Consulting on the cusp of disruption — fresh ways to do business

A 2013 Harvard Business Review article prophetically sounded the alarm — consulting, an industry that hasn’t changed in 100 years, was on the cusp of disruption.

The same forces that disrupted so many industries — from steel to education to publishing — were at work again, and the pattern was familiar: New competitors with new business models were arriving on the scene; incumbents were either ignoring them or fleeing to higher-margin activities; and previously unsung players were achieving broadly acceptable quality, often introducing a new basis for competition.

The impact was already substantial, the authors noted. The share of classic strategy work at traditional consulting firms was down to 20%, versus 60% to 70% some 30 years before.

It is noteworthy that some senior consultants interviewed for the study scoffed at its thesis. After all, as long as there is business, there will always be problems that need fixing!

And to be fair, unlike the disruption of the likes of US Steel, consulting firms have certain things on their side that resist disruption.

A large portion of traditional consulting relies on consultant knowledge and expertise. Until artificial intelligence becomes sophisticated and economical enough to replace consultants’ deep knowledge and relationships, there will be a need for external consultants.

Secondly, consulting is highly opaque compared to manufacturing companies. The most prestigious firms have evolved into solution shops whose recommendations are created “in the black box of the team room”, HBR observes. As a result, clients struggle to judge a firm’s performance in advance, because they are usually hired for specialized knowledge and capabilities that they themselves lack. In such circumstances, price becomes a proxy for quality.

Thirdly, consulting is exceedingly agile. The practised ability of top firms to move from big idea to big idea allows them to respond flexibly to threats of disruption. Their primary assets are human capital, so their fixed investments are minimal and they aren’t hamstrung by substantial resource allocation decisions.

But the world is changing, and the privileged advantage of incumbent firms is being eroded.

  • Perhaps most importantly, their clients are becoming increasingly sophisticated (a rise of internal consulting is attributed to enormous turnover at consulting firms of up to 20% annually).
  • Secondly, alternative solutions with greater transparency, speed and clear return on investment than traditional consulting houses are seeing the light, spawning new delivery and service models (such as HourlyNerd).
  • In addition, new analytical tools enable organizations to better diagnose and navigate complex business problems — or at least reduce the ongoing need for external expertise.
  • And then there’s the democratization of data caused by the advent of market research companies and database providers.

All of which increases pressure on firms to open up their intellectual property and provide measurable results beyond just brand value. How can consulting firms formulate a response to all this?

To me, as one of a new breed of consultants engaging in disruptive new directions, the digital angle is irresistible. Much of the abovementioned disruption is enabled by digital technologies (specifically, analytics). In consulting jobs that have been routinized (where the process for uncovering a solution is well known and the scope of the solution is fairly well defined), analytics-enabled consulting is making waves. Involving the packaging of ideas, processes, frameworks, analytics and other IP for optimal delivery through software or other technology, it further threatens the traditional consulting model.

According to the HBR article, we can expect a steady invasion of hard analytics in consulting, as solutions featuring greater predictive technology and automation will only get better with time. Their speed and quantifiable output will help reduce, and perhaps even negate, brand-based barriers to growth, accelerating the success of emerging-market consulting firms such as Tata Consultancy Services and Infosys.

But does it have to disrupt, or can it be a vehicle for self-disruption? Indeed technology, the vehicle of much of the current disruption, can be employed to great effect to stay ahead of the game.

But disruption is easier said than done, given the “illogic” of disruptive business directions to established thinking. Consulting firms that hope to incubate a technology-assisted model will want to revisit the lessons HBR’s Clayton Christensen laid out inThe Innovator’s Solution.

These focus most significantly on separation — business unit autonomy, separate resource allocation, independence of sales channels and a new profit model — all of which will take a considerable amount of courage and determination.

In addition to technology-enabled insights and the power of separation, there needs to be a fundamental reassessment of the consultant’s value, if the industry is to escape the deadly pull of comfort zones. I’d like to offer the following five ways in which the industry can refresh its business approach, to drive its continued relevance:

  • Innovation — always be focused on bringing new ideas to the table.
  • Remove the box — do not constrain your thinking (refer Christensen’s advice above to remove the shackles from your thinking).
  • Be holistic — take responsibility for end-to-end impact — outcomes are what your client is interested in.
  • Stay on the hook — related to this is the realisation that you’re in it together with the client — shared risk/reward models are required.
  • Partners — finally, still in the same vein, commit to long-term partnerships with shared goals.

Are you ready to do what it takes to disrupt yourself?