This session will be dedicated to the possibility that a professional organization can be run more effectively when it becomes a knowledge firm rather than a service firm. Creating such an organization is hard work and not for everyone. It requires us to think differently than we have in the past about what it is that we do. You are hereby invited to open a dialogue on a different model for creating and capturing value in a professional firm. We will explore two business models: the firm of the past and the firm of the future. We will also begin a conversation about the four transformations that need to occur in order for firm to make the transition successfully. This session will be led by Ed Kless, Sage senior director of partner development and strategy, who will facilitate this session.

1. P-95 Introduction to Firm of the
Future
Ed Kless
@edkless

2. CPE Credit
• In order to receive CPE credit for this session, you must be present for the entire
session.
– Session Code: P-95
– Recommended CPE Credit = 1.5
– Delivery Method = Group Live
– Field of Study = Specialized Knowledge and Applications
• Visit the Sage Summit Connect kiosks to enter CPE credit during the conference.
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3. Firm of the Future Symposium
August 20-21 in Irvine, CA

4. What is a Business Model?
How your firm creates
value for and captures
value from customers.

5. ―Disruptive threats
come inherently
not from new
technology but
from new
business
models.‖
Andy Grove, Founder,
Intel

6. PSF

7. Four Assertions
1) Growth without profit is perilous
2) Nonrival assets = 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

8. Four Defenses of Timesheets
1) Pricing
2) Productivity
3) Cost accounting
4) Project management

9. Professional Knowledge Firm
Profit =
Capital
management
X Effectiveness X
Pricing on
Purpose

10. Professional Knowledge Firm
Profit =
Capital
management
X Effectiveness X
Pricing on
Purpose
↑ ↑ ↑ ↑
Two Business Models

11. From Revenue
to Profit

13. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Cost
Price
Value

15. From Capacity
to Capital

16. Four Forms of Capital
• Financial
• Intellectual
• Structural
• Social

17. Rival Asset
Non-Rival Asset

18. How Knowledge Workers are Unique
• They own the means of production
• Firms need them more than they need firms—
balance has shifted
• Office is their servant, not their master
• Effectiveness is far more important than efficiency
• Judgments are more important than measurements
• Ultimately, they are volunteers

20. From Efficiency
to Effectiveness

21. The Antithesis of Efficiency
• Continuing education
• Knowledge management/CKO
• Total Quality Service (Ritz-Carlton)
• Mentoring and coaching
• Networking
• Business development
• Social media
• Pricing on Purpose

22. What you can
measure you can
manage
––The McKinsey maxim

23. “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

24. KPIs: The Big Three
• HSDs
• Turn around time
• Value Gap

25. From Cost-plus
to Value-led

26. “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

27. The 5 Cs of Value
Comprehend the key value drivers for
customers
Create value for customers
Communicate the value that you create
Convince customers that they must pay for
value
Capture value with effective price strategies

28. A 1% increase change in, yields
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
- Fixed
Costs
+ Revenue - Variable
costs
+ Price
2.7%
3.7%
7.3%
11.0%
1.5%
2.5%
4.6%
7.1%
McKinsey AT Kearny

29. The Smile Curve

30. Ed’s IT Smile Curve

31. A Tale of Two Theories
The Labor Theory of Value
The Subjective Theory of Value

32. COST-LED PRICING
PRICE-LED COSTING
Customer Value Price Cost Service
Service Cost Price Value Customer

33. Eight Steps to Pricing on Purpose
① Conversation with customer
② Pricing the customer, not the services
③ Developing and pricing options
④ Present options to customer
⑤ Option selected codified into an FPA
⑥ Proper project management
⑦ For scope creep, utilize Change Requests
⑧ Perform After Action Reviews (AAR)

34. Five Ts to Offering Options
1) Terms
2) Technology
3) Timing
4) Talent
5) Training

35. Behavioral Economics

36. Anchoring

37. Baron Joseph
von Neinbach’s Model
WA HF PF
C
B
A

38. Develop Choices
E D S
C •B+
•RQA
•B+
•Convert…
•Integrate…
•1 hour
•4 SR
B
•A+
•BPR
•SRC
•A +
•Provide…
•Develop…
•4 hour
•2 SR
A
•PC
•NA
•SoF
•Install…
•Educate…
•8 hour
•1 SR

39. “When it leaves the
factory, it’s lipstick. But
when it crosses the counter
in the department store,
it’s hope.”
Charles Revson
Founder, Revlon

40. “The customer never buys a
product. By definition the
customer buys the satisfaction
of a want. He buys value.”
Peter Drucker

41. Your Feedback Is Important to Us!
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• Session code for this session: P-95
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42. Contact Information
• Presenter Contact Information:
– Ed Kless
– ed.kless@sage.com
– Twitter hashtag @edkless
• Follow us @Sage_Summit
– Use the official Sage Summit hashtag: #SageSummit
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Thank you for your participation.
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