Disruptive Trends in Strategy Consulting: Recent and Past
In this report, we review three major disruptive trends affecting the strategy consulting firms in the US. To provide the full context, we also provide a brief overview of factors that trigger these trends.
There are several insightful theories and detailed explanations of these trends, which include additional trends not captured in this report due to the time and scope limits. In lieu of a full report of the additional trends, we provide a list of articles for further reading.
FACTORS INFLUENCING THE CHANGES IN STRATEGY CONSULTING INDUSTRY
In the past, strategy consulting firms solved their clients' problems and brought value by putting together strategic recommendations based on the consultants’ experience and skills. With the increasing amount of data available, clients are pressing for a more data-driven approach, which in turn changes the nature of the recommendations provided by these consulting firms.
With the rise of big data and artificial intelligence, consulting firms are forced to utilize these data in synthesizing their solutions. In the same token, clients also have increased access to such data and technology, making them more inclined to try to solve their problems using internal resources.
2. Increased senior-level awareness of the costs of hiring “solution-shop” consulting firms.
According to an article in Harvard Business Review, the recession in 2002 has made companies more watchful of their professional services spend. C-suite executives, who typically hired consulting firms, yet did not pay too much attention to such spend, are now becoming acutely aware of how their decisions are affecting their bottom line.
3. Disaggregation of consulting services.
As a result of the cost pressures faced by senior leaders at the client side, clients are becoming savvier in deciding which project they want to outsource to a consulting firm and which they solve internally. Instead of hiring “solution-shop” providers for the entire project, clients break down these projects into smaller chunks and split the work between internal and external teams.
DISRUPTIVE TRENDS IN STRATEGY CONSULTING WITHIN THE PAST FIVE YEARS
1. Increased use of digital platforms as deliverables and tools for consulting engagement.
In the past, the typical consulting engagement included in-person meetings and PowerPoint presentations. The drawback of this approach is that the data presented on the slides can become obsolete within weeks, reducing the value of the solution.
To keep their data and solution up-to-date, consulting firms need to leverage new technology, such as cloud and adaptive approaches in their deliverables. Implementing such technology will allow firms to provide real-time data that the client can independently update after the engagement is concluded. It will also allow firms to stay connected with their clients using the live platform.
Digital platforms also change the way clients select and interact consultants. Mobile, social and other digital solutions have allowed clients to review potential independent consultants, select and interact directly through a peer-to-peer consulting system. This system has the benefits of reduced cost while maintaining the right level of expertise of consultants needed for the project.
2. New business models of strategy consulting due to unbundling/disaggregation of projects.
As a response to increased client savviness in unbundling/disaggregating projects into smaller chunks, some consulting firms, such as Eden McCallum (EMC) and 10EQS, have created a new business model using a mix of freelance consultants as on-demand talents and in-house consultants. By using freelance consultants, EMC is able to provide specific expertise required for each part of a client’s project while keeping the cost low because it doesn’t have to invest in recruiting and training its consultants. The freelance consultants can also benefit from this model by choosing projects they are interested in and not having the demand of traditional consulting work.
Similar to the mix of on-demand and in-house approach mentioned above, other firms such as PSFK Labs offer a mix of solutions based on tailored and off-the-shelf research to meet their different client needs. This company build their reports using a network of consultants from around the world and provide their clients access to the analyses or reports, but not to the consultants.
A slightly different take on this network approach is done by the Gerson Lehrman Group (GLG), where it offers clients the option to connect directly with a subject matter expert from every industry for both short- and long-term engagements. Clients can engage by phone, in-person meetings, surveys, special reports or roundtables.
Another business model that has recently emerged is the offering of solutions for a particular step in the consulting engagement. Certain firms, such as Narrative Science and Inspirient, only offer automated data analysis and interpretation services. Others, such as Celonis, focus on process mining and modeling.
3. Asset-based consulting.
This approach consists of software solutions, models, algorithms and data-based assets, according to a book titled “Digital Transformation of the Consulting Industry: Extending the Traditional Delivery Model.” In this type of consulting, there is less human interaction. As a result, the services can be scaled and multiplied easier than the traditional consulting model. This type of services will also be less expensive because the firms can conduct multiple projects with the same consulting teams. Large firms such as McKinsey have started to adopt this model.
To wrap up, the main disruptive trends that have emerged in the last five years include increased use of digital platforms, use of data analytics solutions, use of in-house consultants, new business models such as using freelance consultants and specific solutions for a particular step in consulting engagements, and asset-based consulting.
1. Consulting on the Cusp of Disruption, Harvard Business Review, October 2013.
2. Digital Transformation of the Consulting Industry: Extending the Traditional Delivery System, Volker Nissen, 2018.