Posted , in Business model
Accenture: Continuing to stretch the meaning of “consulting”
Watching Accenture in action is always an invigorating experience. While scale is still a key part of the firm’s narrative, the years in which Accenture offered the consulting equivalent of Bauhaus brutalism have given way to an altogether smarter approach, all agile and innovation.
But where is Accenture going now? Based on time spent recently in its San Francisco Innovation Hub, it’s going into engineering and product development, helping its clients design, prototype, and launch new products and services. Of course, it’s not the first firm to enter this space: In the UK, PA Consulting has a long-established Innovation and Technology Centre, just outside Cambridge; in Denmark, Valcon has always had a product development practice alongside its mainstream consulting business. But Accenture’s scale makes this a significant move. It takes the firm way beyond conventional consulting and execution, and out of the back office, and positions Accenture to play an important role in the front office, helping drive up revenues rather than cut costs. The move is fuelled by the recognition that sensors and other technology embedded in physical products erode any residual distinction between our physical and digital worlds. Another motivation has to be the fact that, while the move to the cloud is currently generating huge revenues for Accenture and other firms, it will ultimately cannibalise their systems development and integration businesses. At the same time, however, it could mean that Accenture faces new competition in the form of the R&D functions of mainstream manufacturers. Having visited McLaren’s Technology Centre, just outside London, it’s hard to believe that Accenture, huge though its resources are, will be able to match the depth of focus of companies such as this, so success will depend on Accenture’s ability to complement existing R&D teams—to do something they can’t do by themselves.
How? Most R&D functions are separate from the organisations that fund them, literally and often conceptually—McLaren’s Technology Centre is a good example of this. Ken Gabriel, President & CEO of Draper and former head of the US government’s Defense Advanced Research Projects Agency, said the following when writing in the Financial Times about Bell Labs: “Without some connection to the broader business goals, many of the innovations . . . that came out of Bell Labs were instead commercialised by competitors.” In this context, consultants’ business perspective can provide a crucial bridge between different parts of an organisation and contribute to the process of commercialisation. Being outsiders, consultants have another advantage—the objectivity to be able to recognise when a product has limited commercial potential, pre-empting costly mistakes.
The problem, I think, will be scalability. Regular readers of this blog will know that “blockbuster” consulting services share four characteristics: They resonate in society, not just in the boardroom; they represent a new challenge or opportunity for the current generation of managers; there’s evidence that, once adopted, they will have a measurable impact; and they stimulate demand for large-scale projects, without which consulting firms are reluctant to make the investment needed to fuel the market in its early stages. It’s that fourth aspect that’s of concern here: R&D is an inherently secretive activity. Manufacturers won’t simply want to keep their secrets from their rivals, they’ll also want to develop products and/or services that others would find hard to replicate. By contrast, consulting firms have historically made money from developing solutions that could be applied across multiple organisations. The bigger the firm, the more dependent it would have been on mass production. For a consulting firm, especially one that is as big as Accenture, the underlying challenge will be how to balance two conflicting forces, to find a way of offering clients a service that’s so customised it can create a genuine competitive advantage, while at the same time enjoying the economics of scale.
Accenture’s a very smart firm—and it will have to be very smart indeed to pull this off.