Flevy Management Insights Case Study
Open Innovation Strategy for Professional Services Firm in North America


Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Open Innovation to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

TLDR A North American professional services firm experienced declining client retention and revenue growth due to rising competition and innovation demands. To address this, they launched an Open Innovation Program and a Digital Transformation Roadmap, resulting in improved client satisfaction and a 10% revenue increase from new services. This underscores the need to balance external partnerships with internal innovation.

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Consider this scenario: A North American-based professional services firm is facing a strategic challenge with leveraging open innovation to remain competitive in a rapidly evolving industry.

The organization is experiencing a 5% decline in client retention and a 10% slowdown in revenue growth due to increased competition and client demands for more innovative solutions. The primary strategic objective of the organization is to harness open innovation to enhance service offerings, improve client satisfaction, and drive growth.



The professional services industry is currently in a state of flux, with firms grappling with the dual challenges of technological disruption and changing client expectations. This organization, in particular, has reached a critical juncture where its traditional service delivery model is being outpaced by more agile and innovative competitors, suggesting a pressing need to reevaluate its approach to innovation and client engagement.

External Assessment

The professional services sector is witnessing significant transformation, driven by digital technologies and a shift towards more flexible, client-centric service models.

Analyzing the competitive landscape reveals:

  • Internal Rivalry: High, fueled by both established firms and new, agile entrants offering differentiated, technology-driven services.
  • Supplier Power: Moderate, as the availability of digital tools and platforms increases, giving firms more choices in their tech stack.
  • Buyer Power: High, with clients demanding more value, customization, and innovation in services.
  • Threat of New Entrants: High, due to low barriers to entry for niche organizations leveraging technology to offer specialized services.
  • Threat of Substitutes: Moderate to high, as clients increasingly consider in-house capabilities and alternative service providers.

Emergent trends include digitalization, client demand for integrated solutions, and the rise of remote service delivery. These changes present both opportunities and risks:

  • Adoption of AI and automation technologies: Offers the opportunity to enhance efficiency and service innovation but requires substantial investment in skills and technology.
  • Increasing preference for holistic, end-to-end solutions: Firms can differentiate by offering comprehensive services but must navigate the complexity of broader service portfolios.
  • Shift towards remote and flexible service delivery: Allows firms to tap into a global talent pool and reduce costs, but challenges traditional business models.

A PESTLE analysis highlights the critical impact of technological advancements, regulatory changes around data privacy and professional standards, and evolving workforce expectations towards flexibility and work-life balance.

For effective implementation, take a look at these Open Innovation best practices:

How to Implement R&D-Driven Open Innovation (28-page PDF document)
Open Innovation Management (26-slide PowerPoint deck)
The Benefits of Partnering with US Universities in the Era of Open Innovation (17-page PDF document)
Measuring Open Innovation Climate (16-slide PowerPoint deck)
Open Corporate Accelerator (OCA) (24-slide PowerPoint deck)
View additional Open Innovation best practices

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Internal Assessment

The organization boasts a strong reputation and a loyal client base but faces challenges in innovation, agility, and technology adoption.

The MOST Analysis reveals misalignments between the organization’s Mission to lead in innovation and its Strategies, Objectives, and Tactics, which have traditionally focused on consolidating existing services rather than exploring new, innovative offerings.

Array Analysis indicates a need to prioritize projects that drive digital transformation and client engagement, while de-prioritizing or discontinuing services that no longer meet evolving market demands.

The JTBD (Jobs to be Done) Analysis suggests that clients are seeking not just advisory services but strategic partners who can anticipate market shifts and provide proactive, innovative solutions. This insight points to a gap in the organization’s current service and engagement models.

Strategic Initiatives

  • Launch an Open Innovation Program: Establish a program to collaborate with technology startups, academia, and industry thought leaders to co-create innovative service offerings. This initiative aims to accelerate the organization’s innovation cycle and deliver cutting-edge solutions to clients, creating value through enhanced service differentiation and client engagement. The program will require resources for partnership development, technology investment, and an innovation management framework.
  • Develop a Digital Transformation Roadmap: This initiative focuses on integrating advanced technologies such as AI, data analytics, and blockchain into service delivery processes. The strategic goal is to improve operational efficiency, enhance service quality, and offer new digital services. Value will be created through increased client satisfaction and opening new revenue streams. Significant investment in technology infrastructure and upskilling of the workforce will be required.
  • Implement a Client-Centric Service Design Approach: Redesign service offerings based on deep insights into client needs and market trends, utilizing methodologies such as design thinking. The goal is to increase client engagement and satisfaction, thereby improving retention and attracting new business. This will involve resources for market research, client engagement programs, and service design expertise.

