Trends and challenges in the management consulting industry

20 February 2017 Consultancy.uk

These are tough times for firms in the management consulting industry, who must embrace change and quickly adapt to the changing landscape in order to retain clients in a newly digitised world.

Management consulting is a client-driven industry, and as clients’ needs change, the sector – and the consulting firms within it – must adapt quickly in terms of services, structure and operations. The past few years have seen significant transition, particularly in terms of technology and legislation, and management consulting firms have had to respond rapidly, while maintaining their competitive edge and ensuring their own long-term growth.

On the surface, things are looking good for the UK management consulting industry. Figures published recently by Source Global Research, a provider of market intelligence on the sector, revealed that UK consulting grew almost four times faster than the economy in 2015, up 8.2% from  £6.02 billion to £6.79 billion. The report also found that the Big Four (Deloitte, EY, KPMG and PwC) outperformed the market, growing 11.5% to £2.55 billion – a position bolstered by a busy regulatory environment, especially in financial services.

The consulting market in the US also enjoyed good growth in 2015, growing at a healthy 7.7% to reach almost $55 billion (£45 billion). Within Europe, Source Global Research identified the countries making up the DACH region (Germany, Austria and Switzerland) as being the most attractive for consulting firms. Here, the sector has grown by €1 billion to a value of €8.7 billion (£7.5 billion) over a two-year period.

Size of the UK Consulting Industry

Challenges to the consulting industry

However, the sector also faces challenges that cannot be ignored, not least the growing division of the market into two increasingly distinct parts: a low-cost, commoditised part, and a high-value, more classic management consulting part.

Edward Haigh, a director at Source Global Research, says: “This is forcing consulting firms to think about how they can address both markets, which is necessary if they are going to capture a share of the lucrative digital transformation market. This then leads to discussion about the consulting business model, pricing and brand architecture.”

The pace of development in digital technologies is also creating new business models at a faster speed than many current company structures are able to cope with. To deal with this challenge, consulting companies must develop a comprehensive digital strategy and rethink their business and operating models in order to deliver it. There must be cross-channel connectivity and continuous engagement with all stakeholders; but, crucially, the strategy has to be about C-level leadership, and innovation and differentiation through the business and operating models.

Size of the transformation consulting market

Learning from mistakes

“Innovation cannot be achieved purely by investing large sums,” says Marco Amitrano, UK head of consulting at PwC. “We need to adopt that ‘fail fast’, agile mentality that is seen to work so well in small businesses; we need to learn from our mistakes. As an industry we can often have low acceptance of failure, and end up valuing accuracy over creativity. It’s important to recognise this as a barrier to reinventing the way we operate, develop our people and, ultimately, provide our clients with greater value.”

Alongside this, the recruitment and retention of talent remains a perennial issue. “As this issue becomes greater, consulting firms are forced to think more about offering services and, increasingly, products that don’t rely on their ability to sell people,” says Haigh.

Nevertheless, talent is a prize asset, and many organisations seeking talent are casting their nets beyond the traditional top universities, and focusing on the skills someone has, rather than where they acquired them. At Grant Thornton, recruiting a diverse workforce will continue to be one of the most crucial priorities. People and culture leader Stephanie Hasenbos-Case says: “Three years ago, we were one of the first to identify the opportunity to be more representative of wider society, and we made some fundamental changes to the way we attract talent.

This year, Grant Thornton saw a 47% increase in applications for our school-leaver programme, with trainees joining the firm across 20 different office locations. Our recent analysis also found that employees who would not have met the previous academic hurdles are performing just as strongly as those who did.”

Why employees leave their firm in consulting

Working together

Another key challenge facing the management consulting industry in the next two or three years involves multi-sourcing: working with other firms when niche or complementary expertise is required. And this isn’t just about large generalists working with small specialists; consulting firms are increasingly forming partnerships with people outside the consulting industry, including digital agencies, academics and technology companies.

Andrew Moore, director at DAV Management, says: “SMEs are inherently agile and flexible and have always been good collaborators, whereas larger management consultancy firms haven’t tended to be. Smaller firms typically specialise and have strengths in specific areas (e.g. attracting talent) and naturally collaborate with other firms where there is a shared need. In such relationships there are mutual dependencies and relationships built on trust, whereby all parties are, collaboratively, focused on performing in the best interests of the client. This is more difficult for larger management consultancies, as they typically want to be in control and will protect their position, are less collaborative and often see smaller firms as a threat.”

Disruptive business models, for example digital and innovations such as crowdsourced consulting firms, are also emerging and impacting the sector, driven both by new technologies and by ever-smarter clients.

“Crowdsourcing for consulting provides the ability to source specific consulting expertise from small firms or freelancers who can react quickly and provide a particular service from anywhere in the world, with little or no overhead,” says Moore. “For analytical-type consulting services, crowdsourcing looks to be a good way forward. For longer-term professional services and programmes, small specialist firms are a real threat to the bigger players, especially around aspects such as quality, trust and price.”

Eight trends in management consulting

Valuing expertise

A further issue for the consulting industry to face is a growing perception of consulting as a series of more commoditised, transactional interactions. Paul Heugh, CEO of strategy implementation consultancy Skarbek Associates, says: “As technical work becomes commoditised and margins fall, comprehensive expertise in consultants will be more valued. There will be an outflow of purely technical staff into other industries, as consultancies promote those with a greater knowledge of the industry, geography and the customer.”

Recent geo-political developments have led to increased uncertainty in the market; however, many organisations are already identifying and preparing for potential threats and opportunities, often with consultancy support. In order to meet this demand, Peter Richardson, managing director of Protiviti UK, advocates management consulting firms developing specialist teams that understand the intricacies of their clients’ businesses and sectors, as well as the opportunities and challenges they face.

He says: “They should also continue to move away from the traditional time-and-materials model of pricing and towards a commercial proposition based on defining and delivering outcomes, and sharing their clients’ risks and rewards.”

What effect has Brexit had on client growth expectations

If they are to remain competitive in the future, management consulting firms will need to find innovative ways of retaining clients and solving their increasingly complex business problems, while diversifying their own product offerings and attracting the consultants of tomorrow.

This article was created in collaboration with Deltek, a global provider of enterprise software and information solutions for professional services firms and other project-based businesses. For more information download the Deltek Management Consulting Industry Snapshot.

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Accenture's push into the creative sector is an identity crisis

18 April 2019 Consultancy.uk

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.