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Consulting has been on a roller-coaster ride in the last decade.
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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.
In this article we extract insights based on the experiences of firms like Capgemini, BT, A.T.Kearney and Marakon Associates to name but a few…
A market transformed
“I have been in consulting for almost 20 years,” says Capgemini’s global head of consulting, Bjorn-Erik Willoch, “but 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.”
Mark Leiter, who runs Leiter & Company, a consulting firm specialising in the professional services sector, takes up the reins. “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,” says Paul Hayes, who leads BT’s technology transformation team, part of BT’s rapidly-growing consulting practice. “The 1990s were typified by organisations 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,” agrees Michael Traem, the head of consulting at A T Kearney in Europe. “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,” says Tram. “They want to get things done.”
“The biggest change we’ve seen has been in client behaviour,” agrees Ken Favaro, the New York-based Chief Executive of Marakon Associates, a strategy consultancy. “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 organisation, 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,” says David Owen, the head of Deloitte’s consulting practice in London, “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.”
The authors – Gilbert Toppin and Fiona Czerniawska – argue that 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 organisation benefits from being scrutinised 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 organisations 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.
As Geoff Dodds, formerly PwC Consulting’s Global Brand Director, says: “Consulting firms do not do themselves any favours 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.
Further information
Our thanks go to Profile Books for allowing us to base this article on quotes from The Economist’s new publication “Business Consulting”. We are grateful also that they have agreed to extend a special offer to you our readers. Until the end of July you may buy a copy of Business Consulting by Gilbert Toppin and Fiona Czerniawska (Economist/Profile books) for £15* including P&P; (normally £20). To place your order at this reduced rate simply call Gavin Conn on +44 (0)207 841 6304 and quote promotional code TC1.
* Customers ordering from Europe please add £2 for postage; £4 for Rest of World
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