Introduction to the firm of the future

Introduction to the Firm of the Future

Ed Kless@edkless

#fotf#laat2014

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

Two Business Models

Professional Knowledge Firm

Profit = Capital management

X Effectiveness X Pricing on Purpose

↑ ↑ ↑ ↑

Four Assertions

1) Growth without profit is perilous

2) Nonrival assets have 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

From Revenue to Profit

Cost$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

From Efficiency to Effectiveness

The Antithesis of Efficiency

• This conference • All continuing education• Knowledge management• Total quality service • 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

From Cost-plusto Value-led

Eight Steps to Pricing on Purpose

① Conversation with customer② Pricing the customer, not the services③ Developing and pricing options④ Present options to customer⑤ Option selected codified into an FPA⑥ Proper project management⑦ For scope creep, utilize Change Requests⑧ Perform After Action Reviews (AAR)

“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

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

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

Seven Ts for creating choices

1) Terms2) Technology3) Timing4) Talent5) Transference6) Tailoring7) Travel

Behavioral Economics

Anchoring

Baron Joseph von Neinbach’s Model

WA HF PF

C

B

A

Firm of the Future Symposium

Ed Kless@edkless

#fotf#laat2014

Ed.Kless@Sage.com

NA.Sage.com/leaphttp://bit.ly/1me9S7j