Product manufacturers and tech companies have for years embraced the concept of rewarding employees who create marketable new products that help their outfits stay ahead of the competition. For professional-service firms, on the other hand, the concept of innovation is much less embraced. Yet, more than ever, it is critically important.

Imagine the reactions of lawyers, accountants, management consultants, IT consultants, engineers, or architects as their marketing teams present the stark reality: If they don't start to innovate their firm's service portfolio, they will be vying with a legion of lookalike competitors, the only notable distinction being their rock-bottom bids. Presented with that news, you would expect to see throats clearing and arms being crossed. Then, the audience would begin disputing the facts and bickering over how to react to them.

FASTEN YOUR SEATBELTS.  The underlying theme here is denial and anxiety, which brings Steve Martin to mind. In the 1989 movie Parenthood, Martin's character, Gil Buckman, imagines taking a roller-coaster ride. He smiles through clenched teeth,since he doesn't like roller coasters one bit. The professional-service marketplace can be a roller-coaster, and most firms don't like it one bit either. When they hit those marketplace twists, turns, and plunges, professional firms compete defensively, tentatively, and, yes, anxiously.

Let's face it: most professionals focus on selling what their competitors sell. They avoid real innovation, sticking instead to the seemingly "safer ride" of supposed innovation through acquisition or step-improvements on existing products and services. This is competition by trying not to fail, instead of by trying to win. Think of it as Gil Buckman's hatred of roller-coasters, when he should have been savoring the joys and thrills of doing something new.

Fortunately, the above characterization doesn't fit all professional-service firms. Recent survey findings conducted by my outfit, Expertise Marketing, reveal that many firms do view innovation as an astute move. Some have invented new value-added services, and many have achieved favorable marketplace results simply by working toward innovating their portfolios.

REWARDING ORIGINALITY.  Easy for some, but for other professional-service firms, embedding innovation into the fabric of the firm is a white-knuckle experience. Adopting that mentality underscores the acknowledgement that a firm's service portfolio has a finite shelf-life, that it is powerless to stop the inevitable march of commoditization, and, above all, that it will take responsibility for its own survival. It does, however, require leaders who are prepared to reorient the mindsets of the legions of Gil Buckmans, helping them make the transition from roller-coaster haters to roller-coaster enthusiasts -- participants who embrace the ups and downs of the ride.

Can it be done? With incentives and rewards, definitely. Most professional-service firms already reward their people for a host of behaviors -- and reap the beneficial results. So, too, should they develop programs to motivate their professionals to innovate the firm's services. Research points to three reasons these firms haven't used incentives and rewards for innovation and to the prescription for each:

• Incentives or bonuses generally are not structured to put a focus on innovation. Compensation practices at most professional service firms are largely focused on rewarding revenues related to rainmaking (selling the firm's services) or "billability" (performing the firm's services). Firms have begun to expand their rewards programs for qualitative behaviors like satisfying clients and managing client relationships. Astute professional service competitors go even further -- they incorporate incentives and rewards for innovation.

• Incentives require the measurement of performance, and professional service firms don't "do" measurement well. Measurement means work, especially as the behavior being measured moves from easily quantified to the more subjective. Professional service firms simply must wrestle this beast to the ground.

First, they could start with a program that measures and rewards the "quality" of new ideas. The qualitative measurements could feature a series of subjective assessments of, say, the relative newness, uniqueness, or potential value of an idea. Other measures could include how much effort it would take to incorporate the new idea into the firm's everyday operations. For the next step, firms could begin to reward their practitioners for well-documented and vigorous "thought leadership."

Qualitative measurements could include the successful publication of a thought leader's work in respected journals or book publishers. Over time, this practitioner would be rewarded for publishing in increasingly rigorous, prestigious or broadly distributed publications. Another qualitative measurement could be the development of a clearly-documented methodology: How thoroughly was it supported by marketplace research? Did clients pilot-test this methodology? How did clients assess its short- and long-term value? The next step could be toward an incentive program for a team-driven new services development function – qualitatively and quantitatively measured milestones that result in incentives and rewards for teams that conceive and launch new services into the marketplace. The bottom line is this: If innovation counts, it should be counted. And rewarded.

• Few professional-service firms have created a defined R&D framework. Without a formal "managed innovation" process, it may be hard to reward for the desired behaviors that would fit within it. There are some professional service firms that have created a defined R&D framework.

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