Digital may be the defining force of a consulting generation… and double-digit demand has firms scrambling to define, structure, expand, deploy and differentiate their digital-consulting offerings.
What, exactly, is digital consulting?
This pressing question generates an evolving set of answers. Digital consulting is blurring delivery channels, expanding across client functions, driving acquisitions of digital and design agencies, injecting more agility into consulting playbooks, and notching double-digit growth rates. Annual digital consulting service revenues are projected to increase more than 12 percent this year, according to ALM Intelligence; that’s more than twice the 4.7 percent projected annual growth rate for all overall, global consulting services.
This demand has firms scrambling to define, structure, expand, deploy and differentiate their digital-consulting offerings. Some firms are doing so via formal practices with P&Ls and nifty new names. Others are intentionally forgoing that type of structure in favor of digital networks and “ecosystems.” Despite the variety of digital-consulting definitions and delivery mechanisms streaming into the market, digital consulting leaders agree on the offering’s potential.
“We think of digital as the defining force of our consulting generation,” says EY Americas Advisory Digital Leader Woody Driggs, who has three decades of consulting experience under his belt. Sanjay Srivastava, Senior Vice President and Chief Digital Officer at Genpact, drops the phrase “world-changing” when describing his firm’s approach to digital consulting. “We don’t say this lightly,” Srivastava continues. “We think that the combination of Lean principles, design thinking, and process-centric digital technology, coupled with deep business domain expertise, gets to results faster.”
C-level buyers across all industries are hungry for these types of results, which are being delivered through technology- and design-related engagements whose unique qualities are cementing digital’s status as a prominent consulting practice.
‘Wave After Wave’
Digital consulting services are growing at a swift clip, posting an 11.5 percent growth rate in 2015 according to ALM Intelligence research. The forces driving the demand for these services, along with the titles of the buyers, suggest that these growth rates are sustainable.
Although firms and practices define digital consulting differently, these services typically include offerings related to data analytics, artificial intelligence (AI), collaborative networks and connected systems, and innovation and “design thinking.” Many, but not nearly all, digital consulting services were previously housed in firms’ strategy, operations, IT and/or human resources (HR) consulting practices. A new emphasis on certain services—including, most notably, innovation, design thinking, ethnography, customer experience—mark one way digital consulting offerings differ from similar services that existed before firms began formalizing their digital consulting practices, or networks, in recent years.
The end buyers, who are increasingly CEOs and their C-suite colleagues, represent another important difference.
PwC Global Digital Services Leader Tom Puthiyamadam describes a recent engagement for a global services organization that wanted help addressing the fact that 20 percent of its business could disappear within a few years due to the rise of online competitors. “When you’re talking about 20 percent of the business going away,” he notes, “that’s a CEO conversation.” CEOs are also “demanding more creative solutions from every member of their C-suite,” Puthiyamadam explains. He notes that CIOs, CTOs, chief digital officers, COOs, chief HR officers and CMOs are looking for digital guidance and solutions that deliver “tremendous competitive advantage” and/or a defense against disruptive forces.
Driggs describes these forces as waves whose frequency and impact are intensifying. “New waves of digital technology are getting bigger, appearing faster and becoming disruptive to businesses,” he says. “As these waves continue to hit, businesses need to react. That’s why [digital] has become such a C-suite issue in the past two or three years.”
Past waves—whose impact companies will contend with for years—include social, mobile, analytics and cloud (SMAC). More recent waves include Internet of Things (IoT) and back-office robotic process automation (RPA). Individual waves of new digital technology also interact with each other to create even more new challenges and opportunities.
By combining social and mobile analytics with geolocation data, a retailer or consumer packaged goods company now knows a heck of a lot about a consumer at any point in time. Customers increasingly expect to be served with products and services in a context-appropriate manner, notes Capgemini Consulting Vice President and North America Practice Leader, Digital Advisory Services Tony Fross. He says that these contexts are multiplying.
A shopper no longer needs to visit a physical store to conduct a transaction in our buy/receive/service/return-anywhere era; and a similar shift is occurring in many industries. As a result, a wider range of companies are hungry for what Fross describes as “context-first design.”
Delivering this type of design requires the broad range of expertise, technology and process knowledge—data analytics, customer experience, ethnography, design, back-end systems, change management and on and on—that digital consulting offerings are designed to deliver. More companies want these services because they’re witnessing many well-known experience-driven design companies outperforming traditional organizations, notes Puthiyamadam.
Digital Consulting Defined and Designed
The Boston Consulting Group’s digital consulting offerings combine strategic, technology and industry-specific expertise within the firm’s traditional consulting model. These services also incorporate specialized experts from BCG Digital Ventures, BCG Platinion (BCG’s IT-consulting subsidiary), the firm’s advanced analytics team and external partners.
