Is it Possible to Reinvent the Consulting Business Model in the Digital Economy?

A difficult question, for sure. Even for a consultant. Before taking a position, we should first bring to the table a broader context and some background. In the world of professional services, consulting has played a very important role in modern business history. Supported by a business model based on bringing together, the best talent available and specialized knowledge in various disciplines, generated the most innovative business solutions to its customers. But in this era of “democratization of knowledge”, where it’s common to have handy talent, knowledge and solutions, at increasingly lower costs through innovative Internet resources, we should take it seriously to have an answer to this question.

So far, consultancy business had been practically immune to the biggest technological changes of modern business history.

Just imagine. Will it be possible having one day, all knowledge required by any organization, to solve a problem no matter how complex, at their fingertips (and budget)? Digital Economy, does enable it. At least, this is true when we find ourselves trying to solve everyday problems, and looking for handy tutorials at Youtube and Wikihow, or acquiring new knowledge in technical areas, at widely popular MOOCs in Coursera, Udemy and others. It wouldn’t be foolish to think that one day, you may also find yourself generating this fast, “specific solutions for a specific client.”

Clearly, seasoned and experienced consultants, won’t resist questioning this statement and claim that “clients always face new challenges and problems” in their organizations. And it’s true. New challenges always need new solutions, but in turn they may also need new knowledge to be acquired, at a faster rate. Despite this threating outlook, this is becoming reality for consulting business, then we should consider changes in its business model.

So far, consultancy business had been practically immune to the biggest technological changes of modern business history. For over 100 years, the business model consulting hasn’t changed anything at all. It has always involved allocating experts from a particular discipline, in an organization for a certain time frame and help them generate solutions and recommendations to their particular and complex problems. There are some barriers that may allow paradigm shift in consulting business. Still, many customers rely on brand and reputation from large firms, rather than using measurable results and quality that can demonstrated by that smaller firms or individual consultants. But to worsen this, smaller firms and consultants, rather than try to change this vision, using innovative models and smarter ways to provide business value, fall into the temptation to emulate the same business model from larger ones.

New challenges always need new solutions, but in turn they may also need new knowledge to be acquired, at a faster rate.

However, there are other paradigms related to consulting business that have been finding winds of change, for example the notion that consulting business is exclusively provisioned as services, rather than taking an approach of mixing of products and services, thus finding a way to reinvent the business model. A good example of this paradigm shift is McKinsey Solutions, delivered as a set of solutions based on technological tools, methodologies and data analysis, replacing the traditional advice provided by a on-premise consultant, providing timely and realiable decision-making support of its clients. While it’s still early to judge whether McKinsey Solutions’ business model changed the consulting paradigm at all or not, clearly there are new trends in technology such as Big Data, which not only supports this approach but invites more players to take advantage of these benefits.

Other examples of disruption of the traditional business model of consulting, come from the consulting paradigm to maximize the usage rate of the firm’s “knowledge resources”, allocating its consultants to billable clients, with the incentive to increase staff as maximizing revenues. At the time you read these lines, LinkedIn, the world largest professional network with more than 400 million members worldwide and one of the largest databases of freelance consultants in the world, moves business for “online recruiters” that use LinkedIn premium services. They are also pushing forward the macro-trend of freelancing around world. And they are also making happy days to LinkedIn and Microsoft shareholders. And it isn’t a consulting firm! This is possible, thanks to cloud technologies and the new Digital Economy.

In conclusion, reinventing the consulting business model in these days of Digital Economy, requires more than the acquisition of new knowledge and growth in staff. To do this, you need to consider differentiation, scaling the business to new boundaries, testing new markets, mix products and services, and faster without sacrificing quality. The disruption in the consulting business model is inevitable, as the boundaries between a business models are increasingly blurred. Maybe Patrick Van Der Pijl was right.