Openside Managing Director William Johnson on consulting disruption

15 April 2019 Consultancy.uk

Five years since a well-known article in the Harvard Business Review proclaimed major disruption was on its way to the consulting sector, the industry has indeed seen huge changes. New competitors, technological innovation and an on-going contest for an ever smaller pool of talent have transformed modern consulting, according to William Johnson, Managing Director of professional services advisory firm The Openside Group.

Five years ago, Clayton Christensen, Dina Wang and Derek van Bever published a seminal article named ‘Consulting on the Cusp of Disruption’ in the Harvard Business Review. In the paper, the team asserted that the same forces that had already disrupted many industries were starting to affect the consulting industry, and that the implications for all professional services firms and their clients would be significant. Looking upon those predictions in 2019, it appears that much of that fateful forecast was correct.

This was emphasised towards the end of 2018, at the annual conference of the European Federation of Management Consultancies Associations (FEACO) in London. Consulting industry leaders from across Europe gave their perspectives on the current and future trends impacting the sector at the gathering, and according to William Johnson, Managing Director of The Openside Group, the feedback showed that three major trends have been shaping the consulting sector since the end of 2013.

Openside Managing Director William Johnson on consulting disruption

Firstly, consulting firms have to deal with the increased disruption from new competition, new service models and sophisticated, knowledgeable clients. Combined with this, established firms have seen that technology has created significant opportunities and challenges for the sector. Both of these factors have contributed to an on-going ‘war for talent’ – as a growing number of firms look to recruit and retain skilled consultants amid high employment rates, while facing an ageing population and geo-political issues which diminish the available talent pool.

The Openside Group is a firm which designs and delivers development programmes for leading professional services firms worldwide. With a legacy of nearly 30 years, Openside has helped clients improve on service delivery and the way they manage, build and lead their firms. Openside is also an Associate Member of the Management Consultancies Association and is regularly asked to speak at MCA events or serve on their expert panels.

From this position, as well as having been in attendance at the FEACO conference, Openside is able to extract the best practices of the industry with regards to these three key trends. In order to offer consultancies an insight into the transformations the sector has seen over the last few years, the firm has highlighted how consultants might best navigate this sea of change.

Competition

Remarking on comments from the FEACO conference, William Johnson explained, “More and more, the consulting industry’s sacred cows are being challenged by new competitors, new service models, more discerning clients and more sophisticated buyers. Consulting firms are operating in a new competitive environment and facing a new purchasing landscape. In particular, FEACO delegates highlighted the rise of independent contractors challenging larger, traditional consulting firms.”

The fast-changing nature of digitalised business is well suited to the agile offerings of independent consultants and freelance networks. Such is the demand for independent consultants that one-fifth of UK management consulting work now goes to them. At the same time, boutique firms have also enjoyed bullish growth of late, seizing on technological advances to level the playing field with larger firms, and winning work from the consulting industry’s big beasts in the process.

“More and more, the consulting industry’s sacred cows are being challenged by new competitors… Consulting firms are operating in a new competitive environment and facing a new purchasing landscape.”
– William Johnson, Managing Director, The Openside Group.

In the original article on consulting industry disruption, Christensen et al argued that to remain ahead of rising competition "firms will need human, brand, technological, and financial resources to deploy against new and increasingly complex problems and to develop new intellectual property.” While Openside agrees with this argument, five years on, Johnson said that consultants should regard the most important aspect of this statement as the ability to identify clients’ “new and increasingly complex problems.”

Johnson elaborated, “The consulting firms who will be best placed to thrive in the new competitive consulting landscape will be those who are able to deeply understand the mind of their clients; to recognise the value clients are seeking; to provide the appropriate technological and consulting resources and who can demonstrate the value they can deliver during every interaction with the firm – before, during and after an engagement… and developing market leading technological resources, creating new intellectual property and having market-leading consulting methodologies will be essential.”

