4 Major Flaws of Consulting That Will Foster Disruption and New Opportunities for Clients and Consultants
Let’s take a look at how clients and consultants are responding to the challenges of disruption.
In a recent report called “Disrupt and Grow: 2017 Global CEO Outlook” published by KPMG, CEOs expressed their views on Disruption.
These are the results:
74% responded that their organization is actively disrupting the sector in which they operate, and are not passive observers being disrupted by competitors. And 65%, said that they see technological disruption more as an opportunity than a threat.
Disruption creates various risks for businesses that are not able to adapt to the significant changes in their markets. The potential for disrupting their market, or leveraging disruption to diversify, is noted as an opportunity by many CEOs in the survey.
In this article we will focus on the Top 3 areas in the agreement, essential in negotiating that will determine the success of your project.
Riding the Wave of Disruption –
Today Management consulting is a $250 billion industry. It’s big, growing, and highly profitable. And maybe that’s a big part of the reason why it’s about to be disrupted.
Whether the focus is strategy, operations, tax, finance, HR, or IT, business consultants are a staple of corporate life. Over 700,000 consulting firms provide services across all aspects of business globally. From strategic direction to simply serving as an additional pair of hands for outsourced work, consultants have become linked to the success of many large organizations.
New opportunities available to Clients –
As the disruption unfolds, we see new opportunities opening for new entrants who can seize the benefits from the evolution of the value chain. Looking at the forces at work and the new balance of power, clients have all the levers to take advantage of this new context if they dare to.
How are Consulting firms strengthening their position of power?
Hard to imagine an industry that was build giving advice to others on their strategy completely blindsided by the forces at work. But finally, the consulting industry, and especially the large players, are preparing and adapting to all those changes.
When you step back and look at the market from the client’s perspective, a few simple things are giving an edge to the main players.
Branding is more than ever a competitive weapon, and one-stop shop consultancies have understood that a long time ago. They invest heavily in marketing and even recently massive amounts in advertising.
The other part of the puzzle is trust, and many consulting firms have had to weather scandals of various magnitude. The big four at the time of Enron was in the spotlight, even McKinsey in South Africa had its own scandal.
Thought Leadership –
Dominating the thought leadership scene has always been an obsession for the key players. However, the thought leadership scene is still extremely fragmented and remains the avenue for consultancies to place themselves in the spotlight. Boutique consultancies have a big chance to shine in this capacity too.
New Value Proposition –
Just a few years ago, it would have been difficult to find practices in consulting firms around Digital. Today, if you take a few minutes to browse the websites of the same players, they have plenty of offers in the Digital Transformation and Cyber Security space. That includes – Adapting your strategy to digital; Embedding a digital dimension in your excellence programs; Leveraging digital for new customer experience; Innovating and building new business models through digital, and much more.
There are four fatal flaws of Consulting today to consider –
Underneath variety of consulting offerings, methodologies, tools, lie some vulnerabilities that will eventually unravel the consulting business model.
An industry becomes susceptible to disruption when it gets rooted in complex solutions and extensive financial structure.
Disruptive innovations provide simpler and more elegant solutions to existing problems, enabled by new technology and often at a lower cost.
Here are 4 inherent qualities of the management consulting industry that also represent its flaws:
1-Billable time – Labor intensive. Most consulting services rely on people performing research, analysis, recommendations, process definition, process management, and facilitation. Billable time-based business model which encourages lengthy, overstaffed engagements to maximize revenue.
2-“Cost” of People – High margins. The “goods” in consulting refers to people who provide the service. The billable rates of junior consultants in most large firms far exceed what their firms pay them at work.
3-Diminishing Value of Time-bound Deliverables – The moment a research report, competitive analysis, or strategic plan is delivered to a client, its currency and relevance rapidly diminish as new trends, issues, and unforeseen disrupters arise.
4-Knowledge Commoditization vs Information Democratization – For decades the models, templates, and tools of the consulting trade have been kept “secret” by consultants, as intellectual capital. However, there is more and more access to free information that can challenge that.
Ironically, these fundamental flaws, contrary to the best interests of clients, do not affect the growth of the industry, which is over 4 % a year.
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