APAC service-based businesses must build resilience to thrive

Service-based businesses across the APAC market are currently looking for ways to remain resilient in these times of changing customer needs and challenging environments. Whether it’s management consultancies, architecture and engineering firms, or any of the other countless industries that offer human expertise as their main product, professional services have faced unique challenges over the past few years. And with growth across the industry expected not to assume a steady or predictable rhythm in the future, we can’t rely on things going back to business as usual just yet.

Every company has been experienced the pandemic differently, but common themes emerge across the board. Client billing is down. Projects have been scaled back, canceled, and some have been accelerated in ways that escalate pre-existing issues leading to employee stress and disengagement due to unreasonable expectations. Renegotiations sustained downward pressure on fees, and increasingly uncertain sales pipelines are common. Even some of the largest service-based businesses are considering – or have already begun – reducing headcount.

As recent downturns have made clear, focusing on resource constraints can have effects that are extremely damaging in the long term. Both on the ability to deliver on existing projects, and on the ability to win new business and rebound when conditions start to improve.

How can APAC PSOs respond in a way that ensures survival and success?

By anticipating new conditions that will replace the old, companies can position themselves for the business climate’s return to a healthier state. But we should be aware – this healthier state is unlikely to resemble pre-COVID times. We need to understand the new reality, that we need to work and plan both for a ‘New Normal' – that exists now - and a coming ‘Future Normal’.

Clients are going to be much more selective and demanding about projects going forward. Deal flows and talent sourcing will be more turbulent. Delivery talent will require better enablement and support for their new daily work realities.

But the emergence of new technologies and the necessity of deploying them to ensure survival creates a unique situation. Major opportunities now exist in creating a more holistic and dynamic PSO operating model that can cost less and with less talent loss while increasing margin and significant new types of business and growth opportunities have come within reach to offset recent revenue impacts.

How professional service firms can leverage technology for the ‘new normal’

Several key shifts in technology are emerging that PSOs across APAC must embrace to navigate the post-pandemic world. We’ve already become intimately acquainted with the technology that facilitates remote working – but this is simply the beginning. New tech can be organized into three categories: that which supports the business and client delivery, that which supports the PSO worker, and that which supports the overall health and wellbeing of all of professional services’ stakeholders.

These growth trends range from the essential – like next-generation client engagement that prioritizes consumer-grade digital experiences and enables more sustained, informative, and transparent connections between your firm and your customers, and smart recruitment tech that leverages AI to find the talent you need and personalize outreach – to the more speculative but high-potential. Such as new business models supported by technology that allows us to synthesize insights from data that has previously been untrackable and explore green fields, access new markets, and increase the profitability of our existing revenue streams.

… and prepare for the “future normal”

With sudden and widespread shifts surrounding the industry – and likely to continue to surround it for some time – PSOs in APAC have a historic opportunity and an existential need to pivot and adapt.

Embracing new trends represent the most obvious way for service-based businesses to navigate through the storm and towards a brighter future. But key to achieving this is motivation. Leadership must be willing to embrace the need and balance cost-cutting and rapid investment simultaneously to secure revenue and growth in the medium and long term “future normal.” Ultimately, PSOs willing to create the smartest, most adaptive, and most effective new operating model will reap vast rewards.

APAC PSOs need to eliminate the complexities within the market and be able to adapt to future disruption. Here we take a look at a few of the trends on the horizon:

Inflation – while the APAC region has seen less inflation than other parts of the world recently, the rates are still higher than usual and may increase further in the future. That said, you might be able to make a case that across the APAC region as a whole, the more developed economies arguably seem to be seeing the largest increases in inflation.  

Heightened geopolitical risk – for APAC based PSO businesses, this means considering the potential for international political conflict to threaten their financial and operational stability. Developing strategies to pivot quickly should the need arise is a must.

Competition from SMEs and more M&As – access to finance has strengthened SMEs’ capabilities for innovation across the region and allows them to foster talent and skills. Business leaders across the Asia Pacific region are turning to M&A as a catalyst for growth and renewal as they look for new pathways to profitability, adapt to market disruptions, and reposition their companies to succeed in the marketplace. Companies can now use M&A to realize transformative change to remain competitive and resilient in an increasingly complex world.

Cybersecurity risks – professional services organizations across APAC need to develop behavioral detection, machine learning, and threat hunting capabilities to keep pace with the onslaught of cyber-attacks. Businesses need to look at their technology and also their people and processes – they need to have trained people and appropriate processes to mitigate risk. 

Waning confidence – while business confidence is slowly rising in the APAC region, many businesses are still feeling the pinch post-pandemic with concerns around natural catastrophes, cyberattacks, interstate conflicts, fiscal crises, extreme weather events, and, of course, the fear of data fraud or theft.

Talent shortage – a service-based company’s most important asset is their people, and the current talent shortage has affected many people-centric organizations across the APAC region. Access to freelance or contractual workers for creative and professional work means businesses must embrace the hybrid workforce as a solution for addressing talent challenges.