Management consultancy industry upgraded with design

Acquisition of design competencies for digital transformation

Rauno Pello
Jan 4, 2018 · 11 min read
Illustration by Santino Calvo

Background

Management consultancy industry is changing

Qualls (2015) describes five types of consultation companies: (1) management consulting that offer big-picture strategy for markets and companies; (2) innovation strategy consulting that create new business models or product categories; (3) experience design consulting that design new products or services with great experiences; (4) development and manufacturing consulting that create the digital or physical products; and (5) operations and service consulting that maximise service or product efficiencies. Traditionally management consultancies helped companies become more profitable within the pre-existing constraints and the innovation strategist used design thinking and human-centred business development to find new disruptive business models (Qualls, 2015). Today, the consultancies reflect the market situation and are not as single-faceted but incorporate a comprehensive selection of services (Fincham & Clark, 2003) that merge and blur the lines between different types of consultancies (Qualls, 2015). For example, the Big Four (Deloitte, PwC, EY and KPMG) accounting companies now compete on consulting market with the MBB (McKinsey & Company, Boston Consulting Group and Bain & Company) and have outgrewn the latter in annual turnover and continue to shape the industry (Chin, 2014).

Experiences are driving the economic value

More than two-thirds of the world economy is comprised of services (World Bank, 2017), which confirms that we are moving from the industrial to the service economy (Pine II & Gilmore, 2011). Higher economic value has progressed from commodities to goods, from goods to services, and now, is moving from services to experiences, paving the way for the thriving of the experience economy (ibid.) where “goods and services are no longer enough” (Pine II & Gilmore, 2013, p. 32). Customer engagement through experiences has become necessary for business success (Kilian, et al., 2015; Pine II & Gilmore, 2011) which is proved by the rise of the innovation strategy, product design and service design consulting service provision (Qualls, 2015).

Digital transformation is all the rage

Consumers are looking for omnichannel experience via different coupled online and offline channels powered by connected data across the organisation (Del Rowe, 2017). Glinska (2017) stated that adopting a companywide innovation is a strategic necessity in the Digital Age. Furthermore, digital transformation is not just about implementing novel technologies, but also “enabling human excellence in critical thinking, creativity, and innovation” in order to survive as organisations (Glinska, 2017, p. 1). Therefore, it is important to find right partners for the transformation process who have also a strong business knowledge, can drive success (Del Rowe, 2017), and can aide the management with the organisational change that comes with digitalisation.

Newman (2016) states that digital transformation has become a vital element of business strategy which is illustrated by the importance of the adaptability to change, the significance of customer experience, the speed of innovation, popularisation of the remote workforce, the prevalence of augmented and virtual reality, application program interfaces (API) for multiple avenues of availability, big data analytics and measurement, the impact of Internet of Things (IoT), smart machines and artificial intelligence (AI), destruction of organisational silos.

Design is finding its place in business discourse

Design is not just style, aesthetics or looks it is “about market relevance and meaningful results” (Maeda, 2017). The design process starts with the user and market research, empathy and exploration; and continues with iterative development involving prototyping and user testing; id followed by product or service refinement for the best design outcome or service implementation (Stickdorn & Schneider , 2011; Qualls, 2015). Best (2006) presented that design is active in different levels of organisations: in the operational level implementing projects and processes into products, services and experiences; in the tactical level integrating business processes, teams and functions; in the strategic level to connecting policies, missions and agendas.

According to Design in Tech Report 2017 (Maeda, 2017) all top business schools have student-led design clubs, and are integrating design thinking to their curriculums; furthermore, management consultancies are appointing designers to their most senior level positions. Global companies want to better understand design, boost creativity, introduce new skills and tear down corporate silos with the new collaborative design tools and techniques (O’Connor, 2017) — rooted in product, graphic and service design and design thinking.

Management consultancies are acquiring design competencies

As the design is gaining popularity and consulting on innovation, customer experience, design thinking and digital transformation has become an attractive topic (Thomson, 2013), even the traditional management consultancies are entering the game and using the most classical corporate way to do it: acquiring or merging with standout design companies (Hurst, 2013). This trend is illustrated by McKinsey & Company acquiring design companies LUNAR (McKinsey & Company, 2015) and Veryday (McKinsey & Company, 2016), EY acquiring digital consultancy Seren (EY, 2015), Deloitte Digital incorporating full-service advertising agency Heat (Deloitte, 2016), PwC acquiring user experience design consultancy Optimal Experience (PwC, 2014).