“Digital consulting at BCG is focused on helping clients achieve and accelerate their digital transformation,” reports Ralf Dreischmeier, a BCG Senior Partner who serves as global leader of the firm’s Technology Advantage practice. While many companies are aware of the risk for disruption in their industry and have run some digital pilot programs, relatively few have elevated this work to the scale of companywide digital transformation, Dreischmeier notes. “For us, digital transformation is about scaling up initiatives and creating digital assets,” he says, adding that this transformation “requires a holistic view on strategy, technology, operations, organization and culture” and a “much more agile” operational model.
IBM’s Interactive Experience practices employs roughly 10,000 consultants globally. Their expertise covers strategy, creative and design, mobile design and development, big data/analytics, cognitive computing, operations, IoT and more. These consultants, notes IBM Interactive Experience North American Leader John Armstrong, apply design thinking while looking at their work “through the lens of experience.”
Since digitally driven value-creation requires expertise across numerous disciplines, Armstrong notes that IBM’s digital consulting practice mixes numerous types of traditional consulting talent with creative and design talent into what he jokingly calls a “primordial soup.”
There is no standard recipe for how firms create and structure their digital practices, and that can generate some confusion, particularly among smaller services firms, as to what qualifies as digital consulting.
“Because digital consulting cuts across other areas of management consulting, there’s not always an obvious line separating what does and does not constitute digital consulting,” says Brendan Williams, Associate Director and Lead for Digital Consulting Research at ALM Intelligence. “In these cases, it can be helpful to revert to a simple rule of thumb by asking if the service in question is really consulting, and if it is truly digital in nature. For it to be considered digital consulting, the answer to both questions must be ‘yes.’ ”
Armstrong emphasizes that IBM intentionally avoided housing all of the digital agencies and creative/design talent it has recently acquired in a separate business unit. Instead, his practice has integrated traditional consulting talent and creative/design talent. “That’s really changed the way we work with clients,” he says, noting that the integration is not without its challenges. “It’s not always easy,” he adds, “to get a thoroughbred analytics consultant to understand creative talent.”
A similarly integrated talent-management approach exists in other digital practices.
PwC uses what Puthiyamadam describes as the “BXT formula:” a blend of business talent, experience talent and technology talent. The PwC digital consulting team that helped the global services organization prevent 20 percent of its business from evaporating included strategy experts, customer and product experts, ethnographers, creative directors, tax experts and technology consultants.
“We don’t look at digital in isolation,” notes Genpact’s Srivastava. “We bring in people who design-think the end customer experience, and pair them up with technology and analytics and process design people as well as operations people who have domain expertise and know how to scale and run large operations. It is a hub-and-spoke mechanism that creates a special, effective genome.”
EY takes “bits and pieces from across all of the business to build what we call a digital network of excellence, an NOE, as opposed to a center of excellence, a COE,” Driggs explains. “We believe that our ecosystem approach enables us to be much more agile and adaptable as the next waves of disruption hit. The waves disrupt us as much as they disrupt our clients, so we have to be able to be agile and flexible.”
Driggs also emphasizes that the customer-experience work at the core of many digital engagements absolutely require traditional consulting skills. A client recently told Driggs that most of the digital-experience work his company performed prior to engaging EY felt more like science experiments—the creative and design work lacked the business cases, time lines, program management, systems integration, cybersecurity, risk and controls work and other practical expertise needed for a successful implementation. “Big-C consulting is still fundamental to making this work,” Driggs notes. That need helps explains why, for example, EY has 13 different tax service offerings within its digital services.
Apps Disrupt Decks
The nature of digital consulting engagements vary significantly, but these projects tend to share core qualities, including an emphasis on agility and/or agile development, a phased approach, the involvement of numerous functional disciplines and types of expertise, and the imaginative deployment of digital tools.
“In terms of demand, the scope is very broad,” Dreischmeier reports. “We do see some shifts from a focus on one-off initiatives, pilots and proof-of-concepts to more holistic digital transformations. One particular need is how to scale up an agile way of working through the organization.” ING Bank Netherlands has partnered with BCG to adopt what Dreischmeier describes as an “end-to-end agile model based on squads, chapters, and tribes of employees to accelerate and enhance their responsiveness to clients.” He also mentions a three-phased project implementing a digital program for a major utility.
Genpact helped a global financial services company complete a post-merger integration by applying robotic process automation to massive amounts of customer data housed in legacy systems. “The data that needed to be injected into the insight-to-action cycle of the acquiring institution as soon as possible for regulatory reasons,” Srivastava reports.
Puthiyamadam describes how PwC Global Digital Services helped a client company digitize a succession planning program through an innovative application of Salesforce’s cloud-based CRM application.
A gas-station chain recently approached Armstrong’s group at IBM for help improving customer loyalty and repeat purchases. The traditional consulting response, Armstrong explains, would have been to arrive at the initial meeting with a beefy customer loyalty study in hand, listen to the client team spell out the problem and then share IBM’s perspective on customer loyalty. “And then in eight or 12 weeks, we would have killed a bunch of trees so that we could give them a document that showed the current state, the future state and a plan for filling the gaps,” Armstrong says, noting that his group’s new approach differs greatly.
