String theory: why the standard model of consulting may need a re-think
Monday 2nd Feb, 2015
By Fiona Czerniawska
Consulting services are linear, right?
We’re all familiar with the upstream/downstream model that has strategy consulting on the left (or at the top, if you’re a strategy consultant), technology consulting on the right, and everything else in between. This standard model is as convenient as it’s simple: everyone knows where they stand, and it’s easy to imagine all the players neatly lined up along a single piece of string.
But perhaps that’s not so true anymore. The announcement by Publicis that it would acquire Sapient, a capital markets consulting and technology firm, for $3.7bn shouldn’t have surprised anyone when it was made back in November. With a failed merger with Omnicom behind it, Publicis now gets SapientNitro, one of the few remaining large advertising agencies not already owned by a holding company. But the deal is clearly about far more than consolidation: it’ll resonate with consulting firms that have watched creative agencies broaden out into consulting work, largely on the back of digital, and that have, in turn, tried to encroach on creative agencies’ traditional space (Accenture Interactive, Deloitte Digital, et al). It also comes at a time when clients’ interests in digital are turning inwards: rather than seeing this new technology as just a platform for serving or communicating with their customers, they’re increasingly exploring the options to digitise their own processes. Digitisation represents a new way of simplifying and streamlining complex businesses; apps and agile development all appear to be ways of circumventing an existing, cumbersome infrastructure.
When we analysed the digitisation market earlier this year, we estimated that it accounted for about 15% of all consulting (that’s just under $15bn in real money, based on our definition of the consulting market). But that’s not $15bn of new consulting work, because digitisation effectively eats into other, more traditional services. Clearly, digitisation has had the biggest impact on conventional IT consulting, just over 40% of which we think could now be termed digitisation (remember: our numbers exclude systems integration and implementation). But we also think that about 13% of strategy consulting now has a digital element to it.
Almost every conversation we have with consulting firms at the moment touches at some point on the convergence between the two extreme ends of my piece of string: strategy and technology. But most of the discussions are around linkage – how you step from one of these services to the other – when the real opportunity is to devise a different type of consulting in which the two are far more integrated. The problem is the chasm between them as they sit at opposite ends of the string; knitting them together is far more problematic than it would be to simply integrate, say, operational improvement and strategy work into a single, holistic offering. And the Publicis/Sapient deal proposes one solution to that: SapientNitro becomes the bridge across which (the parties presumably hope) so much traffic will pass that it will become possible to offer up a genuinely integrated service. No doubt other firms will look – and indeed are looking – for acquisitions that could have the same transformative impact.
Our standard model needs to move past the old-fashioned string formation to become circular: the main challenge will be to avoid getting tied up in knots.