It's the Thought That Counts

But despite coveting thought leadership, most consulting firms say that they haven't achieved it, according to a study we completed this September on the intellectual capital development and marketing practices in North American professional services firms. (We surveyed 109 consulting and 18 IT services firms out of 179 professional services firms in all.) While consulting firms as a whole rated strong intellectual capital as the single most important factor in effective marketing, they graded the ideas they took to market as being a little better than average (just 3.7 on a scale of 1 to 5). To paraphrase the Scarecrow from The Wizard of Oz, the tune of these consultancies might be "if we only had a thought."

This is, admittedly, a bit harsh. Many consulting firms possess significant expertise that they haven't captured and marketed, but only practiced. Their intellectual capital remains largely in the heads of their professionals. But too many publish concepts that lack examples, coherence, and new ideas. That helps explain why so many consulting books end up in the bargain bins just months after launch or why HBR rejects more than 90 percent of the manuscripts that arrive unsolicited.

Furthermore, the survey responses of some consultancies indicated that when they did have a thought — that is, excellent intellectual capital for the content of their marketing programs — they often didn't know how to market it effectively. And still others didn't know how to use their intellectual capital to renew old consulting practices and create whole new services.

Yet while the study showed that thought leadership was rare, the consulting firms that achieved it were far more likely to generate substantial market awareness and business leads than consulting firms that admitted to communicating weak ideas in their newsletters, conference speeches, books, and other marketing programs. In other words, content is king in consulting marketing.

The strength of the ideas that consulting firms market — especially the relevance of their concepts, the case study and other data that they have that validate their prescriptions, their clarity and practicality — is the key determinant of whether their marketing investments produce substantial new revenue and market eminence or client indifference and wasted spending. In the following paragraphs, we discuss the findings of our study and what they mean for the way consulting firms develop, capture, and market their intellectual capital.

In Search of Thought Leadership

Like consumer products and services, consulting firms in the past 10 years increasingly been have appearing on prime time TV and other media, with broadcast and print advertisements and sponsorships of golf, racing, and other events. Firms such as Accenture, IBM, Deloitte, and Booz Allen Hamilton have spent heavily on brand marketing to raise their public image. Nonetheless, the 109 consulting firms that took our survey said that strong intellectual capital (IC) to serve as the content of their marketing programs was by far the most important factor in effective marketing (see Exhibit 1). In fact, they said that strong IC beat having a strong brand and image, a competent sales force, a good marketing strategy, and other marketing success factors.

Not only did consulting firms rate robust intellectual capital as the key to effective marketing, but also 70 percent said that its importance had increased in the past five years, primarily because of rising competition (and the need to differentiate your services), more demanding clients, and past success in marketing strong ideas.

This shouldn't be surprising. Consulting concepts such as business reengineering, Six Sigma, and customer loyalty management have generated billions of dollars in consulting services since the 1990s. The firms we polled add further evidence to the belief that "thought leadership" sells. Consulting firm respondents who said that their firm's intellectual capital was far superior to their competitors' IC also were much more likely than those with inferior IC to say that their IC generated a substantial number of leads and market awareness. In fact, 83 percent of the consultancies with far superior IC said that their marketing content was effective or very effective at spawning a significant number of leads and substantial client awareness. In contrast, none of the consulting firms with inferior IC said that they generated lots of market interest.

Thoughts … But Not Much Leadership

As a whole, the consulting firms did not rate the intellectual capital they marketed very highly. In fact, 43 percent said that their IC was worse or no better than their competition's. For every idea like reengineering that becomes a blockbuster consulting concept, hundreds of consulting ideas are forgotten soon after the article or book about them hits the market.

Why? This is the most important question consulting firms should be asking about the way they develop and market their intellectual capital. Consulting firms, of course, aren't in the business of publishing journals, staging conferences, or churning out books. They invest in such activities only if they generate business leads and market awareness whose economic value exceeds the investments. Such investments can be substantial, and they often don't pay off. A consulting firm can spend as much as $1 million to write and promote a book; millions of dollars to publish a quarterly management journal; and tens of thousands to stage a marketing event. And that's only to market the ideas. Developing ideas can require millions more for conducting in-depth case study research, surveys, and extensive analysis.

But we also know that big ideas, marketed well, can generate returns far in excess of the investment in them. Our survey backs this up: The consulting firms with superior IC (we call this group the IC leaders) were much more likely than those with inferior IC (call them the IC laggards) to say that a number of key marketing activities were very effective in generating substantial market awareness and business leads (Exhibit 2).

Further comparison of the responses of IC leaders and IC laggards led us to conclude that the chances of success in IC development and marketing are greatly enhanced by four practices:

Making intellectual capital development a formal activity. The IC leader consulting firms were much more likely than the IC laggard firms to use formal research to develop the ideas they take to market. For instance, 50 percent of the leaders vs. 0 percent of the laggards said that they use studies funded by multiple clients, and 25 percent of leaders vs. 17 percent of laggards said that they use in-house-funded studies as primary IC development techniques.

