The Disruption of the Consulting Industry (2022)
In a world, ready to break free of the traditional working models, the disruption of the consulting industry is becoming more and more prominent and powerful. In the post-pandemic world, most businesses are having difficulties in adjusting to their new environments. The digital revolution, the gig economy, and new company models have already altered the landscape. Against this backdrop, most industries are on the brink of technological disruption.
Over the last 20 years, the rate of change has accelerated dramatically. Take, for example, the music industry. From the radio and CD player in the 1990s to online streaming on your phone; we’ve come a long way. Traditional hardware companies like Sony, Bose, and Denon collided with smartphone companies like Apple, Samsung, and now Xiaomi.
People no longer buy CDs or download music; instead, they listen to Spotify on their phone or computer. And the transformation is not yet complete. The gig economy and blockchain are just beginning to disrupt the industry.
In this article, we will take a close look at the disruption of the consulting industry as well as emphasize the flaws that will foster the disruption of the consulting industry. Also, we will take a dive into how these disruptive forces will create opportunities, and how it will shape the future of consulting.
What is disruption of the consulting industry?
Disruption is all around us. There isn’t a single industry that isn’t affected by disruption. If you believe you are in one that is safe from it, then you my friend, should think again. Just have a look at Netflix, Tesla, e-Bay, WeChat, WordPress, and others. The list could go on and on and on… Thus, in today’s world, the question isn’t really whether your industry will be disrupted, but when and how it will be disrupted.
According to Clayton M. Christensen, “Disruption” is the process through which a smaller company with fewer resources effectively challenges existing incumbent businesses. For instance, incumbents are focused on developing their products and services for their most demanding (and typically most profitable) clients, they often exceed the expectations of certain groups while ignoring the needs of others.
PODCAST: What is disruption in consulting?
Disruptive entrants begin by successfully targeting those under served niches, establishing a footing by providing more appropriate functionality—often at a lower price. Incumbents, pursuing increased profitability in more lucrative niches, are less likely to respond strongly. Entrants then migrate upmarket, meeting the performance requirements of incumbents’ mainstream customers while retaining the benefits that fueled their early success. When large numbers of mainstream customers begin to adopt the newcomers’ offerings, disruption is said to have taken place.
What are some of the flaws that will foster disruptions?
There are some flaws behind the multiplicity of consulting offerings, processes, and tools that will eventually unravel the consulting business model. When an industry is based on complicated solutions and a large financial structure, it becomes vulnerable to change. Disruptive innovations enable new technologies to deliver simpler and more elegant solutions to old issues, sometimes at a lower cost.
Hence, here’s a few intrinsic characteristics of the management consulting sector that also serve as a barometer of its shortcomings:
#1. Billable Time – It takes a lot of effort. People undertake research, analysis, suggestions, process definition, process management, and facilitation for the majority of consulting services. To maximize revenue, a billable time-based business model encourages long, overstaffed engagements.
#2. The “Cost” of People – The term “goods” in consulting refer to the people who do the work. In most large firms, junior consultants earn far more money from clients than their employers pay them to do their jobs.
#3. Time-bound Deliverables’ Value Is Decreasing – As new trends, issues, and unforeseen disrupters emerge, the currency and usefulness of a research report, competitive analysis, or strategy plan presented to a client swiftly dwindles.
#4. Commoditization of knowledge vs. democratization of information – For decades, consultants have protected their intellectual property by keeping models, templates, and tools “private.” However, free information is becoming more and more accessible these days.
Furthermore, it is to be noted that despite these fundamental flaws in consulting disruption, which are detrimental to the clients’ best interests, the sector continues to grow at a healthy rate.
How will these disruptions benefit clients and consultants?
Disruption of the consulting industry or rather of the consulting value chain has numerous benefits for clients and well as for consultants. As a result of the digital revolution affecting modern companies, we are witnessing disruption in key sectors such as marketing and sales; knowledge; data analysis; methodology and solution development; and services and resources.
Clients today have a plethora of options for sourcing talent and experience, as well as for utilizing products suited to their individual needs. The same can be said for consultants as well. They are getting more and more opportunities to showcase their skills and talent.
We can see fresh opportunities emerge for new entrants that can capitalize on the value chain’s transformation. Clients have all the levers to take advantage of this new context if they dare to look at the dynamics at work and the new balance of power.
Moreover, the consulting sector is pretty adaptive and quite robust. It started with a value proposition centered on job optimization, but quickly evolved to include more value and focus on strategy. It has also demonstrated a high level of capability in embracing managerial mega-trends.
Also, it created specific services to assist their clients in implementing new management concepts such as total quality management, internationalization, voice of the customer, design to X, value pricing, lean six sigma, and succession planning.
How will disruption shape up the consulting industry in the future?
We have now entered a new era of Consulting 4.0 – a term derived from the stages of the industrial revolution – industry 1.0 to industry 4.0. Technological advancements, or more precisely, digitalization, have impacted the Consulting area as well. Disruption of the consulting industry has taken center stage in this era.
If you look at the history of consulting, the recipe for success was straightforward up until now. Consultants needed to gain experience, gather expertise and data, collect and process information, process data quickly, and organize results into professional-looking reports. However, it appears that digital is reshuffling the cards.
The Consulting Value Chain is always changing and clients are also evolving at the same time, extending their knowledge and expertise, gaining access to data, and relying on in-house Consultants more than ever before. The role of consultants is also shifting gears.
The primary business model, which is centered on issue solving, whether it is designing a new strategy, implementing cost-cutting measures, or implementing new technology, has ensured the consulting industry’s success.
Revenues are declining, competition is increasing, and the industry is consolidating. All these are causing concern for consulting businesses. However, a better way to look at this is to frame it as the start of a new age — Consulting 4.0!
With new business models, new growth areas, and creative goods and services to develop, the consulting sector must redefine itself. Digital change is, without a doubt, at the heart of Consulting 4.0.
Hélène Laffitte is the CEO of Consulting Quest, a Global Performance-Driven Consulting Platform and author of “Smart Consulting Sourcing”, a step by step guide to getting the best ROI from your consulting. With a blend of experience in Procurement and Consulting, Hélène is passionate about helping Companies create more value through Consulting.