Business consulting at the crossroads
Analysis--Consulting has been on a roller-coaster ride in
the last decade. From being a boom sector whose services clients were desperate
to buy, consulting has gone full circle through a cycle of severe downturn and
back now to a period of sustained growth once again.
A new publication from "The Economist" entitled
"Business Consulting" has tapped the insights of many of our
industry's leading figures to try and assess how the market has changed. What
is clear is that both clients and consulting firms have had to evolve to get
the most from the client-consultant relationship. Further shifts in the
industry are expected with those firms that adapt quickest expected to be the
winners in the coming decade.
A market transformed
“I have been in consulting for almost 20 years. I have never seen restructuring as brutal as
that of the last two years. Everything has changed, and most things are more
difficult. Clients are more demanding--and with good reason. During the 1990s,
you could win good consulting engagements without much effort; there was a lot
of learning on the job by consultants; you could be credible just by reading
the right magazines. Clients could not attract the people they needed, so
consulting represented a mutually useful way of getting good work done. Now you
need to be a world-class expert with a very good idea up-front.”
“Four years ago, people were sitting on the beach. The
consulting industry faced a crisis of confidence in terms of whether the consulting
proposition made sense. The erosion of many traditional consulting
markets--such as corporate strategy--is being masked by a series of management
ideas, years of cost cutting and now outsourcing. If you look under the cover
today, you’ll see western consulting firms selling more services in the
developing world where ideas that have peaked here are still new. That lack of
innovation and clear thinking eventually catches up with you. Answering the big
question--who are we?--is the biggest challenge facing the consulting industry
today.”
Most of the professionals interviewed for this book agree
that clients are now choosier about when and where to use consultants,
preferring to hire a small number of experts rather a cadre of bright, but
freshly-minted graduates.
“We are seeing more clients focused on becoming intelligent
clients. The 1990s were typified by
organizations taking a 'me too’ approach to implementation in order to keep
pace with the latest trend and the increasing pace of change. Consequently
there was a tendency to lurch from one bandwagon to another, rather than
concentrating on their real business needs. This created a credibility gap as
consultancy and systems integration firms failed to deliver real value. The
consulting industry’s challenge now is to be more pragmatic and to focus more
on delivering tangible and sustainable benefits.”
“Clients have become more reluctant to use consultants, they
have built up their own internal consulting teams, often hiring consultants who
have lost their jobs with major consulting firms. They have the capacity to do
much of the work themselves that they used to hire consultants to do.” Part of
this is cyclical: clients have established internal consulting units, only to
sell them off when the market changes. But it also points to a longer-running
trend: “clients want less in the way of strategic booklets and presentations,
and more in the way of concrete results.
They want to get things done.”
“The biggest change we’ve seen has been in client behavior,
Projects are smaller and more focused on tangible outcomes--a reaction to the
experience of the late 1990s when many consulting firms were guilty of making
big promises that they failed to meet. As an industry, we’ve gone from enjoying
the benefit of the doubt to suffering from the ‘tyranny of the doubt,’ where we
have to all but guarantee results. Moreover, the fact that so many people have
left the consulting industry to join clients’ organizations means we’re seeing
a lot of in-sourcing going on in the market for high-end advisory work. That’ll
dissipate as managers realize that fresh thinking is always valuable. People
who join clients from consulting firms can be very helpful in the short term,
but their intellectual capital is effectively frozen and over time they become
compromised by the inherent momentum, habits and politics in any organization,
particularly the largest ones. Plus, when does it ever make sense to in-source
when there’s a highly competitive and innovative market, like the consulting
industry, to meet one’s needs?”
The consulting industry at a crossroads
Business Consulting argues that the consulting industry
across the world is at a crucial stage in its evolution. The principles by
which it grew in the 1990s--the focus on big management or technology ideas,
the emphasis on upping revenues at the expense of just about everything--have
not served the industry well. The downturn in demand for consulting in the
early 2000s has provided the industry with a salutary reminder that consulting
firms, like other companies, exist at the whim of their customers. “When the
phones stopped ringing in 2001,” recalled one consultant, “I suddenly had a
nightmare that they might never start again, that clients might just stop using
consultants.”
As the market picks up and the phones start ringing again,
consultants will be tempted to forget what happened. That would be a mistake.
While the volume of jobs shed by the consulting industry in recent years is
probably equivalent to the number gained during the fattest years of the
e-business bubble, the downturn should not be dismissed as a necessary market
adjustment. There are long-term, more deep-rooted sources of dissatisfaction
here that need to be addressed if the reputation of the industry as a whole is
to recover.
“Clients continue to be very demanding, and our
responsibility is to respond to this. Clients make substantial investments and
have increasingly high expectations both in terms of the relevance of the work
consultants undertake and the quality of the service delivered. Consulting is a
serious business which is addressing serious things.”
Consulting will nonetheless continue to thrive if challenges
are addressed. The case for using effective consultants is compelling because:
• In the same way that effective non-executive directors can
make a profound difference to a company, every organization benefits from being
scrutinized and challenged by an absolutely objective (and therefore usually
external) person. Everyone, whatever their position or job, can lose sight of
the overall wood because they are too busy thinking about individual trees;
having someone come in and ask fundamental questions about what they are doing,
and why they are doing it, can be enormously valuable.
• Consultants offer their clients “economies of knowledge”.
Even though they may seem expensive, used intelligently, their clients spend
much less time and money either recruiting people with the right skills or
training existing staff to carry out a specialist task which may only take a
handful of weeks. Consulting firms, by spreading those costs among their
clients, are able to recruit, develop and deploy experts on a short-term basis.
• Consultants can provide energy and momentum in projects
where clients, often taking a few minutes out of an already busy schedule to
sit on a committee, are unable to do so. Consultants can provide the
imperative, the road-map, the resources, which help organizations do what they
could not do for themselves.
But there can be no doubt that a lot goes wrong. Between the
ideal of consulting and the practical reality falls a shadow. Consultants can
ride roughshod over the wishes and constraints of the clients they are supposed
to serve. They can take longer and cost more money than clients expect. That
they sometimes deliver less than they promised does not mean they will not try
and sell their clients even more.
“Consulting firms do not do themselves any favors because
they are often arrogant. They are reluctant to acknowledge that clients and
consultants go up--and down--the greasy pole of learning together. Some days,
the clients will be learning from the consultants; some days, it will be the
other way round. Together, they can do more than they could independently. What
counts is what really happens.”
The last ten years have demonstrated that consulting is no
longer simply about a relationship between clients and consultants, but about
more complex issues. Clients, markets, and consulting firms are far more
interdependent than they once were. The pressures each side faces are
interlinked, and success only comes from both sides working together. To use
consulting well as a client, and to deliver as a consultant, you need to
understand the whole system.
Ken Roys, CEO
BTF Management Consultants Inc
866-385-1900 Toll Free
713-983-7904 Fax
Ken.Roys@btfmanagement.com