We’ve all heard the old adage that consultants “use your watch to tell you the time”. During my years of consulting, I rarely got the chance to step back and look at where the client was getting the value from each project. In this article, we look at the value chain of traditional consulting before looking at how new entrants are starting to disrupt each part of this chain.
As is common – the biggest threats to the industry are probably not from within, but from new entrants who specialize in various parts of the traditional value chain. After looking at these new competitors, and areas where they can potentially out-compete consultancies, we conclude by surmising what this means to the industry of consultancy.
Breaking down the value chain of consulting
Let’s start by looking at what consultancies offer their clients. Consistency is one of the most impressive things about the industry: I am always amazed at just how similarly all these firms operate. Regardless of the brand name, the magic formula seems the same (albeit with rather different acronyms and nomenclature!):
- Ask an expert
- Data collection and analysis/insight
- Learn from others with similar experience
- Get a bright team to pull the puzzle together, communicate with stakeholders and agree on a way to disseminate across the company
We thought it would be interesting to look at the disruption to each individual part of the value chain. So below, we take each in turn and identify new entrants/threats to the traditional consulting model.
Ask an expert
It’s impressive to watch a Senior Partner command a room of clients. We would always joke, after hours of preparation and analysis, the presentation would be skipped over (or in some cases ignored), in favour of hearing the musings of the day of the impressive Senior Partner. The client knew that hearing the latest industry trends and developments from a genuine expert in the field was as valuable as anything else they were going to receive. On top of this, I was always amazed at how quickly the senior members of the team could drive to the real issue at hand in problem-solving sessions.
Without a doubt, the biggest threat to the expertise consultancies offer are the new “expert networks” that have been developed. These are allowing functional experts, across industries, to offer their insights to an increasingly broad audience. A one-hour call or a day workshop with someone who has been wrestling with a similar problem for years can allow a huge amount of information to be passed over in an extremely efficient fashion. What we’ve also read from industry leaders is how experts who have worked in similar roles to them often provide a level of insight that can be hard to develop as a career consultant.
The knowledge that the “expert” has been in the same boat as you gives clients more confidence in the expert advice: there is a deeper understanding of the shared issues. Expert networks have also become increasingly deep, as companies have an increased number of shared problems. With the rise of technology, a number of previously different industries face similar challenges. Whether it’s cybersecurity, mobile optimization, social media, or online marketing, a higher proportion of key challenges facing Boards are identical across industries. This also helps overcome the competitive issues of “experts” working with industry competitors, allowing far more wide-reaching networks to be developed.
There is far more data today. When I was a consultant, we were often called in to provide market data or access to datasets that clients didn’t have. Given the increased amounts of data, and therefore competition, the price to access large databases has been dramatically reduced, thus reducing the scale of economies for consultancies buying access to all their clients. On top of this, clients now have far more of their own data at their disposal. Regardless of the industry, data collection has become much easier. We’ve found this here at movemeon. In an industry traditionally governed by opaque recruiters, data has been less than sparse.
We regularly hear from clients how refreshing it is that we can tell them how their job performed; from how many people considered the role, through to conversion ratio to an application by consulting brand. Clients can have confidence that they are reaching the best candidates, as we can prove it! Whilst good data doesn’t always mean good insight, new developments in data science and analytics are helping to improve how businesses are using their data. And this is only going to improve – just look at how the likes of Palentir and Tableau are taking the industry by storm. The days of analysts crunching away in Excel and pivot tables are limited.
Learn from a similar experience
As a consultant, you always performed better if it was your second project in an industry or function. You had tacitly picked up a huge amount of knowledge around how another business thought about these issues. You were clearly no expert, but you had already seen at least two different approaches to the problem. On top of that, you would typically have a knowledge bank to call upon; a quick search would come up with at least 5-6 Powerpoints with ways to solve the particular problem you were working on. In my opinion, this is one of the areas where there has been the smallest amount of disruption (one quick look at Slideshare shows you how far we have to go!).
At movemeon, we are looking at ways to develop networks to help spread this knowledge sharing more easily. We are hoping to set up a series of events (e.g., strategy in internationalizing tech companies), to help start the process. However, it feels like there is a huge space for more platforms to start helping the sharing of this content.
Without a doubt, the area that has been most disrupted is the readiness of great talent to join an organization on a flexible basis. At movemeon, our freelance business has grown at an astonishing rate. We are increasingly amazed at the latent demand to bring in top-tier consultants, typically at senior consultant/manager level, to help drive through change. Whether it’s:
- Someone to lead a transformation, post-Board sign-off post a project by a strategy consultancy
- Or, a company post-acquisition who needs longer-term support to ensure the 100-day plan gets genuine buy-in
- Or, just a short-term resource to help get a strategic/operational project
… we are increasingly finding a huge amount of latent demand in the market. This, partnered with more consultants moving in-house, fulfilling their desire to have “more impact”, means consultancies are increasingly seen as a really expensive way to access great manager and associate level talent.
Does this spell the death of consulting?
In a word: no. However, it definitely spells the disruption of consulting. Over the past 30-40 years, consulting has grown into areas where it probably shouldn’t have, filling gaps that should have been solved internally, through better talent management. So I feel there the industry cannot sustain its current size. We’ve already seen some clear shifts in the industry:
- The Big 4 are acquiring consultancies in the “middle ground”
- Growth in specialized boutiques/tech-enabled consultancies
- Strategy consultancies are looking to diversify their offering by incubating or acquiring new technologies/functional expertise
We expect more of this, and the number of players in the middle ground to continue to be diminished. I’m going to expand on these ideas in my next article, on how the grocery market and consulting industry share more similarities than you might think…
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Founded by two ex-McKinsey Consultants, Nick Patterson & Rich Rosser.
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