The leading gurus of management became famous because of their academic accomplishments, books they’d authored, new business insights they’d created and political influence gained with industry leaders. The gurus’ play book fed the appetite of a business ego-system obsessed with short-term results to satisfy Wall Street, stockholders and self-serving management agenda’s. Employees always knew a layoff was imminent whenever management announces a new initiative (re-engineering, reorganization, and quality improvement), being implemented by yet another management consulting firm.
New initiatives, or this year’s management de jour, show management trying to come to grips with radical changes yet recognizing they do not have the knowledge necessary to find adequate solutions. So what has management traditionally done? Hire in the knowledge gurus, management consultants.
How Much Does It Cost to Get Knowledge?
Companies pay executives to manage the business. Managing a business requires knowledge. Management’s job is not only to have the right kind of knowledge to do the job but to continually acquire new knowledge necessary to manage the changing dynamics. The problem is management doesn’t have time to acquire new knowledge so the easy thing to do is hire someone else who has it. The reason they don’t have time is because their time becomes tied up solving old problems. I guess the old knowledge was inadequate.
Management consulting has been and still is an industry that capitalizes on the study of macroeconomic, technological and social change then creating labels for new management theories they’ve discovered from their infinite wisdom. Also known as factories of new knowledge for sale, you can only get the knowledge from their books, their anointed apostles who’ve been trained in the practices or you can get it from a copycat at cheaper prices.
Ira Sager writes in a June 13, 2013 Bloomberg BusinessWeek article: Over the next 12 months, 82 percent of the U.S. clients surveyed by market researcher Source Information Services say they won’t cut the amount they spend on outside help. And nearly half, 42 percent, plan to bring in even more consultants, while 5 percent expect to boost their spending on consultants by more than 50 percent.
The U.S. market for management consulting grew 8.5 percent last year, to $39.3 billion. The fastest-growing areas: marketing and sales (25.6 percent), operational improvement (11.3 percent), and technology (10.1 percent).
Where do U.S. companies need help? Not surprisingly, digitization is high on the list, which the research firm says is benefiting consulting companies IBM (IBM), Deloitte, and Accenture (ACN), leaders in this area. “Where the rest of the world talks about globalization, America talks about digitization,” according to the report.
U.S. companies, however, are spending much less on strategy consulting. That sector is expected to grow just 3.7 percent next year, not good news for McKinsey, Bain, and other leading strategy specialists.
Management consulting has been and still is a huge business because, understanding and applying new knowledge is the solution to every business problem. This is especially true when markets are undergoing dramatic changes.
The Business of Knowledge is Being Transformed
The word “consult” means to ask advice or opinion of or to deliberate together. We are living in a knowledge driven economy that is heavily influenced by collaborative forces sharing intangible and tangible assets to create new value. The internet has accelerated collaboration and people are learning from the interactions.
Note the Bloomberg BusinessWeek article states that the fastest growing areas companies are seeking help in are marketing and sales, operational improvements and not surprisingly digitization. So the obvious question that one might ask is whether the answers to these issues exist within the organizations “social network” and “resources of knowledge” or does it only exist in the minds of expensive management consultants?
The internet will be disrupting the management consulting industry’s business and mental models because more and more people are seeking wisdom while many consulting firms are still trying to sell knowledge. Knowledge has become a commodity because of digitization. Wisdom comes from transforming knowledge into a skill that changes your results. Now there are tools to help the transformation.
We’ll look at these issue further in Part II through Part IV next.