Innovation in professional services in a context of disruption

Abstract

This research is focussed on how large professional services firms in New Zealand innovate in the context of and as a response to potential disruption. The theory of disruptive innovation describes how incumbents can be overwhelmed by innovative new entrants. Typically these new entrants begin in markets which are unattractive to incumbents because they can’t make money there with their existing business models. Therefore, some have claimed that new businesses must be set up, or various dual approaches adopted, to survive against disruptive new entrants.

Semi-structured interviews were held with senior members of large professional services firms to understand their perspective on how innovation is managed in their organisation in the context of potential disruption and the capabilities which support them in doing this. From these interviews, a number of themes emerged which were compared with some of the approaches advocated by the literature in terms of responding to potential disruption.

The research found that large professional services firms in New Zealand are focussed on how they can enable innovation from within the firm – typically built off the back of client demand and concentrating on how they work differently with clients, using new methodologies and resourcing models – particularly partnering with third parties to play a service aggregator role – to deliver better outcomes for clients and maintain the professional services firms’ incumbency.

At the same time, there are some tentative steps to think about how incubation and/or ‘dual organisations’ might be able to test more disruptive, alternative business models.