Posted , in Business model
In praise of simplicity
If the COVID-19 pandemic has taught the consulting industry anything, it’s the need for straight talking—and delivery.
“Why do consultants have to make things so complicated?” It’s a complaint we’ve heard many times from clients, but this, from a private equity partner waving three proposals he’d received from strategy firms, was particularly pointed: “The up-front analysis is great, but the process they’re suggesting is the kind of thing we’d have expected before the crisis. Their approach is over-engineered. I need them to say clearly and simply what they’re going to do and to demonstrate that they can focus on what we really need to know.”
Why are firms such magnets for complexity? I’d blame a combination of two factors. The first is deep subject matter expertise. Specialist knowledge is, of course, a critical reason why clients come to consulting firms—and more so than ever during the pandemic, when the upside of remote working has made it far easier for clients to speak to highly knowledgeable consultants in other parts of the world. But we’ve all encountered experts who parse every data point, and who find it difficult to stand back and communicate the overarching messages. Everyone worries that making something simple is, in fact, making it simplistic. The second factor is the intangibility of consulting work. Unlike in—say—consumer products, there are no hard and fast rules about where knowledge sits. Definitions vary. One partner’s view of the scope of supply chain expertise may be very different to another’s, meaning that firms can spend a lot of time and energy embroiled in discussions about who does what.
Crash these two factors together and you get a situation where clients, who are looking for clear distillations of complex issues, become—like our PE friend—deeply frustrated by consultants who want to stake out their area of expertise and dig into the detail rather than clarify the key messages.
A good analogy is land use. Pre-industrial farmers with several sons could bequeath their land to the eldest, or they could divide it up between all or some of their children. As alternative career options for the younger boys were severely limited, they often chose the latter, with the result that the parcels of land passed down from generation to generation became unsustainably small. The same is true in consulting firms: A partner builds a business, but to attract the calibre of people capable of sustaining it when they retire, they need to divide that business up. Obviously, the expectation is that the new partners will grow their share and the overall “estate” gets bigger. That works during times of growth but results in the equivalent of medieval strip-farming when the economy tanks.
But strip-consulting isn’t any more effective than strip-farming was. As your farm becomes increasingly complex, more time is spent arguing about who grows what, and less on ensuring the farm as a whole is delivering what its customers want: innovation and new technology. Consulting firms shouldn’t wait for economic recovery to simplify their business models.