Moneyball and Professional Services:
The Art of Winning the Services Game
In 2004, Michael Lewis published Moneyball: The Art of Winning an Unfair Game, a story that chronicled the Oakland A’s quest to turn themselves into one of Major League Baseball’s most successful franchises — despite having the second lowest payroll in the game. They competed successfully against teams that spent three times as much on superstars as the A’s by finding players who were undervalued by the market.
The A’s defied convention by taking a very quantitative, numbers-driven approach called Sabermetrics to evaluate each player’s performance. Rather than relying on the generally accepted wisdom long held by baseball insiders of what contributed to the success of a team, they crunched the numbers to identify the metrics that actually mattered.
They figured out that winning in baseball was more a matter of the cumulative effect of many small actions than of singular sweeping gestures. It’s a game won by walks and singles rather than towering home runs.
As I read this year’s Professional Services Benchmark by SPI Research, I was struck by the parallels between what the team at SPI are doing in the professional services industry with what the early Sabermetricians did for America’s national pastime. The benchmark doesn’t blindly accept conventional wisdom, but rather quantitatively measures the effects of the plethora of decisions, both large and small, services managers make each day.
The study objectively examines the metrics, the tools, and the strategies that have tangible effects on the performance of the organization. It clearly demonstrates that success in professional services, much like winning in baseball, is based on simultaneously optimizing many different facets of the process at once. A tiny improvement in utilization, an incremental boost in bill rates, a slightly better billable to non-billable ratio, and a marginal improvement in project delivery can add up to material, double-digit gains in profitability.
The data shows that the cumulative effect of small gains in each of these metrics can allow an organization that uses the right tools to achieve a particular level of profitability with half the staff. To see how, take a look at our infographic, What it Takes to Make $10 Million in Professional Services Profit.
Not only does the benchmark illuminate the benefits of data-driven management, it provides insight into some of the tools, processes, and techniques that are essential to introducing this level of scientific rigor. One of the key tools that the SPI team highlights is a Professional Services Automation (PSA) solution, which forms the cornerstone of executing and measuring all the delivery activities of the services firm. SPI’s conclusion about PSA software is that “these systems pay for themselves with a 74% improvement in net profit” and “must be considered for any organization with 10 or more consultants.” SPI found that “every one of this year’s top performers use a commercial PSA application and credit it with improving…billable utilization and on-time project completion.”
What’s important about SPI’s benchmark report is that it tells this story in the context of the ever-evolving professional services market and the challenges it faces. It provides practical strategies that may defy conventional wisdom, but are proven to have measurable impact on the success of the business. Much like the protagonists in Lewis’ Moneyball, it challenges long-held assumptions using the rigor of empirical measurement.
To see these perspectives and to start benchmarking your organization against your peers:
Sign up to download the Professional Services Benchmark Survey Results
We hope the insight that it contains helps you to achieve your goals no matter what surprises the coming year and beyond may bring.
Originally published at www.projectorpsa.com.