Consultants, deservedly, have a mixed reputation in the business world. On the one hand, there are those who believe the old saw that consultants borrow a manager’s watch so they can tell him the time when he asks. Translation: consultants have no value-added; they only help managers figure out the meaning of information already at their disposal. The other hand is that there are many managers who will attest to the value of a third-party point of view, of insights gained from consultants having worked at many other firms and of ideas that were only generated by the creative friction between practitioner managers and cerebral consultants.
Strategy consultants, however, are a special breed. Whenever your company decides to entrust the formulation of its strategy — the decision about how it will compete in the years ahead — into the hands of a consulting firm, it basically means that someone else is going to decide your future. Or, at least, help decide how your firm is going to try to manage its destiny. That’s a consulting assignment with enormous responsibility. The consulting firm has to be sure it understands the industry, the firm’s competitors and their probable plans and, of course, your firms strengths, weaknesses, opportunities and threats.
Yet, says John Gapper on FT.com [link], there are many strategy consultancies who are, themselves, lost.
Ironic? You bet. Seems like many strategy consultants can’t see the forest or the trees. Says Gapper: “Consultancy is in a funk as midsized partnerships with venerable names, such as Booz & Co and Roland Berger, realise they have to do something but cannot decide on what. Just carrying on is not an option – they face the spectre of Monitor, the consultancy that went bankrupt last year, and was bought by Deloitte for only $120m.” Gapper’s post has lots of important details about the state of both big and medium-sized consultancies, with revenue numbers to boot.
In the language of nextsensing, these firms are very deeply in a state of “disruptive ambiguity”. They are confused and overwhelmed by a stupendous array of conflicting data about trends in the marketplace. They must confront the same reality in their own business that many of their clients have: that strategy as, first, planning, and then, executing (two parts in a staged sequence in which consultants help with the first part and not the second) no longer works in today´s fast-paced and ambiguity-filled environment. Ironic indeed.
What to do?
The importance of being embedded in the nature of the problem becomes critical to imagining — nextsensing — future opportunities. What you can observe, organise and originate depends greatly on how close to the customer firing line you are, and customer boardrooms and macro analysis is as close as most strategy consultants get — not very close at all and woefully insufficient in many cases in today’s dynamic environment.
Perhaps, you might think, this means that strategy consulting should be left to the big-tier firms alone. John Gapper has something important to say about that as well: “Only a minority of what strategy consultants now do is blue-sky thinking for CEOs. Two decades ago, 70 per cent of McKinsey’s revenues were from strategy and corporate finance but most now flow from hands-on work on risk, operations and marketing.” As I read this, a lot of consulting work these days is part-time knowledge-worker labour. The big-tier firms have shifted into more of the “second stage” services of aiding in the execution phase of strategy, which has proved good business for them, albeit only temporarily (in my view) as the distinction between the stages disappears and the need for more nuanced insights into shifting customer needs (at the micro, not the macro level) and experiences make the “arms length” position of consultants tenuous at best.
Thus, this is the situation for consultancies, as I see it. Lone ranger and small firms are dependent on their notoriety and/or the loyalty of their long-time clients. The size and number of opportunities for small consultancies keeps shrinking, as companies pay for consulting only when it’s absolutely needed.
Medium-sized firms, as Gapper so well describes, are lost.
The big firms (McKinsey, BCG, Bain & Co.) are increasingly doing nuts-and-bolts day-to-day work, which isn’t really consulting at all.
I know too many people in the working world who will not be sorry to hear about the demise of consultants, if this is what is on the horizon. As said, consultants have a very mixed reputation.
But the challenge right now facing both consultants and businesses is the same: what’s next? Whoever can answer that question first — and then act on it — will be the leaders of tomorrow’s marketplace whatever the industry.