Management consulting is the delivery of one or more services comprised of advice, people, processes or technology into a client organisation in order to improve that organisation, either in terms of capability, efficiency or growth. That all sounds great, so why is it not working any more?
It has been a challenging year across management consulting, with many firms letting unprecedented numbers of staff go after failing to recognise that their recent explosive growth was abnormal. That, combined with inflationary pressures pushed up the cost of consulting and reduced the available spend of potential clients which led to the perfect storm. If nothing changes, consultancies will continue to be increasingly unaffordable, driving themselves out of their own market as they seek to differentiate themselves and identify what makes them unique to boost their ability to sell.
Consultancies have countered this with reassuring statements claiming this is simply a rebranding exercise. Asking consultancies if everything is ok in this situation is like asking them to mark their own homework. They do not want to apply critical thinking to their own organisations because they are afraid of what the analysis will show – that it is time for change, time for a reformation, time for Consulting 2.0.
For too long, consultancies have held the hands of their clients, provided reassuring advice which enabled them to sell more of their own resources into those same clients and no-one batted an eyelid. It was seemingly acceptable to pay a day rate for someone to sell to the client, putting into practice the land and expand approach which is rife in consulting. Consultancies were always incentivised to sell as much as they possibly could, with a focus not on the client’s growth and success, but their own.
Consulting 2.0 is a fresh new approach to delivering the right technology solution where consultancies still have a place, but they are restructured to put the client and their needs first, ahead of their own, and are remunerated via a new model which focuses on outcomes and benefits to the client rather than either a day rate or a fixed cost. This could be based on a risk/reward style of contract, or as a percentage of cost savings, both of which make the bulk of consultancies uncomfortable, This is because there is too great a risk placed on the consultancy to deliver great work, in line with what was originally agreed, and we really have to question why this is such a concern for them and whether working with organisations who won’t stand by the expected quality of their work is ever the very best thing for the client.
Perhaps there is a space for an even more radical approach. What if consultancies focused on building the capabilities of their clients rather than creating a micro-industry for themselves by supplementing them? Consultancies must start building, upskilling and integrating the client’s own teams so they no longer need to rely on consultancies for day to day work. Clients will then take advantage of lower costs, take control over their technical direction and reduce a dependency on consultancies for all but the most niche of skillsets. Consultancies need to adapt to become genuine experts with staff a cut above anyone working in a client’s own organisation. This could result in the growth of new highly skilled IT departments, a virtual collapse of traditional consultancies and a new generation of consultancies with a fresh perspective on doing the right thing by the client, even if it isn’t the right thing for them.