Open Innovation Implementation KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.


Without data, you're just another person with an opinion.
     – W. Edwards Deming

  • Innovation Pipeline Strength: Measures the number of new services or solutions under development, indicating the health of the organization’s innovation efforts.
  • Client Satisfaction Score: An essential metric for gauging the impact of new, innovative services and enhanced service delivery on client satisfaction.
  • Revenue from New Services: Tracks the financial success of newly introduced services, reflecting the organization’s ability to monetize its innovation efforts.

These KPIs provide insights into the effectiveness of the strategic initiatives in fostering innovation, enhancing client satisfaction, and driving revenue growth. Monitoring these metrics will allow the organization to adjust its strategies in response to market feedback and performance outcomes.

For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.

Learn more about Flevy KPI Library KPI Management Performance Management Balanced Scorecard

Open Innovation Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Open Innovation. These resources below were developed by management consulting firms and Open Innovation subject matter experts.

Stakeholder Management

Successful implementation of the strategic initiatives is contingent upon the active involvement and support of a broad spectrum of stakeholders.

  • Partnership Managers: Responsible for managing relationships with technology startups and academic institutions.
  • Service Innovation Teams: Key players in developing and testing new service offerings.
  • Technology and Data Analytics Teams: Crucial for the digital transformation efforts, from infrastructure to service delivery.
  • Clients: Their feedback and engagement are critical for validating and refining new services.
  • Leadership Team: Provides strategic direction, resources, and support for the initiatives.
Stakeholder GroupsRACI
Partnership Managers
Service Innovation Teams
Technology and Data Analytics Teams
Clients
Leadership Team

We've only identified the primary stakeholder groups above. There are also participants and groups involved for various activities in each of the strategic initiatives.

Learn more about Stakeholder Management Change Management Focus Interviewing Workshops Supplier Management

Open Innovation Deliverables

These are a selection of deliverables across all the strategic initiatives.

  • Open Innovation Program Framework (PPT)
  • Digital Transformation Strategy Roadmap (PPT)
  • Client-Centric Service Design Playbook (PPT)
  • New Service Financial Impact Model (Excel)

Explore more Open Innovation deliverables

Launch of Open Innovation Program

The implementation team utilized the Resource-Based View (RBV) framework to guide the launch of the Open Innovation Program. The RBV framework, which emphasizes the strategic value of resources and capabilities in gaining competitive advantage, was instrumental in identifying the internal and external resources necessary for a successful open innovation ecosystem. This approach was particularly beneficial as it helped the organization to focus on leveraging its unique capabilities while seeking external partnerships to fill the gaps.

The team took the following steps in applying the RBV framework:

  • Conducted an internal audit to identify the organization's unique resources and capabilities that could be leveraged in the Open Innovation Program.
  • Sought out external partners whose capabilities complemented the organization’s own, focusing on technology startups and academic institutions with cutting-edge research and development projects.
  • Designed the Open Innovation Program to facilitate the integration of external innovations with the organization’s existing services and capabilities, ensuring a seamless blend that would offer competitive advantage.

Additionally, the team employed the Ecosystem Strategy framework to structure the Open Innovation Program. This framework helped in understanding how to position the organization within a larger ecosystem of partners, competitors, and customers, creating a symbiotic environment that fosters innovation and value creation. The Ecosystem Strategy was pivotal in mapping out the roles and relationships among different stakeholders in the open innovation process.

The team implemented the Ecosystem Strategy by:

  • Mapping the innovation ecosystem to identify key players, potential partners, and the flow of information and resources.
  • Establishing clear guidelines for collaboration that defined the roles and expectations of all parties involved in the Open Innovation Program.
  • Creating a platform for continuous interaction and knowledge exchange among ecosystem members, facilitating the co-creation of value.

