A New Business Model for Management Consulting

by Mary Adams on 08/22/2013

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New business models emerge in industries that are ripe for transformation when technology creates opportunities for new ways to create, distribute, and manage value stakeholders value. Usually the transformation provides innovation to not only improve value for an existing market but brings new value to both existing markets and markets that were previously under served.

In our earlier post we said “Technology is changing a lot of things about how businesses run and more importantly how they create value.  Every new evolution of technology ushers in new skill-based technical changes.  This is more than just the skills of those who work with computers but more about the total reinvention and reorganization of an organizations’ intangible capital.”

Moving Into A Better Model

The current model in management consulting can be seen through a quick survey of the top management consulting firms’ web sites. There you’ll see the promotion of what they do for clients in phrases like:

  • bring new knowledge and insights needed to improve results
  • provide deep analytical skills needed to find data driven solutions
  • build internal support, get to real issues, and to reach practical recommendations

These phrases reflect industrial-era thinking that those at the top (in this case management and their consultants) know what’s best for the organization. Traditional management consulting methods, practices, knowledge and business models are seen as the answers to improving organizational performance.  This assumes that they are smarter than their clients and they know what is best for them.  The technological changes underway now in our society are causing a shift away from this kind of top-down thinking.

What does it look like when you shift away from top-down thinking to a more inclusive approach that values the contributions of not only consultants and top managers but also stakeholders like employees, customers, partners and the broader community? This table is the beginning of an answer:

Mngmt Consult BM Old New

This table shows the effect of the technology changes that we’ve been discussing so much. New technologies give companies new options for accessing people, networks, knowledge and tools. It won’t make sense to them to limit themselves to a closed network of a single stand-alone consulting firm.

But it also illustrated the shift from the historical role of management consultants–to help organizations improve results–and tries to move farther back in the process, to understand the drivers of results—the intangibles. This is why there is such a great need for consultants to understand the basics of intangible capital–the people, knowledge, processes, partnerships and purpose that work together to create value for stakeholders .

The shift from shareholder to stakeholder value is in fact a core difference between old and new business as well as old and new consulting. Ultimately, sustainable profits in an intangible economy come from focusing on stakeholders first as the best path to profits. This is because and intangible economy is built on trust. Organizational behaviors drive trust and ultimately profits.

Changing Organizational Behaviors That Drive Results

Earlier we said “The total reinvention and reorganization of an organizations’ intangible capital requires competencies, processes, value propositions and new digital tools unfamiliar to traditional management consulting firms. This will need a new business model for the consulting industry.

In order to change behaviors, generate trust and get the results they need, organizations need to identify, measure and improve the use of intangible capital. This goes for the consulting firms as well as for their clients. Trying to predict results (an output) without changing behavior (an input)  is like trying to get healthy by reading diet books while you over eat. It simply doesn’t work.

Changing the behavior of any entire organization comes from a shift in how an organizations’ intangible capital is understood and put to work. That kind of knowledge comes from a new business model for smarter companies and even smarter management consultants.

This post is co-authored by Jay Deragon

{ 3 comments }

David L. Schiavone November 12, 2013 at 1:28 am

Nice Article! Business Management consultants should adapt to new changes.They should dare to experiment by integrating technology with traditional methods.

http://www.kpmg.com/global/en/services/advisory/management-consulting/pages/default.aspx

Roam Business August 26, 2013 at 11:40 am

Great article! Management Consultants must not only evolve with new technologies, in order to be relevant, they must be on the forefront of change.

Francis Lambert August 22, 2013 at 6:09 am

Excellent point! Interesting how your “intangible capital” sounds a lot like my “kinetic value” in my comment from part 1 of the article. Leveraging this capital requires not only a shift in understanding it is an organisational metamorphosis, an evolutionary process in maturity that is build on leadership, trust, values and mores.

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