In our experience, this is important especially when consultants don't have time to research their ideas — to reach beyond their base of client work to understand the roots of some business issues and how companies (their clients and other firms) are addressing them. As marketing has become a separate function or department in consulting firms, so too must IC development. Accenture, Deloitte, Answerthink, IBM Consulting, McKinsey, and other firms have taken such a route.

Some consulting firms have even turned their IC development activities into revenue centers: Answerthink (which owns Hackett Group, an intellectual capital R&D unit that generated nearly half of Answerthink's $163 million in revenue last year) and Index Group (which owned a number of research services in the 1980s and 1990s, including the PRISM research program with guru Michael Hammer from which the reengineering concept was born) are just two examples.

Smaller consultancies that can't afford an IC R&D function must nonetheless make investments in research that
supplement their consultants' work. Research based on a handful of client examples doesn't impress clients looking for much greater evidence from consulting firms that proclaims superior approaches to strategy, designing supply chains, creating organizational charts, or managing talent.

Focusing on fewer ideas, not more. Consulting firms should not spread their IC development and marketing dollars across too many ideas. Because substantial investments must be made to research, develop, capture, and market any one idea, urging every consultant to come up with the next big concept is a recipe for mediocrity. "Letting a thousands points of light shine" is not the road to thought leadership.

Focusing IC development and marketing investments on just a few ideas — perhaps even just one a year for smaller consultancies — can resolve the resource issue that consulting firms rated the biggest obstacle to developing strong IC. Consulting firms that fund too many ideas spend far more — and generate far less in market interest — than the firms that funnel their IC development and marketing investments into just a few areas (even just one). For instance, 75 percent of the IC leaders — compared with 0 percent of those we identified as IC laggards — said that focus was not an obstacle (giving it a 1 on the scale of 1 to 5) to developing strong IC. Conversely, 42 percent of the laggards versus 0 percent of the leaders rated focus a 3 — i.e., an obstacle.

Using a mix of educational marketing channels. Many consulting firms think that a single marketing success — a Harvard Business Review article, a book, or a marketing event — will pry open a whole new market. This isn't the case. The IC leaders that we surveyed used a much broader range of marketing activities in attracting clients to their ideas. They were far more likely than IC laggards to stage their own seminars and present at industry conferences and post articles on their Web sites and write articles for management journals and publish books and write email newsletters.

The channels consulting firms use are also important. IC leaders found advertising, trade show booths, and sales brochures to be ineffective ways of marketing their ideas. These are "low-bandwidth, high-bias" marketing channels. Because of their nature, they don't allow consulting firms to impart much information on a specific area of their expertise — and they are blatantly promotional. In contrast, the most effective marketing channels for selling ideas were firm-produced seminars, conference presentations, firm publications, bylined articles in third-party journals, and other activities. Such high-bandwidth, low-bias marketing channels are inherently educational and allow for deep exploration of a business issue.

Measuring impact. Consulting marketers and IC developers almost always complain about insufficient resources. There would be fewer complaints if they could show the managing director and other firm partners their value. Knowing the kinds of returns that thought leadership marketing can generate would loosen the purse strings. In fact, IC leaders in our study were far more likely than IC laggards to measure their efforts — and do so with more meaningful metrics such as the number of proposals won and revenue generated that were precipitated by an article download, convention speech, or some other marketing activity (Exhibit 3).

Thought Leadership: A Luxury Becomes a Necessity

The largest consulting firms know the market advantages that thought leadership status confers on them. McKinsey, Accenture, Boston Consulting Group, Bain, and others spend significant sums in developing and marketing their intellectual capital. But three forces will raise the ante for thought leadership in the next few years: the increasing use of in-house consultants, increasing competition in the consulting industry, and the offshoring of the consulting business.

Companies such as Google, Fidelity Investments, Johnson & Johnson, and JP Morgan Chase have built in-house consulting units. Their edge over outside consulting firms is, of course, knowledge of their companies' internal workings. Consulting firms that hope to work in such firms must be able to demonstrate whole new expertise that is vital to their success.

Increasing competition in the consulting industry makes it easier for clients to play consultancies off of one another — unless one of them stands out with clearly differentiated expertise. And while offshoring has focused largely on IT services and call centers, Indian and Chinese offshoring firms will soon have a large pool of business school graduates on whom to build substantial strategy and operations consulting firms — for a fraction of the price.

Then, consulting firms will no longer debate their investments in intellectual capital development and marketing. They will stop questioning the value of thought leadership. Their focus will shift to generating the most out of those investments and attaining and maintaining thought leadership.