Why Management Consulting Will Be Disrupted: Part IV

by Jay Deragon on 08/15/2013

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This is the last of a series of four posts that examined why management consulting will be disrupted. This doesn’t mean it will be displaced rather alternative business models and tools are in fact expanding both the market of knowledge and affordable resources to transform that knowledge into new skills and wisdom for a larger market.

What these changes do mean is the old business models, rules and practices of management consulting will change forever. But to see the change and the related possibilities we have to think outside the box rather than inside

Thinking Outside the Box Rather Than Inside

Business leaders tend to think about change inside their box. “Inside” means a frame of reference to past experiences, education, knowledge gained and looking at the world from limited perspectives. Management consultants have claimed to have broader experiences, extensive knowledge and education gained from looking at the business world from outside in. Many, not all, of the consultant’s view of the outside world are still filtered through mental models, business philosophies, rules and practices of the past. For instance to even suggest that their industry could be disrupted is considered by many to be an ignorant position for anyone to believe.

Inside the box of management consultants is an analytical approach to problem solving based on exhaustive data collection, analysis and modeling of potential solutions. Steeped deep in an understanding of research methodologies, statistical tools and minds that love to create fancy models and graphical presentations to support their findings.  They live to exercise their minds and to demonstrate the fruit of their work as if it were an art.   In many ways it is and in other ways it is simply speculating on outcomes and getting paid to do it.  The point is the rules and practices of management consulting are still inside the same old box they’ve been in for 60+ years and how dare I say such a thing!

Forces Thinking Outside The Box

IC graph 1

You’d have to be living in a cave not to recognize that entire industries and institutions have been disrupted over the last 10 years by the digital revolution.  The disruption happened because someone created technology that displaced what and how things were being done “in the box” with a better way at lower cost totally “out of the box”. Beside displacing what and how things were being done some have also created new value by discovering new things and new ways of creating value, see Smarter Companies for tools to measure Intangible capital. Innovation always comes from thinking out of the box and leveraging intangible capital.

When we consider that management consultants sell knowledge and skills, both intangibles, let’s look at some trends and innovations that “could squeeze” the management consulting space in the near future. Three categories to watch:

1. New Ways to Access Talent:  Knowledge has left the building. Talent is moving freelance – wisdom is not staying with the big name firms anymore. Tired of the rat race and corporate politics people have discovered a world of collaborative resources. New models of networked firms are disrupting how clients access knowledge and wisdom in a real time, customized, open source and globally connected environment. oDesk is an example, started in 2005, a marketplace of over 3 million independent professionals and their clients can establish and fulfill work arrangements. Last week ODesk just hit $1 billion in work brokered between businesses and freelancers online.  The current revenue would make ODesk rank in the top 15 of management consulting firms globally but they are not a consulting firm they are a “networked marketplace of knowledge workers”. Many of the freelancers are previous consultants from the large management consulting firms seeking a better quality of life.

The category of skills offered by this rich pools of freelancers include market research, business analyst, digitalization, marketing, writing and the list goes on and on. The list looks a lot like the list from the Bloomberg Businessweek article on consulting services in demand, see Part I  .  For more info on ODesk read the LinkedIn Today article titled “Half Of Us May Soon Be Freelancers: 6 Compelling Reasons Why”

2. New Ways to Access Information.: Online tools are abundantly available to both facilitate the flow and the synthesis of knowledge.  The world’s largest reference library, Google, helps anyone find an array of information that any organization can learn to convert into knowledge if they can read and think. Just typing in “digital tools to conduct market research or tools to do competitive analysis” and you’ll find an array of tools that automate the process. Do your homework and it will save you money but it will cost you time. There is nothing better than learning a new skill.

3. New Approaches to Analyzing Intangibles: Businesses hire management consultants to help them improve results by applying knowledge and skills to the improvement of performance.  Historically businesses and consultants have analyzed everything except the things that create all the value, the intangibles that until recently were invisible. As we discussed previously in Part III , intangibles are influencing entire economies of nations and there is more than enough evidence that they influence the economics of business. Tools like these represent innovative ways to identify, measure, transform and monetize intangible assets.

It is the three categories above that will continue to evolve and disrupt the management consulting business as we’ve known it.  We’ll continue to research the three categories above and share our findings in future post. Feel free to add your list of resources that might fit under each of the categories above as comments to this post

Thanks for your interest and comments in this series.

Here is the previous parts of this series: Part I, Part IIPart III

{ 3 comments }

Hmmm... September 1, 2013 at 8:16 pm

It’s hard to take this series of articles seriously when there are two fundamental flaws to the argument. 1) The author clearly does not understand management consulting, since he presents a 60-year-old, tired caricature of what top management consulting firms actually do. These firms have long moved from a business model that resembles author’s understanding of what they do. 2) The “disruption” the author describes is, at the very least, 15 years into the past and, unbeknownst to the author, was a major concern for many of the top firms and many initiatives were taken to respond to it. Most would argue they have weathered the storm pretty well, since the top three firms have continued to consistently grow 10+% a year.

I’m not saying management consulting won’t be disrupted… it very well might be someday. The reality is, if the author wants to make a truly convincing arguments, he needs to actually know what management consulting firms do (which, unless you work in one, you will not be able to find out since these firms are not transparent).

Management consulting, contrary to the author’s understanding, is a very dynamic industry with intense competition. What we call “management consulting” is constantly changing. The management consulting of even 10 years ago is fundamentally different than today. There are the big players that everyone knows and there are constantly new and small niche players grabbing at market share from the big players. There major players who suddenly begin to struggle and are acquired, new ones who rise to join the big players, small niche players who constantly serve as disruptions to their bigger cousins, and big players who are forced to constantly adapt to a rapidly changing industry.

caleb August 24, 2013 at 12:32 pm

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Paul Nunesdea August 15, 2013 at 5:40 pm

Great article! Thank you for such a thought provoking categories of disruptive forces to the management consulting industry – new ways to access talent, new ways to access information, new approaches to analyzing intangibles.

I would add “new ways to deliver consulting services”. The Internet today is allowing remote meetings with robust software tools that deliver group decision making support that was just imposible to think about 60 years ago. for instances, a dispersed group of engineers in a large multinational firm like Siemens or ABB can rapidly brainstorm and reach consensus on the best technological solution for an innovative optical fibre service in a matter of days instead of months, without traveling around the globe. The sales behavior in retail outlets can be analyzed and produce a compelling report within the traditional model, worth 200K USD/EUR maybe more (which would probably cost 50K of research time). But today a big retail firm like Inditex can gather their 100 best shop managers around the world and brainstorm better ways to increase sales and then use this same information with a sample of existing and potential customers in key markets to rate those ideas according to diverse criteria such as ‘cultural stickiness’, ‘urge to buy’, ‘adictive bargain deals’ within a cost tag of less than 50K USD/EUR but that could easily be prriced by 500K or even more if you would include in this croud sorcing consulting project the intangible value of brand wareness and ‘love of brand’ that could be generated.

The question remains who would take advantage of this new ways of delivering consulting services? Would the oDesk free lance consultants would be able to adopt and master these new Internet tools for on-line meetings with group decision support replacing traditional delivery methods? Would the traditional big six be able to reinvent their service deliver with these new tools? There is perhaps a third alternative. I see a trend where the most unsuspected event & communication agencies like MCI Group are going to take a growing share of the busines that was once exclusive to traditional management consultancy firms. As you brilliantly wrote in these articles, companies are no longer looking for knowledge, they want to acquire wisdom.

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