The future of consulting: from utilisation to outcomes
Is the traditional consulting model dead? I don’t think so. But it needs to change.
Consulting equals to prestige
Consulting is still a prestigious activity. Consultants are respected for several reasons, namely the fact they (we) usually have experience in different projects, customers, technologies, sectors, etc. They usually carry in the belt a good diploma and also a few certifications. Guys that are always up do date, aware of the best practices, with knowledge about the sector, the future, and everything else we can imagine…
When we wire a consultant we expect to have a trust adviser. Someone we know that will helps us on our transformation journey. Someone with the scars from previous battles. An innovator.
But nowadays something changed: everybody has free access to all the information the world. You just need to Google it. Information comes in all flavors, from documents to funny Youtube videos where anyone can learn literally everything.
A couple of years ago it was different. When I started to work at Arthur D. Little customers would hire ADLs consultants because of their knowledge. There wasn’t a Google to ask questions. Youtube was literally impossible. The consultant was a god of knowledge — with access to endless PowerPoints full of secrets and valuable information. If you had money to hire a consultant, you could make a difference.
Then all the companies with money started to hire the same consultants. There were only a few consulting companies. End of the day you wouldn’t have any competitive advantage by hiring consultants because “everybody had access” to them.
Now the challenge is even bigger: information is free. everybody has access to it.
If someone wants to learn about a framework or a methodology it’s a matter of using Google, YouTube, Kindle or enrolling in a 12 Euros training program.
So, what’s the future of consulting?
It’s certainly not selling slide decks. Long term strategies. Lists of recommendations and critical success factors. Business plans forecasting the next 2000 years.
In my opinion there’s only one future for consulting (i.e. I don’t include selling a software developer full-time as consulting — that’s body shopping): success fee consulting. Shared risk. Meaning, consultants need to be worried with outcomes not only delivering a project on-time, on-budget and making sure utilisation is 80% or higher.
As a former customer of organisations like Kaizen I can somehow compare with typical consulting models. Those guys from Kaizen will charge a small fee at the start of the engagement and then a percentage of the results. Usually these are the variables:
- cost reduction (amount of cash saved)
- more sales (new or transformed revenue because of the changes Kaizen suggested)
From a customer point of view it’s important to mention that I feel more safe when I hire someone that I know is deeply engaged to improve my numbers. somehow is like hiring a co-founder to my startup — he will not be paid for his effort, he will be paid for results.
Nobody likes risk — especially when cash cows exist
Changing the revenue model from effort to results is a huge risk — you really need to trust your capacity, your approach, your people and also the customer. Certainly that a lot of customers don’t have the right maturity level for this or regulation doesn’t even allow (e.g. Government).
From a motivational point of view, as a consultant, I would be proud to update my LinkedIn saying that I’ve helped company A improving sales in X%, company B reducing costs in Y% and company W lunching 20 new products that contributed to +200% on the gross margin in 3 months. It different than saying that I’ve worked for company A, B and W as a consultant. And what about the results? Yeah, right. My utilisation was high, daily rate as well, and everybody was happy.
I know, this is an extreme view of the future of consulting. But isn’t this change happening already when “younger companies”, or decision makers, prefer to hire talent directly? Or when they hire smaller consulting boutiques just to improve, by doing, customer experience? Create a new product? How many new design-oriented-consultants are out there, right now, selling this new type of consultancy? A few hundred for sure. Opportunity cost is high.
Yes, I am a consultant. Yes, I’m assuming that my current model needs to be disrupted. It’s better to assume. All business models need to innovate continuously. At least incremental innovation. It’s better to be honest. Even if I’m not the market doesn’t care. Options are out there — everybody has access to everybody and everything. There are no secretes nowadays.
About contracts
Long-term contracts will also change to short-term contracts. Like I said before, these contracts will be paid according with results, not only effort. And this is going to hurt because it’s really comfortable to sell a few millions for a couple of years. But is this the trend? I think it’s the opposite. Short term, outcomes based contracts. Sprint by sprint. Prototyping together. Validating. Doing customer research. Working on the experience. Discovering new needs. Etc. Etc.
Subject Matter Experts
Subject Matter Experts (SMEs) are the ones who can talk about outcomes. The outcomes that they helped to achieve. I can be a guru on methodology X but unable to transform an organisation to use that methodology. The SME is no longer the one who knows the method but the ones who knows it and is able to implement it.
Hiring skills is a commodity. Hiring someone that will be paid by the outcomes achieved is what can really make a difference.
Good news is that customers need to be ready for this. I guess 80% aren’t. So there’s still money to make out there. But it’s a declining market, I guess. I don’t imagine younger companies hiring expensive consultants but I do imagine this companies subcontracting someone that will share the risk. people committed to laugh and cry depending on the results. In this is such a mindset change for the typical consultancy engagements that it will take time. But, like I said, I really think this is already happening.
Innovation is a process. Everybody needs to practice it before it’s tool late.
And yes, even www.consultancy.uk is already talking about the fact that there’s a need to improve consultancy business model.
Who’s going to be brave enough to change? :)
Side note:
Outputs tell the story of what you produced or your organization’s activities. Outputmeasures do not address the value or impact of your services for your clients. On the other hand, an outcome is the level of performance or achievement that occurred because of the activity or services your organization provided.
Opinions are my own.
