Posted , in Differentiation
The end of the matrix?
It sounds as though it should be a movie, a grim account of an unravelling dystopia. And, for some consultants, that’s probably exactly what it feels like.
The origins of the consulting firm, as an institution of collective activity, lie in fragmentation. Individual experts, working autonomously, built up small teams of more junior people around them who could leverage the partner’s expertise across a number of projects. But it was a hunter-gatherer model that allowed little opportunity for investment: Every expert-team combination was constantly on the move, either working on existing projects or looking for new ones. With the arrival of larger, longer projects, often centred around technology, these small teams needed to start to work together. The key experts, accustomed to independence, found themselves part of an emerging hierarchy—and they weren’t happy. To solve the issue and salve their egos, they came up with the partnership structure. This established the principle of equality among partners, all of whom had a stake in the business, but it didn’t encourage the people around one partner to collaborate with those around other partners—indeed, at best it legitimised the status quo; at worst, it made the teams more tribal than ever.
To resolve this second issue, most firms chose to organise themselves around a matrix structure, in which each partner team would be allocated to (usually) a service area, (often) a specific industry, and (sometimes) a particular geography. This structure had several advantages: It gave the partner teams a “home”, but didn’t challenge the boundaries around them; it was relatively flexible, so new services, industries and geographies could be accommodated as the firm grew; and it created plenty of positions for partners, which was crucial, not only to ensure the existing partners felt they had an important role to play, but also to provide up-and-coming high-flyers with the chance to be partners in the future.
For many, those advantages continue to outweigh the manifest problems with this model—the slow speed of collective decision-making, the scope for complexity and confusion, and the extent to which investment has to be sliced and diced, to name a few. But there comes a time when even the most diehard matrix structure has to admit defeat. It’s clear that the greatest areas of growth in the consulting market are at the intersections of different parts of the matrix. Clients in one sector are interested in the lessons learnt in others. Digital transformation, data and analytics, and risk/cybersecurity—the three fastest-growing areas of the market at the moment—all depend on being able to weave together different services to come up with innovative approaches for otherwise jaded clients. Investment needs to be focused on a small number of key intersections, rather than being spread equally across all parts of the matrix.
The professional services firm of the future will, we think, be organised around a portfolio of propositions, each of which is a combination of industry and practice/service expertise. Some may also involve regional clusters of firms—something that’s already becoming more common. The role of the firm will be to manage its portfolio of services, balancing cash-cow propositions with high-potential revenue streams, and solid, annuity income with short-term projects. Some of these propositions will be sufficiently important in economic terms and/or require a different model of recruitment and charging that they’ll be explicit sub-brands. Others will just be clearly defined but very specific services. Some vestiges of the matrix will remain—a large firm will have so many propositions that it will need to group them in some way—but it will be the proposition itself that is the economic focal point, not the sector or service it’s grouped with. Firms will go to market via their propositions, and some may organise their people round them, too, while others may assign them to capability groups. Those that do the latter will probably continue to look broadly similar to today’s consulting firms, but the former are likely, over time, to look more like private equity firms. There’ll still be consulting firms, but not as we know them today.