Management Consulting: An Industry on the Brink of Disruption
All things considered, the traditional management consulting business model has remained the same for the past few decades. Generally speaking, this involves sending smart outsiders into organizations for a specific period of time and asking them to recommend solutions for the most difficult problems facing their clients. However, forces present in today's environment signal a change may be on the horizon. Early signs of disruption in the consulting industry include companies with non-traditional business models starting to gain traction. Furthermore, according to Tom Rodenhauser, the managing director of advisory services at Kennedy Consulting Research & Advisory “the share of work that is classic strategy has been steadily decreasing and is now about 20%, down from 60% to 70% some 30 years ago1.”
There are three main drivers to this disruption2:
- Clients have increased access to knowledge the consulting firms previously considered proprietary
- Clients are increasingly equipped with technological and talent competencies as that of the consultants
- Clients are becoming cost-conscious and more concerned with implementation, instead of plain advice giving
In the past, exclusive access to data and industry knowledge was a key point of differentiation for management consulting firms. Today, data vendors increase accessibility of industry-specific information, reducing the need to hire consultants to gather data. These data vendors collect customer data from statistical surveys/interviews in all areas of industry. Furthermore, digitizing and commoditization of this information can allow clients to collect basic internal data for themselves, rather than hiring external consultants.
Secondly, as ex-consultants leave to form their own companies or join their client firms, they bring with them, problem-solving frameworks, strategic thinking skills, and industry knowledge. All of which enables the client to internally-tackle problems that were once thought to require external help. Furthermore, as technologies become cheaper and more efficient, clients have also been increasing their technological capabilities, thus reducing the need for consultants.
Finally, triggered by the recession going back to 2002, companies are much more cost conscious nowadays. To reduce costs, there is a shift in the consulting business model to modular providers, which specialize in supplying one specific link in the company’s value chain. This is leading to the rise of asset-based consulting, in which tools and software solutions are primary assets, in addition to human capital. Asset-based consulting is advantageous as it provides better reproducibility, less reliance on manual effort and greater return on investment.
In summary, the consulting industry is on the cusp of disruption at a pace that will continue to accelerate, forcing the incumbents to change their business model. Failure to do so will inevitably put them behind the eight ball in an already competitive industry.
- Christensen, C. et al. Consulting on the Cusp of Disruption.Oct. 2003. Harvard Business Review
- Suhenda W. Unbundling Deloitte’s consulting service package. Nov. 2016. Deloitte LLP.