Adaptability is What Companies Need. Management Consultancies Can’t Provide it.
We need to create companies that thrive on change.
In the first article of this series, we talked about the paradox that the growth of the management consulting business over the last 50 years has corresponded with a decline of overall business health — higher mortality rate and greater power in fewer hands. Despite this seemingly problematic relationship between the practice and its outcomes, the industry is still in high demand, with $280bn annual sales projected for 2019. What’s going on here?
Traditionally, consultants (especially strategy consultants) are brought in to provide management with an objective point of view on how to tackle business problems within an existing market: how to accelerate or scale the business, how to make the business more efficient, how to make it more profitable. For many years, tackling these problems with an approach that combined vertical industry expertise, analytical scrutiny and strategic decision-making frameworks proved at least somewhat successful.
But as we ushered in the new millennium, a new era of business began to emerge, one marked by an ever increasing pace of change. Legacy businesses now face a new type of problem, one that cannot simply be tackled by the brute force analytic methods that had worked in the past. Their entire landscapes are changing dramatically, fueled by cultural and generational shifts, technology and infrastructure advances, the proliferation of ecosystem and platform business models that support and power innovation, and an abundance of venture cash to fund market disruptors.
In this new era, consistency is less valuable than adaptability, longevity is less valuable than agility, and analysis of the past is less valuable than the ability to imagine and create the future.
Younger businesses have become not just change agents but dominant players today, creating entirely new markets, and dramatically shaping or morphing existing markets. These companies have a genetic advantage in that imagination, experimentation, adaptability and agility are baked into the core of their businesses. They have aligned culture, capabilities, structure, systems, partnerships and metrics to ensure they constantly evolve and innovate. They thrive on change.
To illustrate this point, it’s worth noting that the top ten global businesses by market capitalization in 2010 had a median age of 57, compared to just 34 today, just ten years later!By contrast, many legacy businesses are struggling to keep pace, held back in part by the very assets that gave them an advantage in the past — their supply chain, legacy relationships and partnerships, their efficient but rigid systems and processes, their scale. In category after category, many formerly successful and respected companies are failing to adapt and suffering the consequences. Kodak and Blockbuster are obvious examples of businesses blindsided by new technologies. Forever 21 and Tiffany illustrate the perils of not adapting to shifts in culture and consumer attitudes, in the former case, towards fast fashion and in the latter, towards luxury.
It’s not that the legacy firms don’t know the problem, or recognize the need to change. Every business publication over the past few years has relentlessly covered the need for transformation. Most businesses just don’t know how to do it. There are some notable exceptions of course — IBM, Disney are two companies who have adapted to the new era. But many of their peers are struggling to figure out how to transform themselves to succeed in today’s volatile environment.
And by turning to management consultants for help, they are inadvertently exacerbating their problems. As we outline in the next post, the tools that were useful for improving performance in existing markets are just not effective when the the real need is to create or grow an emerging market, one that is not clearly formed.