Client companies are getting more conversant with benefits of design and technology and are expecting consultancies to keep up with the trends and modern requirements. Therefore, all traditional consultancies should ask themselves the future-defining question “Is your firm changing (at least) as rapidly as your most demanding clients?” (Christensen, et al., 2013). If the answer is no, then it is time for the leaders of the companies to figure out what is missing and what needs to be changed in order to keep up and surpass demand of modern consultancy competency provision. Furthermore, CEOs are progressively recognising the value of the impact of design and design thinking (Blecken, 2016). VanHemert (2015) states that McKinsey’s acquisition of Lunar proves that “business world is increasingly seeing design as a necessary competency” and shows how “design’s influence is growing beyond the tech industry into the corporate world at large”

Developing design competencies help consultancies: with digital engagement strategy and customer experience design (EY, 2015); to connect holistically brands and consumers and help companies find their disruptive advantage (Deloitte, 2016); to use customer insights for a better business strategy that’s fit for the realities of the digital and the customer (PwC, 2014); to deliver design impact (Edson, 2015); to help more clients grow more quickly by creating amazing new products and services, launching new ideas, re-engineer products and shaping product portfolios (McKinsey & Company, 2016); to ‘future-proof’ clients and take on all challenges in the marketplace (Gianatasio, 2017); to deliver rapid growth for clients and create value for their customers. (McKinsey & Company, n.d.-a); to create a lasting competitive advantage in digital (McKinsey & Company, n.d.-b).

Though, nothing happens in a vacuum. Blurring the lines between management consultancies and creative companies has also brought up some design companies developing their own management consultancy skills. For example, advertising agency R/GA offers consulting services with business consultants on its payroll (Rath, 2017).

Reflection

Management consultancy industry might be reacting to the slowing down of the business growth predicted in Marketline (2015) industry report. Or, they are looking to fill the gap made by the classic strategy share of work decrease to less than a half the size it used to be a few decades ago (Christensen, et al., 2013). Either way, transforming the business model and acquiring design (especially digital design) companies indicates the consultancies’ desire to “tap into clients’ escalating digital marketing budgets” and describes “ongoing transformation of the business landscape as a whole” (Gianatasio, 2017).

Today, design encompasses “everything from products, branding, and business models to corporate strategy and structure” and therefore it makes sense being a part of management consulting world (VanHemert, 2015). Although with caution, Sturdy (2011) found that consultancies have an impact on management more generally. This gives reason to believe that the human-centred approaches introduced (brought to focus) by design and design thinking will find its permanent place in the management discourse and result in products and services that are more usable for and desirable by the customers and efficient and effective to produce and offer by the companies.

This change in management advice consultancy industry illustrates how the digitalisation is disrupting the traditional industries and blurring lines between previously separated disciplines — that design and business used to be.

Combining and unifying the different services from the different economic fields on a large scale will also have implications on the global economic statistics collections. Will the Big Four or MBB be accounted into the creative economy statistics now? Is it possible to differentiate management strategy consult and disruptive design consult?

As the big management consulting companies are driving the trend from one side the design companies should also consider developing their service portfolio to match the consultancies and keep the competition open. For example, investing in business-minded strategists and developing in-house know-how, or acquiring or merging with business consultancies.

Further research should be done to understand effects of the merging of the design and business onto the educational system. What should the new curriculums include? It is fair to say that design schools need to incorporate more business and management studies into their curriculums, as much as business schools must include design theory, design thinking and innovation studies in theirs. Importance of customer experience design implies that business students would also gain from more sociology, anthropology and psychology studies in order to develop more human-centred business models and enterprises.

The driving force behind the changes seems to be the Big Data and its analytics and the run for customisability and personalisation of the offerings to be ready for what Pine II and Gilmore (2013) call commodification of experiences — the feeling of ‘been there, done that’ — that will be followed by provision of fully personalised unique transformations. Thus, the data scientist with design and anthropological competencies would be valuable additions to both design and management consultancies.

Conclusions

Digital transformation is happening more rapidly. Experience economy is fostering, the opportunities of creating value from just products and services is decreasing. Thus, companies need design-driven competencies and capabilities in order to design customer experience and build engagement. To be able to consult on digital transformation, global management consultancies need to obtain the knowledge to keep up with growing demand from the clients and competing offerings from specialised companies. Building human resource and educating in-house teams is slower than acquiring the fully working teams to be integrated into the management consultancy business models, therefore global management consultancies are acquiring well-known design studios and agencies.

The design inherent collaborative process integration into business and management should help bring down the corporate silos and inner competition that hinders innovation and creativity. The conservative Big Four and BMM welcoming design to their business practices acts as a seal of approval for the design consultancies and agencies or as McKinsey and Company (2015) puts it: “It’s no secret that design is increasingly a source of competitive advantage and business value. In a world of fierce competition, products, and services that are well designed — working better as well as looking better — have a critical edge”.

The transformation of management consultancies might, and probably will, have a counter drift in the design world. Designing new solutions for co-operation, or survival in the new market situation, with the new players will fuel also the design business’ future success.


This article is an edited version of my course paper for the Digitalisation: Society, Organisations, People class at Estonian Business School’s MBA program in Digital Society.


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Rauno Pello

Written by

Design strategist, service design consultant & design thinking advocate. Applying design to solve business problems.

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