... ...
In many professional services industries not only is it difficult to gain abnormal share, but it is equally difficult to differentiate services in the clients' mind. Figure 11 shows that clients perceive no significant difference in quality of services among the Big Eight accounting firms.
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From page 184... ...
Doyle Dane Bernbach O- ~ 1 1 1 11 1 ' 10x 7x 5x 3x 2x 1.5x 1x .7x .4x 1 1 1 1 1 .2x .1 x .07x .04x .02x .01 x Sector Growth ORelative Market Share (1983) = 1 Billion US Billings, 1985 Dollars FIGURE 9 U.S.
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From page 185... ...
! 7 8 1 Arthur Andersen 2 Price Waterhouse 3 Peat Marwick Main 4 Ernst & Whinney Firm 5 Coopers & Lybrand 6 DeloiKe Haskins & Sells 7 Arthur Young 8 Touche Ross FIGURE 11 Service to clients: Big Eight fimns.
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From page 186... ...
on information technology and software, not counting service fees or internal development expense. Computer utilization in many professional services industries ranks among the highest.
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From page 187... ...
In the most recent survey on computer use in consulting engineering firms the American Consulting Engineers Council found that more than 80 percent of all consulting engineering firms are computer users. All firms with more than 150 employees were computer users, whereas the average size of noncomputer users was just 7 employees.
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From page 188... ...
The most obvious is that accounting, management of information, and project management are common activities shared by all engineering firms regardless of the type of services offered. Additionally, availability of software programs may also influence computer usage: 91 percent of the nonengineering software programs listed in the survey were purchased, whereas 60 percent of the engineering programs were purchased, 26 percent custom written, and 13 percent time-shared.
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From page 189... ...
A fimn has a body of knowledge (which INTERNAL SPECIAL STUDIES by, PERSONAL EXPERTISE ~ i/ EXTERNAL SOURCES | if, ~_:I'ROFESSIONALS ) KNOWLEDGE ~ \\\\\\\\ BASE J \\ Specific , ~Solutions FIGURE 14 Information flows in professional services firms.
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From page 190... ...
developing the human capital at the junior and middle levels. Information technology allows firms not only to make information available to client services staff but also to educate the firm's professionals about both hard data and the firm's methodology, assets, and culture.
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From page 191... ...
For example, in 1987, accounting and law firms were projected to spend more than $500 million on computer hardware (Professional Publications, Inc., 1986~. Although more than 90 percent of the firms surveyed are planning on buying personal computers, only 13 percent are going to buy minicomputers, and only 25 percent are planning on investing in network
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From page 192... ...
The computer survey by the American Consulting Engineers Council, referred to earlier, likewise supports the concept of investment in personal tangibles. Seventy-seven percent of all computers used by consulting engineering firms are microcomputers, and frequently a firm owns computers from multiple manufacturers.
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From page 193... ...
If so, and if information technologists can deliver firm-specific, responsive, timely solutions, information technology investments may both multiply and be able to deliver competitive advantage to those with a clear vision of how to use technology and a concomitant capacity to sacrifice current earnings for that vision.
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From page 194... ...
1986. Gaining competitive advantage as a professional service firm.
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