Posted , in Business model
The consulting resource chain: flexibility and expertise
Put simply, there are two reasons why organisations use the services of consulting firms. Either there’s a specific capability that they need but don’t have in-house, or they’re short of capacity but don’t want to or can’t recruit. Developments of the last 30 years have swung the pendulum of client needs towards capacity, but is the current crisis changing that?
The lone-wolf-with-briefcase was the archetypal consultant of the 1950s and 60s, spending months roaming factories and offices to find ways of increasing productivity and improving competitiveness. He—and it was almost always a he—was a respected adviser to senior executives and had often been one himself. The growth of computing and the increasing complexity of business in the 1970s and 80s meant that a single consultant, no matter how clever or experienced, wasn’t enough. Increasingly, clients bought teams, not individuals. The 1990s saw an intense debate around the nature of organisations: The idea that businesses should focus on their “core” activities resulted in a wave of outsourcing; an era-defining change in technology (the rise of ERP systems that provided better information about core activities); and, ultimately, a belief that organisations needed fewer people. Consulting firms and other suppliers stepped in smartly to fill the gap: While “staff augmentation” is something many firms are likely to keep quiet about, it’s generated billions of dollars in revenue.
But here’s a client talking about their experience of using consultants during the COVID-19 crisis: “The one thing we really don’t want to buy in this environment is a large team of consultants. We’re trying to do more of the work ourselves, so we’re only looking for external help where we need specific input. Junior consultants may be cheaper, but they can’t answer the kinds of questions we’re now asking, and they require hand-holding that we don’t have the time to provide and aren’t prepared to pay for. It’s also easier, when you’re buying a service remotely, to focus on the expertise of individuals than to try and gauge the culture of a team.” Consulting firms’ flexibility is floundering on the lack of expertise.
But before we jump to a definitive conclusion on this issue, we need to consider an alternative scenario: What clients need—and arguably have always needed—are both flexibility and specialist expertise. Reading between the lines of this client, they’re turning to consulting firms because they want experts on short-term contracts. They want their staff to be augmented—but by experts, not recent graduates. Consulting firms have been forcing them to choose because it’s much easier to run a profitable business if you’ve got lots of junior people. The margin on their time is typically higher because more of their time is spent on chargeable work; and they’re far more flexible, so you can move them to where the demand is. Subject matter experts are expensive, difficult to hire, and unwilling to work outside their comfort zone.
Even before the crisis, firms were rethinking their resource chain. Many have invested in associate practices, crowdsourcing platforms and ecosystems that help them provide the specialist know-how clients are looking for without having to take on the risk of employing someone permanently who they may only need occasionally. But just like the car manufacturer that found that production depended on a critical component from China that was unavailable earlier in the year, or the PPE procurement organisations that have discovered that a supply chain that cuts costs to the bone is too rigid to respond to rapid change, the crisis has highlighted critical weaknesses. For example, that the in-house junior people firms can deploy most quickly don’t have the capabilities clients are looking for, and that finding those scarce capabilities outside the firm takes time and is high-risk (not everyone who claims to be an expert is).
The solution will certainly involve greater diversity of resource pools and rethinking firms’ relationships with their external experts. It will be both complicated and facilitated by a permanent shift in favour of remote working. But, at its heart, it will need to deliver both flexibility and expertise: Clients don’t want to choose between these, and the consulting business model shouldn’t force them to do so.