Case for Valueism in consulting to thrive amidst disruption
Customers and how business works are two different things nowadays. If you want your business to be a success you have to plan major innovation strategies and be updated with the competition, know more about your clients, and give them the best service. Consulting firms have to be updated as well and be willing to change their design of advisory or even their own structures, systems and cultures. Particularly, here you will see how authors suggest new consulting industry models and some advice that can be useful for your business!
Leading Harvard Business School Professor Clayton Christensen and his co-authors wrote that it is in their article for Harvard Business Review, [“Consulting on the Cusp of Disruption“](http://hbr.org/2013/10/consulting-on-the-cusp-of-disruption" target="_blank).
The article offers evidence of early signs of change and examples of new consulting industry models. It notes that “incumbents are showing vulnerability” and, ” Big consulting is also questioning its sacred cows”. They also note, “Management consulting’s fundamental business model has not changed in more than 100 years”.
The authors go on to suggest that to date opacity and agility have made it immune to disruption, and the “solution shop model” produced recommendations “created in the black box”. Additionally, the many external factors make it hard to judge success or failure, or to identify a responsible party for either. As a result, clients rely on brand reputation and ‘social proof’ as substitutes for measurable results, giving incumbent agencies an advantage.
The solution shop model has served the incumbents well but could be the cause of their demise. They are “structured to diagnose and solve problems whose scope is undefined”, and deliver value, “primarily through consultants’ judgement rather than through repeatable processes”.
Pointing to evidence of disruption already underway in the legal profession, the authors suggest services are likely to be un-bundled, to be delivered by independent specialists who are found and co-ordinated by in-house or external facilitators. These specialists will then collaborate closely with in-house strategy teams or executives in management functions.
They offer evidence that the buyers of services are increasingly sophisticated and “no longer rely on the easy assumption that price is a proxy for quality”. The consequence is less reliance on Solution Shops. Instead, they “funnel work to individuals or firms most appropriate for the specific job”, leading to an, “increased modularization of the industry”. This change will allow clients to access the advice they want, when they want it.
Within this context, there is a role for the firms that act as the curators of experts. A few already exist. And, clients will no longer have to pay the fees of big consulting firms, because the curators of modular services do not carry huge overheads. Clients will also have far more control over outcomes.
These developments will make the same quality of expertise and advice available to smaller and medium-sized businesses and organisations, previously un-served by the large consulting firms whose services they could not afford. The result will be growth in the overall size of the market for advisory services.
The authors warn that incumbent consulting firms will struggle to change because their current model has served them well for so long. This may be so, but as the authors also said, consulting firms have been quite agile in the past. I think a bigger problem will be their entrenched industrial-era ways of thinking, and the outdated management theories and approaches that they cling to. These problems are reflected in their own structures, systems and cultures.
The large incumbent consulting firms are designed to push the products, services and advisers they have, according to the classic consulting industry matrix of “industries served” and “services lines” offered. In my view, a better approach would be to design the advisory firm around client needs, or what Clayton Christensen calls, “jobs to be done”, which are usually related to situations being faced. Those situations and possible response options are usually very closely linked to the stage a company is at in the typical business life-cycle.
The reason it’s important to focus on situations related to the business life-cycle become clear if you consider research showing a large majority executives believe the root causes of their failures, or their inability to grow, are internal, not external. And, the problems are almost always linked to situations associated with the stage of development of the business, so are also predictable. Many of the most important options for addressing the situation are also linked to the stage the business in their business life-cycle, although not all are.
On the one hand, these predictable problems may be the cause of a crisis. On the other hand the fact they are predictable means they are also a potential source of competitive advantage if handled correctly. This is especially true given that the vast majority of competitors will fail to predict them.
You may wonder why predictable problems are so often overlooked, and you may be wondering whether the statement is even true? Well, you only need to look at the data on failure rates to answer the second point. As for why they are overlooked, it relates to a focus on the “external story” rather than the “internal story” as two partners of Bain & Company put it.
The external story is a “narrative that plays out in the marketplace in the form of quarterly earnings, returns to shareholders, market share shifts and profitable growth”. It’s the more visible and easier to read narrative. By contrast, the internal story is less visible and harder to read. “It’s the story of building the business, expanding and retaining a quality workforce, strengthening the culture, upgrading the systems, learning from experience, adapting the business model, holding down costs, and mobilizing the people to carry it out perfectly again and again”.
The internal story is the story of what I call the Value System; the system designed to deliver the customer value proposition in a sustainable way. It must be congruent, not only aligned. The difference being that congruence suggests balance and harmony, not just synchronization – of the internal with the external, of the strategy with the resources; of strategy with the situation of a business at a given point in its life-cycle; of the culture, values, incentives etc.
Alignment is the fashionable buzz word in management theory but, in my view, it is too limited. It links to the old analogy of the business as a mechanical system that must me fine tuned. As an analogy, it is at best too simplistic. Or, as I would argue, it is fundamentally wrong. Business should be viewed as a social system where people are seen as more than “human resources” or “human capital”.
People are the flesh and blood, the minds, the spirit, the personality and the life of businesses as systems of value creation. They come in the form of customers, employees, managers, directors, investors, suppliers and distributors. And when they operate in harmony, as part of a congruent system of value creation, they have the power to create tremendous wealth and prosperity. These are some of the principles of what I call Valueism.
A lack of congruence can see value being destroyed, but that’s the tip of the iceberg. The bigger problem of incongruence is the degree to which it undermines the potential to add value, and that represents the great invisible mass of the iceberg.
Note: This article has been republished with permission from the author