Consulting Disruption: The Case for On-Demand Talent Platforms
Consulting firms have traditionally employed a business model where they hire smart young talent, groom them and help them build expertise through strong apprenticeship models, and then charge clients fees to utilize that expertise for specific periods of time to help solve critical issues. This has led to the creation of a highly respected USD 450bn industry which has been growing at a rate of approximately 4% annually, significantly higher than the global GDP growth rate.
However, despite this strong momentum the consulting industry is undergoing meaningful changes - advancements in technology, data democratization and evolving client expectations
1. Consulting Landscape today
Consulting services by their nature are varied, however we can segment the industry by looking at the following parameters: types of services offered (e.g., business strategy and advisory vs. solution implementation), at what level of the client organisation firms engage (e.g. Boards/CEOs, CXOs, middle management), and pricing. Based on these, the traditional consulting industry structure could be viewed as follows:
Disruptive technologies, new entrants and evolving client expectations are causing these traditional players to adapt and change their business models, and we address some of these trends in the following sections.
2. Disruptive Trends and Emerging Responses
- 2.1 Data democratization is driving firms to diversify service offerings and Delivery Models to maintain growth
As a Harvard Business Review paper notes “At traditional strategy-consulting firms, the share of work that is classic strategy has been steadily decreasing and is now about 20%, down from 60-70% some 30 years ago”. Clients are increasingly looking for data-driven analysis for decision making as opposed to relying upon purely strategic recommendations and brand repute. The opening-up of data or data democratization means that access to large sets of data and the tools to analyse it, are no longer limited to an exclusive set of firms that can afford it. This is enabling communities of data and tech-savvy users, independent consultants and niche consulting firms to conduct cutting-edge analyses and derive insights, without having to spend on large-scale infrastructure.
Consulting firms are finding themselves in the unusual (for them) position of having to catch up – not only are they expanding their service offerings, but they’re also diversifying their talent pool to ensure the right expertise is available to turn data into meaningful information and insights. A specific challenge arises in retaining captive access to such expertise, as on-demand platform connectivity is offering flexible alternatives to traditional employment models (see the following section on ‘on-demand talent models’).
In recognition of these changes, firms like McKinsey & Company are complementing their strategic consulting expertise with technology solutions, tools and analytics and are deploying specialized teams to deliver these solutions (See [McKinsey Solutions](http://www.mckinsey.com/solutions" Target=" Blank)). They are moving toward a model of higher breadth in engagement with clients, as opposed to a greater focus on strategy consulting that more naturally lent itself to shorter engagement models. Several strategy-focused firms that did or could not adapt to the change found that they could not sustain their positions after the 2008 downturn, leading to acquisitions and some consolidation in this segment. (Deloitte’s acquisition of Monitor as a case in point).
The emphasis on data-driven decision making has also enabled technology consulting firms to challenge other traditional consulting firms, using their capability in data analytics, big data and predictive technologies. Entry into this space was a natural extension for these technology consulting firms, as they built upon their core competence and expertise in data and technology. They are now complementing this expertise with domain or industry expertise to compete with the business-led solutions of traditional consulting firms.
To stay relevant and competitive in the big data and predictive technologies space, the Big 4 and other similar firms are not only developing capability organically, but also pursuing a host of acquisitions.
Increasingly, a host of niche firms and even independent consultants are emerging as competition in this space, and with a value proposition built around lower prices. Firms such as Fractal Analytics and Brillio have varied engagement models to serve clients that are Fortune 500 firms as well as small, localized businesses.
- 2.2 Cost competition & rise of internal consulting
Engaging consulting firms gives corporations access to specific expertise and/or smart resources when needed for required duration of time. But this usually comes at a premium price.
In recent years, many large corporations have built up ‘internal consulting’ teams, drawing from the same talent pools as that of the consulting firms. In fact, many of these teams are staffed by ex-consultants who opt for industry careers after getting a start in management consulting. These ‘internal consultants’ are a shared pool of talent, deployed across business units and geographies to pursue growth opportunities and tackle problems. These roles often can be often stepping stones for consultants to direct P&L and business responsibilities.
While this is certainly a more cost-effective alternative to hiring consulting firms, finding specific expertise at the right time, and managing deployment to meet demand remain difficult problems to solve. This is when niche/boutique firms and independent consultants can plug in effectively, complementing the skill sets of the internal strategy teams. Employing external consultants may also be preferable for some corporate managers, especially to drive change in politically sensitive situations.
- 2.3 Democratization of talent access
Advancements in technology and connectivity have led to the creation of new business models for on-demand talent deployment. Clients can access large networks of experts and top talent directly, and often at a lower price. (See section on ‘On-demand talent models’ for how this works).
If corporate managers can break down their business problem into modules, then each could be delivered by independent firms or individuals, with the manager playing the role of a coordinator and bringing the pieces of the solution together. This not only gives the manager a closer look and more control into every module of the solution being implemented but also the chance to hire exactly who they think is the best fit for each module of work. Quality is not compromised as you have niche expertise focusing on individual parts of the problem, however, the risk of failure of ‘pulling it all together’ remains with internal managers.
"Scale of large consulting being disrupted by platform connectivity – response of firms is to join in and aim to simplify the model for their clients”
Increasingly, the Big 4 consulting firms are beginning to adopt a similar model, by playing the role of coordinators for cautious corporate managers. While the Big 4 play the role of the coordinator for large projects, they often sub-contract to individuals or niche firms to deliver specific modules. They’re focusing on breadth, geography, and scale, rather than delving into super specialization or niche expertise. Remaining invested in very specialized skills and specific talent is a hard game for giant turn-key consultancies, especially when the market and demand for specific skills is evolving so rapidly.
