Practical consulting set to become the new norm in consultancy industry

11 January 2018

A new report on the future of the consulting industry has forecast the rise of practical consultancy as the next major force in the space. According to many businesses, however, “Third Category” consulting – positioned for the mid-market between expensive high-end strategy consultants, and larger, more multidisciplinary alternatives – is under-exploited, offering firms a major opportunity over coming years.

Against the spending backdrop, small and medium enterprises (SMEs) in the UK admitted to wasting a grand total £12.6 billion on external assistance in professional services, which they felt failed to improve the performance of their companies. When asked by a report in 2017 why they felt such a figure was wasted, as many as two in five British businesses said they found “inefficient” fixed fees to be the main reason for dissatisfaction at the service they received. With this backdrop of perceived inflexibility in mind, it is perhaps unsurprising that new, bespoke, agile services from consulting firms are gaining ground.

Companies are increasingly seeking more tailored practical consulting support, rather than a large team of consultants, commodity players, or a high-priced brand name, although this sector of the consulting industry market is under-filled at present. Instead, there exists a simple dichotomy of two variants: First Category consulting firms provide high level, strategic advisory services and command high fees due to their pedigree. The Second Category represents the reality of the commoditisation of certain services, and encompasses large scale work flows with well-defined processes (using armies of consultants) as well as staff augmentation. These two variants tend to compete on price.

According to a new report by RGP, the traditional two-category dichotomy of consulting firms is not addressing the need for more tailored and individualised services. The survey found a disconnect between what companies want and value from their consulting partners, and what they are actually getting. Almost one-third of the respondents cited cost, delivery of results, and knowledge transfer as the greatest sources of dissatisfaction.

Two-tier system is not meeting all of clients needs

Major dissatisfaction

The analysis from RGP identifies four top areas of dissatisfaction with the current consulting partners of businesses. First, in relation to cost, respondents believe that consultants do not deliver sustainable results often enough. As the delivery of results is one of the most important values expected from consulting partners, if results cannot be maintained without the aid of consultants then engaging external expertise is essentially a waste of time and resources.

Following this, a more surprising criticism from clients is that their consulting partners lacked relevant knowledge. Today, companies are more knowledgeable about what they want done – not just what someone else tells them needs to be done – in part, perhaps because many managers in the current epoch are ex-consultants themselves, and are aware of the tricks of the trade. The alumni bases of large firms such as the MBB strategy consultancies, and the Big Four of the professional services world, have become thousands of managers in decision-making positions. This makes the effective implementation of the second top value from consulting partners – the transfer of knowledge – all the more important.

High prices were also a top four source of dissatisfaction. The consulting industry has been under sustained pressure not to elevate fees, even after a period of recovery following the global financial crisis of 2008. In spite of this, clients still cite consulting partners as charging high prices – while stating a key value of prospective partners is competitive pricing. The question is which tier of consultant this applies to – though as strategy firms are the most expensive, followed by the Big Four, it is perhaps most applicable to Category One. Operational consultants can meanwhile be cheaper.

Finally, respondents of RGP’s study suggested that gaps in tools and methodology were a downfall of many consulting firms. While consulting partners are expected to bring specific expertise to the projects of their clients, clients also expect a set of best practices and tools that can help advance maturity and smoothen implementation.

According to the author of the study, “It is becoming apparent that specific needs are not consistently met by the current two-tier system. Hands-on subject matter expertise and complete knowledge transfer back to the business are two of the most common unmet needs.”

Further to this, clients and consultants clearly demonstrate a disconnect between expectations and delivery. Attributes ranked ‘most important’ when engaging a consulting firm were; Subject matter expertise; Specific industry skills; Project management & execution; and Attentive client service. As a result, the report concludes that there is a real need for new, innovative consultancies to fill the gap, with a model that is better. They call this “Third Category consulting.”

Practical consulting set to become the new norm in consultancy industry

Third Category consulting

The Third Category exists in a state of symbiosis between consulting companies and the organisations they serve. Rather than simply providing recommendations, this new frontier will see firms engaging with clients by helping and training their personnel, while strategising a long term model to leverage. The closer ties between client and consultancy are partially the result of a more refined, individualised process for hiring consultants, with a greater emphasis on the depth of subject matter expertise and the transfer of that knowledge being the top attractions for clients to Third Category firms.

Increasingly, companies are looking to get better value for their investments in consulting partners by pre-vetting service providers by discipline or solution. For example, transaction services or change management specialists would now be favoured for specific projects over broader, multidisciplinary firms which were previously hired for their blanket knowledge. This new selection process provides for a pre-qualified pool of consulting options to leverage the best talent for a particular need. As a result of this method of obtaining specialist know-how, consultants will subsequently be expected to provide more in-depth and personal work, as they are hired on the basis of their specific expertise – not just a broader industry knowledge.

Providing attentive and tailored solutions to the client is an essential factor behind success in this category, then. Looking deeper into the attentiveness attribute, consulting firms need to position their subject matter specialty into meaningful business results. In order to deliver this to Third Category clients, value relies heavily on a consulting firm’s proven ability to work effectively with client teams, and with other consulting firms that the client has engaged. Consulting firms will have to demonstrate that they have this capability and the track record to serve as an integrated partner.

Preferred provider programmes

With this change in flavour comes a new challenge for clients too. At the moment, most larger companies purchase consulting services through their preferred provider programmes – with studies saying as many as three quarters of consulting work can go to such suppliers. However, most preferred provider programs do not accommodate the Third Category trend. Meanwhile, buyers’ perceptions need to be realigned with business reality. At present, the study warns that companies may not know where Third Category consulting firms fit within their existing two-tier structure, mistakenly placing such firms in the Second Category where price, not expertise, is the primary driver. As a result, companies may not be taking advantage of solution efficiencies.

The study recommends that organisations should look into this, as if they rule out innovative firms upfront on a blanket basis, groups risk not getting innovative and best services. Instead, developing a new or revised method for identifying preferred providers is recommended, giving careful consideration to incorporating plug-and-play solutions, and the delivery of value and services desired in order to implement a new preferred provider programme. To this end, the UK government recently implemented a new framework for preferred financial consulting firms, which would see 30 firms including SME representatives subjected to an internal bidding process in order to ensure competitive pricing and maximal suitability for projects.

According to Kaush Oza, Senior Practice Director in Integrated Solutions at RGP, and author of the study, it is clear that the trend toward the Third Category type of consulting is a major force for the future of the industry, as companies are increasingly looking for pre-qualified and just-in-time expertise. Clients no longer have an appetite for large, bundled and branded consulting services and the associated premium fees.

Oza concluded, “The consulting industry is transforming in a similar manner to the dining industry. No longer are we limited to just two dining categories (fast food and fine dining). Now, a third category exists – fast, casual – quick healthy cuisine with an upscale décor.”


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

18 April 2019

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.