Had I been updating my blog I would have taken the opportunity to make a prediction.....that Ryanair would eventually abandon its hate campaign towards customers. I had come to that conclusion because it is unprecedented for a company to survive and prosper while declaring war on its customers.
What Ryanair managed to do was create so large a cost/price gap between itself and its competitors that its customers have been prepared to take an (almost) unlimited amount of abuse and humiliation in return for the cheap fares and large number of destinations on offer.
However it was inevitable that new competitors would enter the cheap airfares market and, while they may never close the gap fully, they have bridged the gap sufficiently to eat into Ryanair's market and cause them concern. In that context its no surprise to see their new about-face.
So let me test that same crystal ball and make a prediction about the Accountancy & Legal professions. Accustomed to billing by time spent on a case (usually in 6 minute increments !) it is inevitable that they will be pushed to provide fixed price quotations for many of their services. This in turn will force them to think about effectiveness and efficiency in their practices, words generally not found in their day to day vocabulary.
To date they have managed to avoid this by propagating the myth that they couldn't possibly anticipate all the complexities of their work and provide an accurate quotation in advance. However when you begin to examine this underlying complexity, what you find is that its source is directly attributable to the failure of the professions to adopt the disciplines necessary to adhere to a fixed price quotation.
Ironically, by developing the skills and management practices required to reliably provide fixed price quotations, such professional services firms can increase their profitability while reducing costs to customers, a true win-win scenario.
At present there is no incentive for them to effectively and efficiently manage their work as the more hours they consume the more revenue they generate. However this often leads to a great deal of haggling with clients, often resulting in serious conflict and a plethora of ad-hoc discounts being offered.
Furthermore this a difficult business model to scale as it requires ever more hours to sell if the business wants to grow. It also relies on a fresh supply of junior staff each year and the moving-on of some of the more costly seniors, a cycle that has slowed down significantly due to the current recession.
A profession whose underlying business model is based on the ability to offer fixed price quotations would develop a competitive advantage by becoming operationally excellent. Such a firm would be able to reduce its prices by 20% while reducing the costs of its services by 40% by eliminating much of the waste inherent in the current processes.
The big question is.....who will make this move first?
The bad news for the professions is that, in the light of the current focus on the cost of professional services in Ireland, its most likely to be a large customer with an ultimatum.
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