Will contingent work change the consulting business?
We can see the world of work changing around us. Forbes calls this ‘the contingent economy’ and says that … while The Economist refers to this as ‘Workers on Tap’ and suggests that more and more companies can adopt ‘The Hollywood Model’ to increase both the efficiency and effectiveness of their workforce.
I first heard the term ‘the Hollywood model’ back in 2006 when I joined the strategy-consulting firm Monitor Group (now part of Deloitte). It was used to describe the project teams that were brought together to build on-line media. These teams had a few core people from inside Monitor, with most of the production staff independents or from small 2-5 person companies. The people from Monitor would generally be the project manager (though there were a few cases where the project manager was also brought in), subject matter experts (one or two senior consultants) and an engineer (to make sure engineering best practices were followed and that Monitor could maintain and modify the code). The goal was to have rapid scalability without over committing to production people who were not always needed and were seen as being foreign to Monitor’s culture of elite MBAs.
The new normal
Today the Hollywood model is becoming the standard approach for smaller consulting firms. A consultant will sell a project then bring together a team of experienced people to deliver. The team disbands once the project is done, but stays in touch through social networks and by working on a few larger shared projects – white papers, data collections, even some volunteer community building work. This model is most common in specialty areas like pricing consulting (where I have been on many such teams) or the design of revenue generation systems (a popular area these days as marketing and sales become more tightly integrated).
The workers-on-demand model is also becoming more common. There are now services such as Zintro that allow you to propose a fairly simple consulting challenge and get proposals from consultants. Most of the responses seem to be individuals and they range from independent consultants that have left larger firms to experienced executives who are willing to share their expertise. I must be seen as a target for this kind of thing ads for this kind of service are constantly showing up on my LinkedIn. This kind of service is nibbling away at the foundations of the consulting industry and bringing skilled consultants to companies that would otherwise struggle to find them.
But what about the mainstay firms? The largest companies seem to be sticking with their pyramid shaped up and out model (more on that below) and only bringing in outsiders when they need specialist expertise or when they want to outsource low-value added tasks like data entry. Mid-tier firms are more flexible. They see great advantage in open models where they can use external expertise to expand the range of consulting services on offer and to scale up and down rapidly (some refer to this as ‘firm elasticity’).
We leverage external consultants to get into new areas and to give us some differentiation on proposals. We tend to use experienced people, people who have left the larger firms or well-known industry figures. This has helped us grow while keeping a tight core group.
Managing Partner at 100-Consultant Firm
Virtual consulting companies are also emerging. These virtual companies have a very small core of marketing and administration (rather than consultants) and outsource virtually all of their work. They usually outsource to a close knot group of people who frequently work together. These companies sometimes manage software platforms for the consulting teams (cheaper than having every consultant do this independently). Some of the more advanced firms also provide a centralized place to hold intellectual property and collect data. In this case, many (or at least some) of the consultants will also be owners.
The emergence and evolution on these work networks has been studied by Jon Husband as is documented on his Wirearchy site.
Challenges of the pyramid model
The pyramid up-and-out model was developed at McKinsey (still the dominant strategy consulting firm) based on practices in place at law firms. A strategy consulting firm has a few senior partners and a large number of associates. The partners get rich by making sure the associates are billed out at high rates. At each stage of the career there is a large culling, and only a small number of people move up the ladder. But the people who leave are not just cut out, they are carefully placed into senior positions with clients, where they often become important buyers of consulting work.
This model is under pressure. Many clients have grown suspicious of being charged a great deal of money for work that is being done mostly by (very smart) junior people. The junior people themselves have many opportunities in rapidly growing technology companies and consulting firms are no longer the first choice of many of the most entrepreneurial. And much of the work that was once done by number crunching consultants is now done by software. Not that software removes the need for the interpretive and higher-level analytical work. The best consultants really can deliver insights that change the strategic direction of a company. But these insights are usually given by experienced and connected people. The kind of people who can succeed outside the pyramid structure.
The brave new world is hardly perfect
The Hollywood model has a lot of limitations as well. It can lead to a lot of fumbling at the beginning of projects as people learn how to work together. And when the team is comprised solely of people who consider themselves the expert there can be a lot of head butting. Clients are left with no one they can hold accountable and when follow up work is needed people may or may not be available.
To make this model work a few things need to be in place.
It works best with experienced clients who know what they need and who can provide quality assurance themselves
There need to be well established best practices and processes that are agreed on in advance (these projects often bill themselves as innovative, but it takes open-minded and disciplined people to really drive innovation from an open group)
The people on the team have a history of working together and delivering results (only experienced people need apply)
There needs to be a system in place to bring people together for these projects, otherwise the open teams can become too inward looking
Three predictions
As people become more used to working in open networks, and large companies continue to shed experienced staff in the quest for efficiency, the Hollywood model will become the standard way of doing all project-based work. The consulting team will generally combine people from inside the organization (to ensure continuity and execution) with external people who lend their expertise.
Processes will become more formalized, and as this happens there will be more formal innovation at the process level. Many of these processes will be captured in software and there will be more opportunities to blend strategy consulting with software implementation (and strategy consultants who see implementation work as being somehow beneath them will struggle). We have seen this happening in revenue generation work, and it is likely to infiltrate the design of subscription models and other pricing related work, in market segmentation, and even in projects meant to help clients imagine the future.
The optimum size for a consulting company will get smaller as social networks become more robust and people become used to working in this new style. True, existing social networks are not up to the task, but new blends of social network , project management and business process software will be and as these become available the shift to the open economy will accelerate.
Image from Open Ear