Some of these consulting firms expect the new on-demand talent pool to represent a large and strategic part of how they deliver and have built their own platforms to tap into this. PwC recently launched the [‘PwC Talent Exchange’](https://talentexchange.pwc.com/" Target=" Blank), an online marketplace that “connects the best independent talent with exciting PwC opportunities”. [Deloitte PixelTM](https://www2.deloitte.com/us/en/pages/consulting/articles/enterprise-crowdsourcing-solution-pixel.html" Target=" Blank) is Deloitte’s global crowdsourcing capability, that enables them to access and collaborate with specific expertise to source crowd-based solutions for their clients. “Deloitte PixelTM-as the name evokes–zooms into an issue or problem and breaks it down to its core components or pixels. Once pixelated, we can assess which crowds are best to execute each component of work in collaboration with specialized Deloitte and client resources.”
Example: [Mercer](www.mercer.com" Target=" Blank) also has new solution, People Pro, which uses independent talent and flex-workers to offer small and midsized businesses HR expertise, on demand.”
3. How do on-demand talent models work?
On-demand platforms connect organizations with professionals for projects and flexible work arrangements as well as subject matter expertise. Firms can engage with industry experts over a call for advice on a business problem or contract with top-tier consultants for support on important projects and strategic priorities. Geography or domain-specific versions of this model are springing up, that connect clients (and consulting firms) to expertise on-demand.
Firms like [Eden McCallum](http://edenmccallum.com/" Target=" Blank) and [10EQS](https://www.10eqs.com/" Target=" Blank) have introduced yet another model – the network model - to deploy talent. These firms work through a mix of in-house and independent consultants to deliver work for their clients. Use of independent consultants provides flexibility and the ability to tap into the expertise needed for an assignment, while in-house partners ensure continuity for clients while also providing some oversight...
Another take on this model is what we see in innovation consulting firms such as [PSFK Labs](https://www.psfk.com/author/psfk-labs" Target=" Blank) that provide consulting services based upon both tailored and off-the-shelf research and offer their clients tools and content for decision making. PSFK has access to a network of experts and partners from across the globe, who are consulted upon to deliver on specific requests from clients. In the PSFK model, clients are given access only to the solution (analysis or report) that is created using the network of experts, and not directly to the experts themselves.
Easy access to local and global talent, aided by platforms that connect demand with quality expertise have helped not just consulting firms and their large clients, but also small businesses who can now afford to hire specific expertise for short periods of time
A different type of platform is the Expert Network such as the Gerson Lehrman Group ([GLG](https://glg.it/" Target=" Blank)) which connects clients to a network of subject matter experts from every industry for short-term and long-term learning engagements. Clients engage experts through GLG for phone consultations, meetings, special reports, surveys, professional training, and roundtables.
Online platforms have also found creative ways to allow consultants to price their services and benchmark the demand for their skills while allowing clients to pay upon realizing results.
Evolving client expectations, technology advancements and data democratization are clearly disrupting consulting by creating new business models and a new basis for competition. Employing the new on-demand model for talent deployment is leading to leaner organizations with lower overheads – for consulting firms too!
However, this is not a solution that can work each time – on-demand hiring can only work when the problem is well-defined and appropriately scoped. In situations of uncertainty and ambiguity, or in politically charged situations, organizations are better off hiring big brand consulting firms and trusted advice. Coordinating on-demand talent and orchestrating the solution can also be time-consuming.
4. Talented Professionals are getting selective
On-demand consulting platforms allow consultants to choose who they want to work with and what they want to work on, tailored to their schedule and availability. Not only does this improve work-life balance, but it also enables consultants to chart their own paths ahead in their specific areas of interest.
Multiple studies and reports by firms like Gallup, Ernst & Young and Fidelity Investments indicate that the millennial generation (people born between 1980-1996, who will soon constitute a majority of the global workforce) are seeking meaningful work and work-life balance as a priority, not necessarily just a regular pay check.
On-demand consulting also opens up opportunities for professionals who would otherwise have had to drop out of the workforce temporarily, either to raise children or for elder care or for a multitude of other reasons. What was once construed as a space for only very senior and experienced professionals, who were called upon by elite clients to provide advisory services, is no longer limited to that cadre.
The connectivity offered by online talent platforms can help increase labour force participation and productivity. A Research conducted by the McKinsey Global Institute estimates that online talent platforms could add $2.7 trillion, or 2% to global GDP by 2025, by connecting people to the right work opportunities.
However, the wave of on-demand and independent consulting does come with its share of challenges: the risks of not having a consistent pay check, a degree of uncertainty and lack of benefits. Fortunately, there has been growing awareness and some resolve to tackle some of these issues and support the ever-growing community of independent workers.
A recent survey of 27,000 consultants shows that there is a growing rejection of a corporate lifestyle, 89% are happier working freelance than they were as a full time employee. Independent working is growing popular with nearly a third of the base of management consultants and business analysts in the UK following this trend. It increases job satisfaction and productivity as a result of improved balance between personal and professional life.”
5. In Summary
Disruptive innovations typically tend to be less expensive for the customer and more easily accessible broadly. Advances in technology and data democratization are enabling precisely that for the consulting industry, by encouraging the utilization of on-demand talent. Multiple models of talent deployment are being explored by clients, consulting firms and innovative platforms that connect demand with expertise. While benefits to businesses are obvious, this movement also works well for the workforce of today that is more technologically adept, has a clear preference for quality of work and work-life balance, and is looking for more control on how their skills are utilized.