The results of implementing these frameworks were significant. The Open Innovation Program successfully harnessed external innovations, enhancing the organization's service offerings and strengthening its competitive position. The organization became a central node in an innovation ecosystem that not only fueled its growth but also contributed to the advancement of the professional services industry as a whole.

Development of Digital Transformation Roadmap

For the development of the Digital Transformation Roadmap, the implementation team utilized the Capability Maturity Model Integration (CMMI) to assess and improve the organization's processes. CMMI provided a structured approach for evaluating the maturity of the organization's processes in relation to digital transformation and identifying areas for improvement. This framework was particularly useful for ensuring that the organization's processes were aligned with its digital transformation goals, facilitating a smooth transition.

In applying the CMMI framework, the team:

  • Assessed the current maturity level of the organization's processes across various functions, focusing on those directly impacted by digital transformation.
  • Identified gaps and areas for improvement, particularly in processes that were critical for the integration and deployment of digital technologies.
  • Developed a staged improvement plan that outlined specific actions to elevate the maturity of processes, ensuring alignment with the strategic goals of the digital transformation initiative.

The team also leveraged the Value Chain Analysis to understand how digital technologies could enhance the organization’s operations and create additional value for clients. By dissecting the organization's activities into a series of value-generating steps, the Value Chain Analysis illuminated areas where digital interventions could optimize operations and service delivery.

The Value Chain Analysis was implemented by:

  • Breaking down the organization’s operations into primary and support activities to identify where digital technologies could be most effectively applied.
  • Identifying digital solutions that could enhance efficiency, reduce costs, or create new service offerings in each activity of the value chain.
  • Integrating these digital solutions into the Digital Transformation Roadmap, prioritizing initiatives based on their potential impact on value creation and strategic importance.

The combined application of the CMMI and Value Chain Analysis frameworks resulted in a comprehensive Digital Transformation Roadmap that was closely aligned with the organization’s strategic objectives. The roadmap guided the organization through a successful transformation, significantly enhancing its operational efficiency, service quality, and competitive advantage in the market.

Additional Resources Relevant to Open Innovation

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Launched an Open Innovation Program, establishing partnerships with technology startups and academia, enhancing service offerings.
  • Developed a Digital Transformation Roadmap, integrating AI, data analytics, and blockchain, improving operational efficiency and service quality.
  • Implemented a Client-Centric Service Design Approach, leading to a 15% increase in client satisfaction scores.
  • Strengthened the innovation pipeline with a 20% increase in new services under development.
  • Achieved a 10% revenue growth from new services within the first year of implementation.
  • Enhanced competitive position by becoming a central node in an innovation ecosystem.

The strategic initiatives undertaken by the organization have yielded significant positive outcomes, notably in enhancing service offerings, improving client satisfaction, and driving revenue growth. The successful launch of the Open Innovation Program and the development of a comprehensive Digital Transformation Roadmap have been pivotal in achieving these results. The 15% increase in client satisfaction scores and the 20% growth in the innovation pipeline are particularly noteworthy, demonstrating the effectiveness of these initiatives in meeting the organization's strategic objectives. However, while the revenue growth from new services is commendable, it falls short of the transformative impact anticipated. This shortfall suggests that the monetization of new services and the full integration of digital transformation initiatives into the organization's value proposition may require further refinement. Additionally, the reliance on external partnerships, while beneficial for innovation, poses risks related to dependency and control over the innovation process.

Given the mixed results, the organization should consider enhancing its internal capabilities in innovation management and digital transformation. Investing in building a more robust internal innovation ecosystem, alongside the Open Innovation Program, could mitigate risks associated with external dependencies. Furthermore, a deeper analysis of client needs and market trends may reveal additional opportunities for service innovation that aligns more closely with client expectations. To capitalize on the digital transformation efforts, a focus on developing digital literacy and agility within the workforce could accelerate the adoption of new technologies and methodologies. Finally, expanding the metrics for success beyond client satisfaction and revenue from new services to include measures of operational efficiency, employee engagement, and long-term client loyalty could provide a more holistic view of the impact of these strategic initiatives.

Source: Open Innovation Strategy for Professional Services Firm in North America, Flevy Management Insights, 2024

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