To address the client’s loyalty-at-the-pump issue, a team of six digital consultants delved into a deep study of the client, the industry, and the client’s loyalty objectives. “It was a lot like the all-hands-approach a small [advertising] agency would execute to prepare for a pitch meeting,” Armstrong recalls. “Not only did we come up with some great ideation around the way they could design and operate a loyalty program, we also built a prototype of the mobile app that essentially expressed our ideation. The app was a fairly viable, working prototype.” In a matter of weeks, rather than months, from the initial meeting, the team met with the client to discuss what was possible in a highly tangible way.
“We didn’t have a deck,” Armstrong adds. “Instead, we brought the app… This design-thinking approach leads to an agile development and delivery approach that dramatically reduces the time it takes for our clients to realize value.”
Talent and Other Roadblocks
The road to realizing value through investments in digital consulting comes with its challenges, with talent featuring among the most formidable potholes, according to Dreischmeier and other digital consulting leaders.
The still-evolving nature of digital consulting marks a less obvious challenge. As firms and practices hustle to address soaring demand for immediate digital assistance (e.g., improving the digital customer experience) deeper needs can suffer from neglect. Fross says that he and his colleagues are realizing that while many companies express their core need as “digital, what’s in fact behind that is a need for innovation.” By “innovation,” Fross says he means “the introduction of a process, service or product that creates measurably greater business value in the context in which it’s intro-duced—not just continuous improvement but a step-function change.”
PwC’s Puthiyamadam points to a tendency in the market to think of digital primarily as product innovation and customer experience. “It’s an equally hot topic for the back office and middle office,” he asserts.
“People don’t talk about that as much, but digital is going to transform the back office, just as much as it transforms any front-office or product-development activity.”
Srivastava echoes that concern, noting that companies still struggle to derive “digital impact” beyond the front office. “We hope that we will get there fast enough so that disillusionment doesn’t set in,” he adds. “We don’t want digital to feel like another dot-com boom and bust just because consulting hasn’t tackled the hard part and solved the bigger problems.”
Sidebar: Consulting vs. Advertising: Crossing the Digital Divide
A number of larger consulting firms are exhibiting digital agency by buying up digital agencies. These acquisitions raise new questions about digital consulting along with new forms of collaboration.
These acquisitions, which are too numerous to detail here, reflect a drive to ramp up digital-consulting offerings. For example, PwC has acquired at least 10 agencies around the world. IBM and Deloitte each have made a string of notable acquisitions.
When Deloitte announced its acquisition of full-service ad agency Heat in February, it billed the move as part of a “series of strategic Deloitte investments evolving its Deloitte Digital practice. The result is the world’s first creative digital consultancy, a model which transforms the way C-suites approach business in the digital age….”
Consulting firms with digital-consulting practices are also snapping up design and innovation firms. Capgemini recently purchased innovation services firm Fahrenheit 212.
While these acquisitions confirm the rosy growth prospects of digital consulting, they also raise questions about where consulting ends and advertising (or design) begins—and how analytical consultants and this influx of creative talent will work together.
Are digital advertising agencies becoming consulting firms? In most cases, probably not. “When it comes to the digital agencies, the relevant question is usually not whether their services are digital, but rather whether they constitute consulting services,” notes Brendan Williams, lead analyst for digital consulting at ALM Intelligence.
Williams says that some of the work agencies conduct—such as projects related to digital strategy or customer experience design—qualifies as consulting. Other work—such as a digital advertising campaign with no consulting component—clearly is not consulting. “But some of their work falls into an area which is admittedly a bit more blurry,” Williams adds. “Market strategy, customer insight, and brand strategy, for example, are relevant components of both the advertising and the consulting worlds.”
As far as how consulting firms are integrating this new talent, it seems clear that creatives are being schooled in the science of consulting while consultants are exploring more creative modes of collaboration. PwC Global Digital Services Leader Tom Puthiyamadam says his team has refocused its infusion of advertising and design talent on business problems. “They’re tackling real consulting issues,” he says. “These creative individuals coming from the agency world are all now working on the big hairy business problems that are out there.”
IBM Interactive Experience (IX) North American Leader John Armstrong acknowledges that integrating creative and design talent with traditional consulting talent occasionally gives rise to challenges. But he also asserts that the integration is improving the way IBM IX-ers work together. “It’s even changed the physical space that we work in, which is something we worked our real estate group to help understand,” says Armstrong.
He says that the newly integrated creatives-and-consultants teams prefer to work face-to face, rather than virtually, and in shared pods packed with writeable walls and tables, as opposed to in traditional cubicles. “If I’m a developer who just produced the next iteration of a mobile app,” Armstrong explains, “I’m shooting my phone across the table to the designer and asking, ‘How’s this?’ The designer says, ‘No change this and change that.’ So, it’s very iterative… We’ve realized that the old style of how we configured an office space no longer works. We need a fundamentally different environment to support this new way of working.”