1. The Client Imperative
Across the professional services industry, evolving client demands are challenging established business models and the delivery of services, and heightening competition in the market.
Greater quality at higher speed
At least partly driven by technology and market innovation, clients require advice on complex, often disruptive, issues and are increasingly expecting high quality work delivered more quickly and cost effectively. In some cases, this has resulted in a growing reliance from clients on internal teams / resources, in others it has meant the growth of agile service providers which are challenging the established incumbent players.
The consulting sector has to some degree remained relatively insulated from this wider professional services dynamic, and is well placed to weather the rising tide of disruption.
This is largely due to consultancy’s primary USP being the application of human experience to specific problems at a given time (for example management consultants who are helping implement strategic change). This work tends to be low volume but requiring a high degree of human insight. Commoditisation is not a realistic option in many circumstances. In addition, consulting is neither a mature nor regulated industry – unlike, say, legal services – and is therefore able to be far more agile than other business types.
The new buyers of consultancy
Consulting firms have traditionally competed on two fronts: breadth - of expertise or geographical spread - or depth - of subject matter knowledge.
This has led to a landscape populated by a handful of ‘universal consultants’, largely comprising the Big 4 and the MBB (McKinsey, Bain, Boston Consulting Group), a relatively sparse upper mid-tier and a dynamic, emerging weight of smaller mid-tier and niche specialists that are entrepreneurial in mind-set, fast growing, and winning work from some of the larger players.
At the same time, while some, very large, corporate entities have sought to establish ‘in-house consulting teams’ as problem-solvers autonomous from the main functions of the business, this has not happened (yet) to the same extent as the growth of in-house legal teams.
What has happened, though, is the beginnings of a movement in terms of the volume buyer of consulting services from being C-Suite driven to being procurement-led. This seemingly minor tilt may yet have a long-term transformational effect on the makeup of the industry. A procurement-led buying approach has traditionally been bad news for niche operators who generally lack the scale and breadth required to be included on panels.
"Many niche firms are growing well, and we may well see an emergent mid-market begin to take shape in the consulting industry."
This is as we have seen in the legal sector, but achieving the scale to compete for the big work at competitive rates will be a fundamental challenge.
This shift in buying position means that consulting industry clients, along with those in the wider professional services industry, are increasingly cost conscious and the expectation now is for improved value and quality of work along with consistency and transparency with regard to price. This may include, for example, fixed-fees for projects. The challenge then for consulting is to have a keen grasp of who their buyer is as they seek to avoid a race to the bottom while suitably adapting the client offering, including through the use of technology, to maintain market share of higher margin work.
The impact on people strategy
This poses a significant challenge, particularly when it comes to people strategy. One consulting firm, for example, recruits using the moniker ‘the best people solving the hardest problems’. Recruiting and retaining ‘the best’ is then the absolute imperative for the consulting industry.
Consulting has, though, traditionally been quick to understand client demands – particularly in comparison to other professional services – and able to adapt accordingly. If this history is anything to go by the industry will be more than a match for the challenges ahead.