It’s been three years since Clayton Christensen argued that the forces of disruption were reshaping the world of consulting. The pattern was familiar and apparent, he wrote at the time: traditional consulting firms were ignoring new competitors with nontraditional business models that the market has increasingly accepted and considers the new basis of competition. To be fair, there has been some movement by traditional consultancies since then to defend against the market disruptions outlined by Christensen. The examples are few and far between, however, and most providers appear resistant to the signals.
The case for denial is strong. Traditional consultancies are returning to growth following a protracted recessionary cycle. According to ALM Intelligence, global consulting market revenues grew by nearly 5 percent in 2015 over 2014. While all domains saw some degree of uptick, digital consulting is the most significant driver and the only segment where double-digit growth is estimated through 2018. Let’s face it: Disruption has always been good business for consulting, but only when it is the client being disrupted. What about those pesky signals and what do they mean for the consulting firms themselves?
The essence of Christensen’s argument is that consulting disruption is due largely to the redistribution of knowledge. What was once the exclusive purview of the McKinseys of the world has transferred to the open market through a combination of economic and technological trends.
The recessions of 2002 and 2008 dumped large numbers of consultants into the market as clients cut spending and firms reduced consulting headcount. Many of those who were let go migrated to positions in industry, shifting the balance of bargaining power to the buy-side. Consultants were essentially facing themselves across the table, negotiating with savvy, cost-conscious buyers who were familiar not only with the core tools of consulting, but also its profit model.
At the same time, a growing force of independent consultants was spawned by the entrepreneurial spirit of the dot-com economy. These were the consultants who loved their work, but were ambivalent about their place in the Darwinian up-and-out culture of the traditional consulting model. They wanted more control over their product, client relationships, career, and personal lives.
As independent, freelance consultants, they posed little threat to the incumbent market leaders. With the advent of the digital networking revolution, however, they were empowered to collaborate and create a marketplace for their services, giving rise to the network-based consulting firm embodied by Eden McCallum and Business Talent Group.
It doesn’t take a big leap of the imagination to see how these two disruptors—the sophisticated buyer and the networked consulting firm—are combining to reshape consulting. But what of the incumbent market leaders, the consulting firms that continue to dominate mindshare and market share? Are they truly on the cusp of disruption or on the path to disintermediation? It’s highly unlikely, but some are not taking any chances as they explore new business models.
One such example is Mercer PeoplePro, a digitally driven, on-demand HR consulting market launched in May. PeoplePro targets companies in fast-growth mode for whom premium consulting services are typically out of reach. The marketplace leverages the freelance trend, as well, by offering HR consulting flex workers the opportunity to monetize their expertise.
Deloitte Pixel, also launched in May, is another example, but one that seeks value from the talent crowdsourcing phenomenon as a source of innovation. Deloitte consultants and clients alike collaborate with external crowds to access specific, hard-to-find expertise in service of new product design and development, including digital assets.
While it’s too early to define success, these are exciting examples of experimentation that also indicate respect for some well-worn advice from Professor Christensen: “If you defer investing your time and energy until you see that you need to, chances are it will already be too late.” In other words, that noise that you’re hearing? Those are signals alerting it’s time to take action.