Three new business models in the consulting industry
According to a white paper from Sioo, while the consulting sector remains a traditional industry, three new business models are emerging across the landscape. A growing number of consultancies are embracing collaborative consulting, continuous consulting and instant consulting – or a blend of the three.
Professional services firm Sioo launched an extensive study into trends in the management consulting industry, documenting the trends leading towards new business models and the type of novel strategies consultants are experimenting with in the process. In collaboration with the Vrije Universiteit (VU) Amsterdam, the research firm uncovered a dynamic and changing landscape, in which careful experimentation with new business models is the norm.
Introducing the study, former Sioo professional and incumbent VU Professor Ard-Pieter de Man said, “It is not easy for consultants to navigate a rapidly changing world. That is why it remains important to stay in touch with developments in the sector. With this large scale, in-depth look into business model innovation, we hope to help consultants in forming their strategy in the area of business model innovation and to give them some insight into the most recent developments in the industry.”
Indeed, according to Sioo’s resulting white paper, it is “striking that the classical image of consultants hardly shows up in our data.” The data found that the traditional leverage model for consulting – using junior consultants, hourly fees and focusing on advice only – is still the dominant model applied. However, even these traditionalists have introduced other elements into their business model, with only 15% of consultancies still working in a traditional one-sided approach.
The survey found that a rapid client impact, collaboration, and service specialisation had become integral to many consulting business models. As a result, looking at how consulting firms were staffing, delivering and charging for their services, Sioo outlined collaborative consulting, continuous consulting and instant consulting – or a blend of the three – as dominant upcoming models at most consulting firms.
Collaborative consulting
Regular collaboration between consultancies in a network on different projects can help companies develop new propositions at pace, by sourcing knowledge from other firms. Consulting models of this kind are low in fixed costs, as members are able to access talent not on their pay-roll as and when a relevant project emerges – though this can lead to high variable costs in turn, making long-term financial planning more difficult.
There are two sub-models within collaborative consulting. First; some consultancies deploy closed networks; a fixed set of companies collaborating repeatedly on client assignments, with others passing extensive selection processes to be brought into the network. The advantage of closed networks is that long-term and more intensive relationships lead to more intensive knowledge sharing, with improved value propositions as a result. One example of this is the Terra Numerata network Roland Berger is building creating to foster the development of digital business models.
Open networks, in contrast, see consultancies and other firms collaborate on projects in a multitude of constellations, possibly with different partners for different projects. At the same time, during a project partners may enter or leave. Consultancies which favour this model do so due to its capacity to obtain a broader set of knowledge and improved agility to meet changes in demand. An example of this is OpenIdeo, a network leveraging the Ideo design approach to solve big societal problems through partnerships.
Continuous consulting
The second model found in the study centres around data analytics and subscriptions. Continuous consulting depends on the use of new tools or processes to accelerate the delivery of projects, with the firms delivering these new services and processes to a collection of existing clients – delivering recurring revenues in the process. This means that consulting firms taking up a continuous model can count on a continuous flow of income from their clients, almost like a consulting subscription, leading to a high level of online interaction between client and firm.
Tools and processes deployed by continuous consultants attract clients for repeated use, because they make for easier delivery as they can help navigate regularly occurring problems, and they may be more up to date. It can be a hard-sell for new firms though, with clients more likely to put their long-term faith in established brands. For example, McKinsey Solutions falls into this category.
Instant consulting
Finally, when consultants deploy an instant model for their services, it sees them look to show their value to the client from the earliest opportunity. Best suited to a disruptive business environment, where agility is key to keep pace with competitors, instant consulting’s key strength is its speed. With consultants working with a client over a very short time span, organisations benefitting from this kind of service could benefit immediately and measurably from day one of an assignment, allowing them to gain ground on their rivals, or get maintain their lead over new market arrivals.
This form of consulting needs little research before advice is given, largely because of its use of gaming. By deconstructing what games actually are and by applying such a mind-set to solve real life challenges, people can see for themselves just how powerful game approaches can be within business. By organising short running games, the instant consulting model can teach employees in a client company the basics behind financial principles, before applying what is learned to make the gains become clear very fast.
