Future Consulting (Consulting2.0)

Historically, most consultants have done their best to differentiate from other consultants by touting a better process and/or better experience in a particular area.   For small consulting companies this may be relevant.  In larger companies neither of those factors have much bearing on the probability of success with the new project.  Process is usually only partially followed and the team is likely to be significantly different from previous similar projects.

Unfortunately, there are two dynamics at odds here:

  1. Consulting companies are under more pressure than ever to maintain exceptionally high utilization rates (% of hours which are billable). 
  2. Clients are starting to expect a point of view rather than just smart people with a process.  With so many choices, a client can now pick the firm that has both the good process AND the well-matched point of view.

These two are at odds because when a consultant is “on the beach” (not billing) there is incentive to place them on a project that doesn’t match well with their skills/knowledge just to get them billing as quickly as possible.  Thus, you rarely end up with the right resources on a project.  If resources are less experienced, they are less likely to have a qualified point of view.

For decades consulting firms have been seeking knowledge sharing and re-use process and IT solutions that will help empower the less experienced consultant to jumpstart their performance on a project.  However, the amount of sharing and re-use is still surprisingly low in large firms.  They rely on smart people learning fast.

Rather than maintaining an exceptionally broad opportunistic profile that relies largely on relationship selling; in a Consulting2.0 world consulting firms should follow the Jack Welch strategy of being in the top 2 or getting out.  Grow deep practice areas where sharing is rampant and there is enough market penetration to create an unrivaled critical mass of skills in that area.  Success will beget word of mouth recognition which will support ongoing sales.  Also, the best people will want to work there if they know they will get to interact with other experts.

Without going deep, large consulting firms run the risk of consistently losing out to mid-size firms.  The mid-size firms will be able to compete on size because that particular practice are is the same size.  They are less broad, have a point of view, and provide consultants with relevant experience every time.

What else is going to change in “Future Consulting”?

UPDATE:  Since writing this I read Johnnie Moore’s blog post about organizations being made up of many moving parts and that we should be careful about over generalizing.  That is certainly true.

10 responses to “Future Consulting (Consulting2.0)

  1. Spot on, Swan! The large consulting firm model seems very broken to me, precisely because of the trade-off that you’ve identified in this post.

    I believe that Consulting 2.0 will be defined by the emergence of loosely organized cooperatives of consultants who share similar interests and expertise. Individual consultants within the cooperative will be able to create opportunity-specific teams that can be both billable and demonstrate thought leadership.

    Small, niche consulting organizations have been able to do both in the past, because their business model allows for revenue from sources other than billable hours (i.e. published research, educational seminars, etc.). Cooperatives will accommodate similar diverse business models, but operate at a lower cost structure than a more tightly organized company.

  2. Pingback: Future Consulting (Consulting2.0) « Future Business - Rod Trent at myITforum.com

  3. There’s a lot of wishful thinking in this post. The big consulting firms will still continue to post big numbers and outpace the small and medium firms. However, the small firms will have more of a chance to compete with medium-sized firms with this model.

  4. @Larry thanks so much for your thoughts. I agree with you that the long-term of consulting will trend towards loosely aggregated specialist firms. Awareness, trust, and process remain the challenges to this happening in the short/med term.

    Awareness = consulting firms being aware of each other in order to know who to leverage where
    Trust = currently very few consulting companies trust each other. Because most follow the “attempt to grab all available business” policy wherever they go, there is very little trust even when two consulting companies are partnered by necessity.
    Process = currently different companies approach the way that they work in different ways. Merging those two teams is hard enough with one is the prime let alone when you have a loose federation of experts.

    What do you think are some of the steps on the way to the better future model that you describe?

  5. @Rod There is no doubt that the big firms will continue to win business. There are clients like the govt that need to outsource to a consulting company that they know can do a wide variety of projects.

    Will the big firms be able to maintain the growth rates? If their success / client satisfaction rates are lower, won’t they slowly lose market share to those firms that are experts in certain fields? Just a stall in growth has already significantly hurt some of these firms. Once the smart consultants realize that there are limited opportunities to climb the ladder, they jump ship and the firm’s resource pool begins to lose its quality.

  6. No doubt the slowdown is affecting the larger c-firms. And, I can attest, personally, that the SMB market is in full swing, and that is partly BECAUSE of the current economic situation.

    SMB consulting, i.e., “cloud” management or remote managed services continues to grow steadily.

    On a personal level – I’ve been on both sides and still maintain close relationships with folks in the large firms. Risk management consulting in large firms continues to be the most popular sector right now. For SMBs, IT “replacement” services is key.

  7. I agree with your views, Swan. In fact I had blogged about how Web 2.0 technologies will enable consulting firms to be leaner and consequently more effective. You might want to check that out at:-

    http://opensesame.rediffiland.com/blogs/2009/01/23/Consulting-2-0-Management-consulting-in-the-Web.html

  8. First Swan I am complimented by you using our discussion for a larger more diverse discussion with others.

    However I do want to add the 2 specific issues that I mentioned for others to chime in on, and one other that I have been mulling over since our discussion.

    Giving Advice (standard biz consultant model) & not being responsible for the actual manifestation of results measured in ROI, i.e. not being aware of the barriers to the advice being used due to the bureaucratic policies and processes inside of the client company make the “advice giving” business pretty much useless in my professional experience. –> Four sets of consultant contractors later, that were considered “best in class”, and my team and I still were left with all of the heavy lifting, points out that “professional advice” is not worth as much as those that are paid for it. Thus low value.

    Second point on why the consultant / training business model is broken. When you train others what you know, then you cut off your long term revenue. If you’re looking for making the one time sale I guess that works, that is if you’re used car salesman.

    Additionally I’ll add one more point, that if one is so great at giving advice why aren’t you out there tearing down the walls of your competition and competing in the market place like any other real company that knows what its doing.

    Clearly a rhetorical set of comments and derision for the typical consultant business model and intended to stir the discussion up a bit more. :^)

    Oh I agree there are of the larger consultant type that will continue to gain benefits but eventually that gravy train will run its course too.

    Cheers,
    Richard Platt
    (former) Intel Innovation Program Manager & Senior Instructor for Innovation Methods

  9. @Richard, thx for your comments.

    You make some great points. re: if consultants are so great, why aren’t they “competing”…… When you are a consultant, you generally prefer to have less politics and broader experiences. When you work within a company, you generally prefer to have more continuity and more ownership.

    Having been a consultant for a long time, I can tell you that I stayed in that role because when I was brought into a client, there had to have been a mandate for change in order for them to have decided to shell out the money, I got to work with some very smart people, and I had the opp to work in a wide variety of industries and companies that gave me a breadth of experience which is hard to obtain otherwise.

  10. Swan – you’re making my very point for me bud.

    The comment re: “less politics” speaks to it, which is the all too common siloing effect in large companies; the differing agendas that sometimes are competing for the larger corporate attention and support, as well as some of the sometimes necessary bureaucratic rules and policies actually impede the effectiveness of a given set of advice provided by a consultant.

    Which is what I am specifically speaking to here and why the larger the company the harder it is to actually implement the advice that is given, unless you’re an implementor of the advice and work the issues specifically, tactically and strategically.

    Hence the reason for my comments to you leading up to this discussion on the business model of pure consulting being ineffective when it is just advice. That’s all I am saying

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