The clients of consulting firms are not really happy with the current business model. The basic complaints (and these have been around for quite a while) are that consultants (i) propose complex solutions that are delivered as massive PowerPoint slide decks that (ii) are very difficult to actually implement and (iii) often sit on the shelf. As a consultant I understand why this is. The real world is complex and clients are willing to pay for an unfolding of this complexity but not necessarily for the extra work required to make things simple. Execution is the job of the people operating the business, not the consultants. There is often a hidden agenda behind major consulting engagements that the consultants, at least the people in the field, are not fully aware of.

All of these reasons may be valid, but clients are coming to see them as excuses and many are looking for alternative solutions. Management consulting companies need to search out new strategies for engaging with clients and delivering sustained and differentiated value.

Sustained: The consulting firm can go beyond developing a relationship to developing complementary skill sets and technologies that its clients rely on for ongoing insights.

Differentiated: The value provided by the consulting firm is meaningfully different from that provided by comparable firms.

Several strategies are emerging as consulting firms begin to transform their business.

One is to build a consulting practice around one’s own software platform. This is often based on some basic insight into how business is or could be conducted. InnoCentive is transforming how large companies seek innovation. ThoughtExchange has a new model for building engagement. Both of these companies combine software platforms with consulting services to provide differentiated and sustained value to a rapidly growing set of clients.

Not every consulting firm is positioned to build a software platform. But they can get a similar result by integrating strategy and implementation services. In the past the top strategy firms have looked down their nose at IT implementations, seeing it as something that did not create the kind of strategic impact their highly-trained MBAs are capable of delivering. Companies that have both strategy and implementation practices tend to manage and staff them separately.

Is this separation meaningful going forward? Or is there a way to combine strategy and implementation work in new ways that will transform consulting firms and how they shape their clients businesses?

This seems to be the approach taken by a firm like Kalypso, which has a track record in both innovation strategy and the implementation of product lifecycle management software. One of the giants in the PLM world, PTC is now moving into the Internet of Things with its Thingworx platform. The Internet of Things will be a major disruptor of conventional manufacturing and there will be opportunities to combine strategy with implementation here as well.

The firms following these strategies are still quite small when compared to the giants of the strategy-consulting world. Are new strategies open to firms that operate on the scale of McKinsey?

In fact, they are already pursuing them. Rumor has it that McKinsey already earns close to a billion dollars from its various software businesses (I do not know if this is true but have heard numbers from $800 million to $1.2 billion from informed sources). Take a look at McKinsey Periscope. This is exactly the kind of hybrid of consulting, data and software that is likely to replace conventional consulting.

The transformation of management consulting will change how these companies think about skills and skills management. Instead of hiring for general intelligence (or if you are cynical, hiring for conformity and confidence, see this Schumpeter column on “How to join the 1%”) and assigning people to teams based on availability, consultants will get much more focussed on actual skills and experience. The successful firms will be looking for the granular skills that indicate real expertise and that can drive differentiation.

See also “The road to excellence – allocate people to teams based on real skills (and not just availability)”

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