Technology

“The FEACO conference delegates had little doubt that when it comes to technology, there are still significant opportunities for consulting firms across Europe, particularly in areas such as AI, machine learning, cyber security, blockchain, advanced analytics and digital transformation” Johnson stated. “Firms who are able to develop service offerings around these areas – either through mergers or acquisitions or through staff development and recruitment will be very well placed for success in the coming years. It was, however, pointed out that focusing on technology services does create some challenges for consulting firms.”

While technological advances such as AI and automation may increase the productivity and quality of work offered by the consulting sector, they also present a key conundrum for the industry. While services firms might feel justified in premium pricing their output due to the increased quality of work, they may still struggle to convince clients of those benefits, especially in a UK economy that continues to enjoy sluggish growth, at best. With fewer human hours going into a piece of work, clients are increasingly calling into question the notion of the ‘billable hour’.

“Consulting firms need to be able to understand the value their clients seek, understand the value they will be creating, and be able to illustrate this value clearly in every interaction.”
– William Johnson, Managing Director, The Openside Group.

Commenting on the situation, Johnson said, “In truth, pricing as a function of time spent has been ripe for disruption for many years. With advances in technology, it really is now time for consulting firms to use the value created by their engagement as the foundation of pricing instead… To make the most of the opportunities offered by digital and technology services – and to overcome the challenges it raises – the focus must return to value. Consulting firms need to be able to understand the value their clients seek, understand the value they will be creating, and be able to illustrate this value clearly in every interaction.”

Arguably, one way consulting firms could be seen to be finding a way around the issue is the rise of strategic partnerships in the sector – including Elixirr’s recent deal with Kaizen to produce an innovative transaction reporting platform for financial services firms, and Thomas Cook's collaborative development of Thomas Cook Money. New partnerships see consultancies ‘getting their hands dirty’, and sharing in both the risks and rewards of projects with a client, replacing a billable hours relationship with an alignment of interests and financial rewards, where firms bring their skills to bear to help businesses thrive.

Talent

According to Johnson, delegates at the recent FEACO conference highlighted a significant lack of technology experts in Europe required to keep up with client demand for digital and technological services. While this might not be something new – as for many years, there has been an on-going ‘war’ for top talent in the consulting industry – the problem has been exacerbated in recent years by high levels of employment across Europe (particularly in the UK, which is seeing its lowest unemployment since the 1970s), as well as an ageing population, and threats to the freedom of movement across the European Union.

As a result, companies can no longer simply worry about how to find and recruit the right talent, on the assumption they can always find more, later. Now consultancies must also be sure they have the appropriate mechanisms in place to ensure their best employees stay. Johnson described how, historically, it was the case that when a new professional joined a consulting firm, they would stay put for many years – if not for their whole career. Now however, amid this heightened demand for talent, younger generations are aware of their bargaining power, and are therefore more inclined to move between firms – and even industries.

“To make their consulting firm a desirable destination of choice for employees, firms should focus on demonstrating the value they create for their consultants – beyond simply financial rewards.”
– William Johnson, Managing Director, Openside Group.

On top of this, FEACO delegates whom Openside encountered during the organisation’s conference suggested that more and more consultants are being recruited directly by their clients to join internal strategy or internal consulting groups, where they get equivalent strategic roles and projects – and a ‘life’ – tempting them away from firms which fail to adapt to their demands. At the same time, and arguably most importantly for consulting leaders, the attitudes of many working in consulting – particularly younger generations – now differ greatly to the attitudes of more experienced, senior consultants. This can particularly be seen on matters such as D&I goals.

Johnson concluded, “We would urge consulting firms to revisit their culture and to objectively evaluate whether their firm is truly somewhere someone would want to work… Once again, it comes down to value. This time however, it’s not about demonstrating value to the firm’s clients but to the firm’s own people. To make their consulting firm a desirable destination of choice for employees, firms should focus on demonstrating the value they create for their consultants – beyond simply financial rewards. For many, high salaries are not enough to keep them motivated or to stop them from looking for opportunities elsewhere.”


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