How to Make It in a Project-Based World

LinkedIn Article by Tim Williams 
July 31, 2016

Is it possible to trade retainer-based client relationships for project work and still do great work, keep people happy, and earn healthy margins? In the increasingly disintermediated world of professional services, it's essential for firms to more effectively adapt to the new ways client organizations are parceling out work. 

While most firms suspect this increase in project-based assignments is related to cost cutting, most client organizations would explain the trend as an effort to obtain the best solutions from the best providers.  Instead of depending on just a few firms to do "everything," companies increasingly have the sophistication, judgment, and access to information that enables them to select best-in-class business partners. 

As Harvard's Clay Christensen explains, “Their growing sophistication leads clients to disaggregate services, reducing their reliance on one-stop providers.  They are becoming savvy about assessing the jobs they need done and funnel work to the firms most appropriate for those jobs.” 

To thrive, not just survive, in this project-based environment, providers of professional services must transform in three key ways


Now more than ever, it's imperative to develop and showcase expertise in just a few selected categories. Deep category expertise has always been a key selection critereon in professional services, but it's even more essential in a project-based world where there isn't time or money for a learning curve. Projects also require that you focus your firm's energies on substance ahead of style. This means developing what the agile community calls "low fidelity" prototypes and exposing them to clients early versus the tendency of most firms to invest time creating elaborate presentations and "unveiling" solutions only to discover they have solved the wrong problem. Project work also requires that we do a much better job of defining "Scope of Value" before jumping into the Scope of Work.  A clear definition of expectations and desired outcomes is essential to minimizing false starts and re-work.


To effectively accommodate multiple projects from multiple clients, firms must break free of the illusion that maximum capacity is optimum capacity.  Adding just 5% more projects to an already busy firm won't take just 5% longer to complete, but may take up to 100% longer. This phenomenon is due to “Queuing Theory,” which explains how adding more projects to near- or over-capacity firms produces chronic problems with past-due work, errors, and sub-optimal quality. Delivering better also means adopting the key principles of agile development, which is based on the concept of small, hyper-collaborative teams who are empowered to make their own decisions (in place of the hierarchy and approval chain of conventional firms.) Profitable project work is also dependent on acknowledging -- and staffing for -- the difference between the higher-value ideation / innovation / problem-solving work ("Magic") and the lower-value implementation / execution / coordination work ("Logic).  Otherwise, your firm succumbs to what some economists refer to as "surgeons piercing ears."


While ongoing retainers can cover a multitude of pricing sins, running a profitable firm is infinitely more challenging when dealing with a stream of free-standing projects. If your approach to pricing is counting up your costs (hours) you will likely chronically underprice, especially when it comes to individual projects.  Hours are not only the wrong unit of value, they're even the wrong unit of cost because they're an incomplete way of forecasting the resources required to complete an assignment. Progressive firms have traded projected hours for much more effective ways of "sizing" an assignment using units such as "project points," "story points," or even t-shirt sizes (a methodology used by more than one of the world's best ad agencies). The larger point when it comes to pricing is to abandon the outmoded and regressive notion that you're selling your costs (hours) and adopt the modern pricing practices employed by 21st-century companies, which is to price the customer, not the service.  Price the value of the outputs or outcomes produced for your client, not the cost of the inputs incurred by the firm. 

Whether independent or part of a global network, agencies, law firms, accounting firms and other professional service providers must re-tool their business models to optimize -- not just tolerate -- an environment that requires a more flexible, modular approach to getting work done.

In their provocative book, A Beautiful Constraint, Adam Morgan and Mark Barden argue that these types of limitations can not only be overcome, but actually turned into advantages.  Today's project-based environment can be thought of as a "beautiful constraint" that can help inspire and fuel the needed transformations in your firm.