Posted , in Business model
The next McKinsey won’t be defined by the quality of its people
The gaggle of a few dozen bright young things crowding the coffee and snack table starts to move, herd-like, for the haphazard rows of chairs that span the width of the conference room, eagerly anticipating the welcome presentation from the firm’s market lead. As they take their seats, she swans into the room, taking up position in front of the interactive digital display and surveying the new blood like a centurion inspecting the troops before sending them into the fray. “Consulting,” she gravely intones, “is a people-driven business. That’s why we’ve prepared such an intensive training programme for you. Our only asset is our people: Without you, we have nothing.”
Over the last few years, however, such platitudes about the industry have been ringing increasingly hollow. There certainly was a time in the not-too-distant past when the value a firm could create for its clients was a direct consequence of the quality of people in its employ—although we should note that quality is not just a synonym for intelligence. Firms like McKinsey built their reputation off the back of finding people with the perfect mix of creativity, empathy, analytical rigour, and political nous.
But now? Not so much. High-quality people are still important—necessary even—to the long-term success of a firm, but they are no longer the only factor that determines whether or not a firm can be a value-adding partner to its clients. Delivery models have had to change to reflect changing client demands, and this process of gradual evolution has opened up entirely new axes of competition between firms.
For example, many firms have invested heavily in developing their own intellectual property. “Asset-based” consulting is, for many types of projects, the new norm: Our research suggests that 68% of clients in the US have at least one licensing deal in place with a consulting firm—often as part of a managed services relationship. Increasingly, firms are saying to their clients, “Work with us, and you won’t just get a team of smart people working around the clock to solve your problems. You’ll also get access to our custom software and our proprietary data models. Think about how much faster you’ll be able to see results!”
At the same time, many of the big players in the industry have recognised that the types of challenges today’s clients want their consultants to solve require a cross-disciplinary, multi-stakeholder approach, often involving partners from a wide range of different types of organisations. As such, they have worked hard to establish so-called “ecosystems” of technology and service providers around them. Such ecosystem relationships have now themselves become an important value-generating asset for many firms.
And with unemployment rates at near-record lows in much of the developed world, workers in this industry enjoy unprecedented levels of mobility: Consultants flit freely back and forth between companies and across the invisible line dividing service providers from their clients. Firms have never had a more difficult time attracting and retaining talent. Which means that other ways of generating value—software, data assets, ecosystem relationships, and so on—are only going to become more important as ways for firms to carve out a differentiated position for themselves within the market.
Clients, for the most part, have not yet fully woken up to this. The traditional tender process for advisory services provides little room for a thorough inspection of a potential partner firm’s IP: Most buyers still tell us that they look, first and foremost, at the quality of people a firm sends to a pitch meeting when they are trying to decide whether said firm will or will not deliver value for money. However, we suspect it will only be a matter of time before clients’ evaluations of firms catch up with the way that work is now delivered.
In the future, the firms whose names become bywords for high-quality, value-adding work will not just be the ones with the highest concentration of graduates from top-flight business schools: They will be those who can find talented individuals and equip them with the IP and the partners necessary to do truly transformative work for their clients.