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Sustainability could be one of the most important post-COVID consulting markets. But how well positioned are consulting firms to exploit it?
In 2019, demand for digital transformation work, which combined strategy, technology, process, and behavioural change, grew by 16%, while demand for more standard and stand-alone services contracted by 1%. If we include other, fast-growing, similarly multidisciplinary work, such as analytics, the growth rate for work straddling the traditional consulting service silos would have been even higher. To this roster of broad-based solutions, it’s likely that we’ll need to add a new one: sustainability. The COVID crisis has revealed the fragility of the world we live and work in; this has driven clients to look at a wide array of environmental, social, and governance issues, alongside very specific business ones. At the same time, awareness is increasing that resolving these problems won’t be simple and will depend on a multitude of changes. Put these two factors together—greater board-level awareness and the need for a multidisciplinary solution—and you get the conditions for very rapid growth in what has been to date a niche market.
But, as with any new multidisciplinary service, the limitations are on the supply side. Clients, looking for a genuinely integrated approach, often find themselves dealing with firms that either don’t have the range of capabilities required or do but can’t weave them together coherently. The way consulting firms are organised and the way in which they measure and reward success have been slow to change. Different practice areas have developed distinct cultures as well as different expertise. The challenge is even greater where the work involves capabilities not typically available in a consulting firm. Recruitment is always an uncertain process, but doubly so when good candidates may be reluctant to join a firm that has no long-standing reputation in a specific field. Too often, people brought in to form new practice areas feel marginal to the mainstream firm; the firm itself may change its mind and move on, leaving them like flotsam in its wake. Just as much of a problem is that those doing the recruitment don’t often have the skills to evaluate candidates; poor choices are made and regretted on both sides. On top of this, recruitment is simply painfully slow. In the time it takes to build a team, another firm may have established an early advantage that’s highly likely to convert into long-term market leadership.
The emergence of new areas of multidisciplinary work is therefore always accompanied by a wave of consolidation. Digital transformation tested the boundaries of “consulting” and triggered numerous acquisitions by consulting firms of marketing and other creative agencies, experience design businesses, and analytics specialists. Fifty-four percent of the acquisitions made by consulting firms from January 2019 to July 2020 were of non-consulting firms. Of course, acquisitions of this type are really recruitment on steroids and consequently share the same issues around cultural dissonance, the potential for marginalisation, etc. But they do have two specific advantages. The first is that the recruitment of individuals, development of IP, investment in assets, etc., will all have been overseen by experts in their field. An acquisition doesn’t just give you more resources—it gives you better resources. The second advantage is speed: Yes, it takes time to identify and execute a deal, but it’s still faster than recruiting the equivalent number of people.
If those that are targeting the sustainability market want to learn the lessons of digital transformation (and we’ve explored the parallels here) then they’ll act quickly and buy their way into this market. Blockbuster services don’t come along often—and they certainly don’t wait for slow-moving suppliers.