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Could we see a seismic shift in consulting services?
Consulting services are a bit like the massive tectonic plates that cover the surface of the world: Ancient and slow-moving, they’ve defined the geography of consulting for the last 50 years or so and continue to shape the competitive landscape. But there are powerful currents of change below the surface which are likely to break the market up in new ways.
Chief amongst those currents is business/digital transformation—although I’d argue that transformation is perhaps one of the manifestations of change, not—as it appears—the root cause. As we’ve noted before on this blog, transformation as a consulting service has grown so quickly (we estimate that 45% of consulting in 2018 was badged “transformation” by clients and consultants alike, up from 36% in 2017) not simply because new technology has stimulated demand in the market but because transformation work is effectively cannibalising a wide range of consulting services. Thus, work that has been labelled “strategy” or “operational improvement” is now called “transformation”. Extending my geological analogy, transformation is equivalent to the forces that pushed the earliest land masses together (remember Pangaea from geography?). Instead of having distinct continents for each consulting service, all of them have been pushed together, making it possible for clients to “walk” from one part of this fledgling world to another, to pull together projects that combine different skillsets and perspectives.
But the thing about Pangaea is that it didn’t stay still, literally. The same subterranean forces that created it went on to destroy it, resulting in the continents we have today. The same is likely to be true where transformation is concerned. On the surface, it looks as though all the currents in consulting are pushing towards greater consolidation of services: All the high-growth areas in consulting (analytics and cybersecurity, as well as transformation itself) all require firms to pull together a wide range of different skillsets and resources in order to deliver actual outcomes (as opposed to PowerPoint reports). The way both sides—client and consulting firms—see it is that this requires substantial amounts of traditional consulting services: Technology+strategy+operational improvement+risk+…++. But that’s to conflate diversity and scale: Just because a project requires all of these different inputs doesn’t mean it has to be big. If we look below the giant landmass that’s transformation in today’s sense of the world, what clients are looking for is to solve intractable, often long-standing problems, that weave together a variety of different capabilities—in other words, the diversity is more important than the scale. Once that becomes more visible, it seems likely that clients will start to break up these very large-scale projects into smaller ones, each focused on a very specific issue, but still involving the breadth of capabilities you might find in large-scale transformation work. This will take consulting in a different direction: Transformation, the Pangaea of consulting, will break into smaller landmasses, moving apart.
And if that sounds negative (the death of transformation!), it’s not. Rather, I’d see it as part of a natural, evolutionary process in Planet Consulting. Transformation has brought the silos of consulting services together and has created an unprecedented opportunity for consultants in different fields to collaborate. We need to leverage that as much as we can, as it creates the conditions for much needed innovation—and we see evidence of this all around us in terms of the software and data assets consulting firms are creating, most of which wouldn’t have been possible without some degree of cross pollination. As clients de-couple diversity from scale, these new configurations of skills and expertise become the bedrock of future services: Rather than one giant transformation “continent”, the future landscape of consulting will be myriads of archipelagos, each with its own unique flora and fauna. And so the whole cycle will start again.
But what does all this mean for consulting firms in practical terms? In a nutshell, it leads to a more fragmented market in which the strategic bets you make about the markets you focus on and the services you provide become far more important. Clients will be looking for very specific solutions and if your business model has been designed for a Pangaea-like environment, then you may struggle to adapt.