When my son was learning to read, he had a storybook he loved about a building site; all bulldozers and people with hard hats and high-vis vests. In the midst of all the activity was The Man with the Plan. Every time chaos broke out, The Man with the Plan stepped in and restored order. That’s precisely what’s needed in today’s consulting and professional services industry: a leader with a cool head and a way forward.
Firms, like their clients, have previously experienced uncertain economic times in which they assumed everything would work out OK, because it had done so in the past. But in an unreliable world, it’s entirely possible that we could either see a prolonged period of low growth in demand for external support or a sudden surge in activity as clients start to appreciate the extent of the changes they need to make.
The determined, frightened, and undecided model
Clients, our research tells us, are responding to the current environment in one of three ways. Globally, around 35% of clients are frightened. They see how economically and politically dangerous the world has become; they’re worried about their ability to respond; and they’re likely to spend heavily on external support in the short term to help them make tactical but still potentially large-scale decisions about the future. Determined clients—who represent just under a fifth of the market—see the world in the same way that frightened clients do but have a different response to it. They’re far more confident of their ability to not just weather the storm but seize the opportunities it throws out. They, too, will spend more on external support but over a longer time frame and in more strategic areas.
Inevitably, undecided clients are the problem for firms—and they represent 46% of buyers. They’re not frightened enough to act now or sufficiently determined to plan for a different future. They’re waiting for things to get better.
Like client, like firm
If clients have it bad, consulting and professional services firms have it even worse. They’re not only exposed to rapid swings in client demand, but also to unprecedented price pressure that could well intensify as the use of AI in service delivery expands. And it will expand because, after the salary inflation of the post-pandemic years, margins are under near-universal pressure. We’ve always been cautious about use of the word disruption (here, for example), but put the geoeconomic and technology change together with falling profitability, and you have a fairly combustible situation.
How are firms reacting? Like clients, some are determined. They’re obsessed with finding out what’s going on with clients, and why, because they want to understand which of the changes they’re seeing in both buying behaviour, and needs, will be sustained and may therefore create new opportunities. Fundamentally, they believe they can grow the market by proactively taking ideas to clients and by helping the latter focus and prioritise. Others are frightened. These firms are obsessed by what their competitors are doing and are investing to keep up with them. They see AI as a threat rather than an opportunity to manage. They pore over their internal weaknesses when they could be staying close to their clients. Finally, we have the undecided firms, those who worry their strategies won’t prove fit for the future but lack the energy or insight to change.
Who wins? In the short term, it could be the frightened firms, because they’ll act faster—but their rapid and more tactical approach means they may not take the right decisions. Determined firms have further to travel and may lose their nerve along the way. The one thing we can be sure of is that The Firm with the Plan will win.
What can firms do now?
In a fast-changing world, it’s not enough to know what’s shifting—you need to know what it means for your firm, and what to do next. At Source, we have dynamic data and proprietary frameworks that look at the macroeconomic scenarios that are set to play out and the big drivers of client demand for today and tomorrow. Contact us to discuss a bespoke session that is designed to translate these insights into specific actions for your firm.