Something that surprises me is how often I hear executives in service-based companies say they can’t innovate because they are in services. They say innovation is more suited for product companies and not so much for services because services don’t need to change as often as a product does. They say that there is so little room for movement in the services space.

The fact that so many people believe innovation doesn’t have a place in the service-based firm means that there is a tremendous opportunity for those who come to the table with that innovation mindset. For those of you that want to innovate but don’t know where to start, here are four ways you can begin to explore innovation in your service firm.


Service firms have a tremendous opportunity to generate a great deal of value for their clients through the development of products that drive complementary value to the services already provided.

The way firms can do this is through recognizing inefficiencies, annoyances, or time-intensive tasks and partnering with technology companies to develop applications that solve those problems. A lot of service-based firms are beginning to explore the potential that applications can have by opening a new market and new opportunities through products.

While many firms reading this are saying to themselves, “Been there. Done that. Didn’t make any money off of it.” There’s actually a very simple reason as to why the vast majority of these firms didn’t make money with their “innovation.” And that’s because it wasn’t a true innovation.

True innovations are those things that are meaningfully unique. Meaningful meaning it’s important enough to someone that they will spend money on it and unique in that it is new to the world. Often organizations that create new products or service get either the meaningful piece or the unique piece right but not both. Achieve both and you’ll find your path to success that much easier.

Recurring revenue streams

While many firms have been able to leverage the recurring revenue model through maintenance contracts, coaching, or content subscriptions, there is another opportunity that is presenting itself through the use of technology.

On the same vein as productizing, service firms that develop applications for their marketplace also have a tremendous opportunity to generate recurring revenue through the continued usage of those applications. While many apps are set up as a one-time payment or pay-per-use, the opportunity to develop applications that require a subscription to continue leveraging the product is incredibly compelling.

Innovation systems

This is about building a culture of innovators. It’s a way of doing business and driving value for clients and their own business. Firms that are armed with an innovation system are able to recognize problems and opportunities much faster and respond in short order with dynamic concepts that aren’t just ideas. Instead, they are ideas backed by math models, project learnings, and business cases for moving forward.

Just as many organizations over the years have armed their employees with knowledge of Lean or Six Sigma to drive efficiency, there is a budding trend just beginning to sprout where organizations are beginning to furnish their employees with a system to drive innovation. These firms benefit greatly as they now have employees who think, act and talk a common language steeped in a foundation of innovation that will drive new ideas and solutions to problems and opportunities that arise as they interact with clients, vendors, partners and internal processes. The opportunities for innovation are limitless when employees know how to innovate.

Upfront pricing

One of the quickest opportunities for innovation in service firms is how they price their services. Many firms offer an hourly rate that works in favour of the firm and not so much in the favour of the client.

Law firms and technology companies are famous for charging ludicrous fees by the hour that can run up a pretty ridiculous invoice at the end of the month that clients are stuck paying. This is something that many forward-looking firms are catching onto and while it’s just gaining momentum, I believe it will become a significant standard in service firms – upfront pricing.

These forward-thinking firms are putting the onus on themselves and offering fixed bid engagements. This means that the firms offering their services can’t go over a certain amount. It also means that they need to be efficient in delivering or they risk cutting into their margin.

Look for the forward-thinking law firms, accounting firms and technology companies to start exploring this more in the next few years.

Innovation in services is difficult, but not impossible. Those firms that prefer to keep things the way they are put themselves at great risk because there is an innovation movement beginning to form and those that are a part of that movement will be setting the new standards while all the others struggle to catch up. The movement is already beginning. Don’t be in the group of firms that get left behind.

Special to The Globe and Mail
Published Thursday, Dec. 03, 2015 5:00AM EST
Last updated Thursday, Dec. 03, 2015 1:27PM EST