In my career I’ve changed between a variety of individual careers (culminating in management...
Professional Services Challenges in 2023
Many of my clients are in technology professional services, where I spent about thirty years of my career. A lot of the newer organizations are worried about recent changes in the marketplace and the disruptions those changes are causing.
What’s so fascinating is that this particular “downturn” is giving some of my clients grief because they’re seeing a drop in revenues, while others are concerned because they’re struggling to grow fast enough! What gives?
In past recessions (I’m thinking of the eighties, the dotcom bust, and the financial crisis of 2008) the impact was vast, affecting the global economy. This time, however, the fallout is far more localized. Sectors like technology took it on the chin because the Fed made capital more expensive squeezing the growth model for many organizations, particularly tech startups. Meanwhile, the collapse of DeFi markets and subsequent exposure of certain banks panicked much of the financial sector, leading to a rapid pivot from innovation to preservation. The professional services organizations that focused these sectors predictably struggled.
Add to that the common phenomenon that many younger firms were simply exploiting a shortage of technology workers and needed to rely on little more than cold calling prospects and announcing that they had bodies to sell; the decrease in spend in the technology sector has left them ill-suited to adapt.
At the same time that tech and finance are cooling, sectors like manufacturing are white hot as manufacturers shorten supply chains and reduce dependencies on foreign suppliers, building on-shore facilities that they now must manage themselves. That pivot from too lean to very safe supply chain strategies has resulted in a boom for the firms serving those sectors.
Some of these outcomes can be attributed to luck, but the professional services firms that will grow above the $25 million waterline will have strategies for diversifying their business development, delivery, and industries served so that when one (or more) of those inevitably changes, they’re able to pivot resources toward more effective models.
This flexibility can be uncomfortable for technology-focused firms, which often fall into the trap of thinking that today’s successes are more permanent than they actually are. The ability to look beyond today’s successes and develop approaches for tomorrow’s changes is what differentiates professional services firms that survive and those that can only collapse when the economic winds inevitably shift.
How well is your professional services firm prepared for changing winds? Take my free assessment and find out!