I've worked in the consulting industry for 25 years. While clearly a participant, I also find myself an observer of classic patterns of industry evolution and value migration. I've studied the effects of deregulation, globalization, the introduction of new technology, and the dot-com euphoria and collapse — changes that have swept through our own industry as well as our clients' industries. So, as consultants, where do we go from here?
If consultants have learned anything in the past decade, it's that status quo in our offerings, platforms, and consulting models can cause near-death experiences. No business design lasts forever, and in fact the life cycles of most business designs are growing shorter, or more unpredictable, or both.
When I joined Bain as a part-timer in 1979 while still in business school, Bain was just six years old and, along with Boston Consulting Group, defined the practice of business strategy. Success bred spinouts with new platforms and distinctive intellectual capital. Together with a great team, I played the "strategy boutique" game for 15 years as we all fought for market share.
While a competitive agenda centered on volume and market share alone may have served consultancies well for years and has led to large-scale firms, it no longer guarantees success. The most important reason for this is that clients have grown increasingly sophisticated, demanding, and diverse. That's true in part because of the steady growth of business school graduates and the presence of "consulting-experienced" talent at most major corporations.
Global clients want global coverage by consultants — but they want other sorts of value as well. Senior executives of complex companies want specialized solutions to specialized problems. Executives under intense economic pressure want fresh yet pragmatic ideas to help them break out of the commoditization or stagnation traps they've been boxed into.
As clients' needs have changed, so too has the nature of the value that consultants add. The value of our industry used to consist of graphing the client's data and bringing one big idea to the party, such as the experience curve, the growth-share matrix, or value-based management. Now, however, clients can access relevant business information instantly from Web sites such as sec.gov and wsj.com archives. They also have vastly improved management information systems at their disposal. Hence, they are looking to their consultants for other forms of value.
To be sure, one element of consulting continues to be a gold standard: objectivity and the ability to effectively challenge the client's thinking and generate fresh insights. This enduring characteristic must now be harnessed to help a client optimize its current business while building bridges to new business designs quickly enough to make a difference. To do this in a way that is profitable for client and consultancy alike, consultants need to anticipate how the clients' economics and pressure points are changing, and then mount a winning response before the window of opportunity closes.
Variety and innovation in business design are critical in consulting as well. Accenture, for example, offers many different services staffed by people ranging from high-priced strategy teams to low-cost programmers in India. The Corporate Executive Board has taken a page from Gartner and Forrester and offers research and programs for clients on management topics.
Within the Mercer group of specialty consultancies, there are numerous business designs that correspond to their specific target markets. Lippincott Mercer offers high-end brand strategy and identity advice and design, using a multiskilled pyramid model. National Economic Research Associates (NERA) employs Ph.D. economists who are experts in high-stakes litigation cases. And Mercer Delta's partners provide organizational design and leadership advice to senior executives, using a senior expert model. Even within Mercer Management Consulting and Mercer Oliver Wyman, we have different business designs deployed by different practices.
Despite the proliferation of business designs, everyone still hopes to create the algorithm informed by 100-person-years of testing and experience — the so-called "black box." Yet, even the most powerful black box has a finite life in a world of rapid and constant value migration. And client business transformation takes more than the right answer. Consultancies need to anticipate each new wave of customer demand, design a business to capture profits quickly, and then build and run the business flawlessly — until it's time to catch the next wave. If you miss a wave, see it too late, or ride it too long, it's "wipeout" time.
Leadership and focus are critical ingredients in this environment. The tasks of leaders in our industry, as I see it, are threefold:
• Invest where value is flowing in, which is relatively easy.
• Disinvest where value is flowing out, which is difficult because of the human and organizational implications.
• Find the next winning business design, which is the most difficult.
We've seen how clients' priorities have changed; they will surely change again. As consulting business designs face shorter and more unpredictable life cycles, the challenge of anticipating the next direction that clients will go in can be daunting. Leaders of consultancies must constantly keep their antennae tuned for the best next wave of growth and be willing to put the existing business at risk when they bet on a new business design.
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