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