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Innovation in the professional services sector

  • A new report from Sheffield University Management School explores innovation and technological change in the professional services sector.
  • The report finds that data and external factors are key drivers for innovation, whilst organisational cultures, cost, capacity and risk are common barriers.
  • Firms must become more open and receptive to innovation to sustain the UK’s position as a global leader in the professional services sector.

 

A report on innovation in business and professional services firms has been published today, led by colleagues at Sheffield University Management School in conjunction with BPS Birmingham. The research, funded by the National Productivity Investment Fund through the Economic and Social Research Council (ESRC), explores opportunities for technological change, including AI and Machine Learning, as well as the challenges they present.

The legal and accountancy sector have historically both under-invested and under-utilised technology, and so there is considerable scope for transformational change. The scoping study highlights a series of organisational and cultural barriers to the adoption and diffusion of innovation.

 

The findings from 34 in-depth semi-structured interviews with senior partners and/or innovation officers in mid-tier and large legal and accountancy firms highlight 5 key issues:

  1. That external factors were found to have a significant influence on the attitudes of firms towards innovation, and in many instances the incentives to innovate were client-led or to ensure regulatory compliance.
  2. The power of data should not be overlooked. Data is likely to become a more significant source of future competitive advantage, as well as a driver for innovation.
  3. The dominant firm structures and organisational cultures of accountancy and legal firms were found to present barriers to the adoption and diffusion of innovation.
  4. The nature of innovation will have different impacts on the sector. Some innovations will enhance the business offer, while other innovations threaten to cannibalise the core business.
  5. Cost, capacity and risk were consistently identified as barriers to the adoption and diffusion of technological and organisational innovation.

The prominence of ‘Next Generation Service’ as the focus of one of the Industrial Strategy Challenge Fund (ISCF) is testament to the importance with which the Government views the business and professional services sector. The aim of the ISCF is to enable researchers and businesses to work together to identify and develop new ways to create value as well as stimulate productivity and growth.

The report concludes that if UK is to sustain its position as a global leader in the professional services sector, firms need to become more open and receptive to the adoption and diffusion of innovation. Many legal and accounting firms have established business models, with innovations typically incremental and slow to be adopted. Whilst artificial intelligence and machine learning are only in their infancy, their potentially transformative power can be seen already and are firmly on the horizon.

The lead author of the research, Dr Chay Brooks, commented that “The findings highlight the need to challenge established norms in many legal and accounting firms which are slow to innovate and change. These established norms pose a threat to future competitiveness and growth.”

Executive Director of BPS Birmingham, Hilary Allen, explained “Given that services account for 80% of the economy, it is right that they increasingly form the focus of research and policy”. She also highlighted that “More than ever, the sector needs to think beyond business as usual and challenge the status quo if its leading position is to be maintained.”

Associate Dean for Engagement, Impact and Innovation at Sheffield University Management School and co-author of the report, Professor Tim Vorley commented “This scoping study highlights the importance of working with the sector to understand the issue faced, and is the first step in addressing them. Through our work with BPS Birmingham we are laying the foundations for a UK-wide study that aims to identify overcome the barriers identified in this study”.

For more information on this scoping study or to get involved with future research associate with innovation in the professional services sector please contact Dr Chay Brooks (c.brooks@sheffield.ac.uk) or Prof Tim Vorley (tim.vorley@sheffield.ac.uk)

 

Read the full report here.

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