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If digital transformation is big, where does that leave mid-sized strategy firms?
You don’t need me to tell you that digital transformation is big. It’s already a massive market ($44bn by our latest estimates), it’s growing rapidly, and it’s right at the top of the corporate agenda. What’s more, by being multidisciplinary by nature, and requiring a breadth of consulting services to be truly transformational, it’s particularly big news for big firms. Which, if anything, makes it even bigger.
But what does that mean for mid-sized strategy firms? Several barriers to these sort of firms playing in this space spring up, at least in theory: They’re not big enough to have the global reach many clients require; their breadth of services is unlikely to be as wide as the biggest firms; and they may simply not have enough people to deploy, particularly when it comes to turning strategies into action.
And yet, when we ask clients about mid-sized strategy firms’ digital transformation capabilities, they tend to speak very positively. Our research shows the likes of L.E.K., A.T. Kearney, and Oliver Wyman sitting alongside much bigger firms when it comes to the quality of their digital transformation work. And when we interview clients, many speak favourably about the flexibility and nimbleness of mid-sized strategy players compared with their larger peers. They get a bit more strategy and a bit less firm.
But if digital transformation is big, and requires the scale and breadth of a big firm, how can those favourable views translate into market share?
While digital transformation is indeed big, some clients want to attack it in smaller chunks. Pilots, proof of concepts, and rapid prototyping in small engagements is increasingly popular. While the overall aspiration of a digital transformation may remain big, the steps taken to get there can be small, quick, and focused. In this space, being smaller can be a competitive advantage.
Linked to this, some clients are still reluctant to place responsibility for delivering their digital future into the hands of just one firm. Although hiring a greater number of firms for a greater number of engagements creates some hassle in the form of extra bureaucracy, some will see this as being outweighed by what’s gained in being able to hire specialists for each specific issue.
Finally, technology is changing the parameters of where firms can operate. Firms that invest wisely find themselves able to scale up and bite off bigger challenges than they were previously able to cope with. Just as the audit market giants could well find themselves outmaneuvered by smaller, technology-enabled competitors, a canny investment in analytics, robotics, or AI, could make “big” aspects of transformation much more manageable for a mid-sized firm.
Two things seem critical to continuing the success of mid-sized strategy firms in digital transformation: The first is a clear proposition—working out the spaces and roles where a mid-sized strategy firm can play, and targeting those with the right skills and technology to do so. The second is keeping an ear to the ground (and money in the bank) for technology that shrinks aspects of “big” transformation so they require far fewer humans to do the work