Updated: Disrupting the Disruptors – Changes in the World of Consulting Firms

The fundaments of the consultancy’s business plans have basically not altered in more than 100 years: Sending outcasts, smart and agile, into associations for a limited time and asking them to propose solutions for the most troublesome issues their customers had to solve. Some experienced specialists have been questioned by a team of researchers and they sneered at the assumption of a coming disruption in their industry, noting that customers will always be confronted by new challenges,thus giving consultants a reason to exist. Their response is reasonable, in light of the fact that two variables—opacity and agility—have long made consultants resistant to disruption.

In “Consulting on the Cusp of Disruption” (Harvard Business Review, Oct. 2013), Clayton Christensen, Dina Wang & Derek van Bever point out the coming disruptive changes in the world of management consulting:

We have come to the conclusion that the same forces that disrupted so many businesses, from steel to publishing, are starting to reshape the world of consulting. The implications for firms and their clients are significant. The pattern of industry disruption is familiar: New competitors with new business models arrive; incumbents choose to ignore the new players or to flee to higher-margin activities; a disrupter whose product was once barely good enough achieves a level of quality acceptable to the broad middle of the market, undermining the position of longtime leaders and often causing the “flip” to a new basis of competition.

The traditional solution-shop model is at risk of being disrupted by other models.
Here are the main differences among them.

  • Structured to diagnose and solve problems whose scope is undefined
  • Delivers value primarily through consultants’ judgment rather than through repeatable processes
  • Customers pay high prices in the form of fee-for-service

Examples: McKinsey, Bain, BCG, IDEO

  • Structured to address problems of defined scope with standard processes
  • Processes are usually repeatable and controllable
  • Customers pay for output only

Examples: Motista, Salesforce.com, McKinsey Solutions
Accenture, Deloitte (both moving toward solution shop)

  • Structured to enable the exchange of products and services
  • Customers pay fees to the network, which in turn pays the service provider

Examples: OpenIDEO, CEB, Gerson Lehrman Group, Eden McCallum, BTG

Here are five questions consultants should ask to find out, whether they are in danger of disruption:

Are you formally tracking the evolution of your clients’ needs and how well you continue to serve them? Has it recently become harder to win clients and to satisfy them? Are you losing your small clients or your large ones?

Are you being forced downstream in the proposal process with established clients, responding to rather than shaping requirements? Are clients having their procurement departments vet your proposals or monitor your progress?

Are you competing against new rivals for business, even with established clients? Are these rivals increasingly specialized?

Are your clients asking that you partner with nontraditional advisers or use their work products? Are these advisers leveraging automation, databases, and other technical assets?

Are you revising your business model in order to manage smaller projects at acceptable profit? Is this activity looked down on in your firm?

Clayton M. Christensen is the Kim B. Clark Professor of Business Administration at Harvard Business School. Dina Wang, formerly an engagement manager at McKinsey & Company, was a fellow at the Forum for Growth and Innovation at Harvard Business School and has just returned to the firm. Derek van Bever, a senior lecturer at Harvard Business School, is the director of the Forum for Growth and Innovation and was a member of the founding executive team of the advisory firm CEB.

Parts of this article have originally been posted on Harvard Business Review in the October 2013 issue: http://hbr.org/2013/10/consulting-on-the-cusp-of-disruption/ar/1

Update – 14-07-03

Clay Christensen’s landmark theory — in under two minutes.

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