What Professional Service Firms Must Do to Thrive

During economic slowdowns, consulting, law, and accounting firms often start offering services and taking on clients they really shouldn’t, just to keep the lights on. This path is perilous. If a firm’s practices have a diffuse mix of clients and unclear strategic positioning, it will weaken the firm’s market profile and lead to internal conflicts, especially about the organization’s future direction.

This article presents two tools that professional service firms can use to manage their client mix and optimize their strategic position. The first is the practice spectrum. All practices fall on a continuum of sophistication that ranges from “commodity” to “rocket science.” Any position on this spectrum can be profitable, though the forces driving profits change as you move along it—as do the capabilities and skills required. Successful practices understand their true position on the spectrum and know which performance levers to pull.

The second tool is the client portfolio matrix, which separates clients into four categories on the basis of cost to serve and willingness to pay. Rather than spreading clients across all four, firms should focus their acquisition efforts and follow different relationship strategies for each type of client.