Consulting now has a chance to return to its roots

Management consulting developed in the late 19th century as a response to the budding demand for strategic advice from organisations to facilitate their growth and expansion. This demand was a by-product of the Industrial Revolution, which had seen new companies form and existing companies grow at an unprecedented speed, driving the creation of new business management disciplines.

In fact, the early management consulting firms — Arthur D. Little (founded in 1886), Booz Allen Hamilton (1914), and McKinsey and Co. (1926) — were founded by university professors from accounting and business management disciplines. Their ability to see how the Industrial Revolution had shocked the market and opened a gap for strategic advice allowed them to grow management consulting into the USD $300 billion industry it is today.

As they grew quickly, consulting firms made it a practice to hire new graduates with a Master’s of Business Administration and all from top schools (the first degree was from Harvard in 1908), to staff their projects. This was a distinct change from hiring experienced personnel from industry.

Over the next 60 years the extraordinary growth driven by technological advances began to characterise the consulting industry. But this growth meant consultants now had to engage beyond the strategic core of the companies they were advising, working instead with parts of businesses that directly involved technology and operations. As a result and in parallel, the field of management consulting evolved and expanded, leading to engagement in lower cost, higher volume, longer-term transactional work such as technology and process simplification and re-engineering.

Consulting firms grew in size and multiplied in number and as they did many of their offerings became commoditised, process-driven, and repeatable (or “Productised”). This reduced the cost to serve their clients, allowing consulting firms to maintain and then increase their margins as they also pushed certain services offshore to make the most of labour arbitrage opportunities. But amid this focus on process, real research, development and innovation began to stagnate. In recent decades, many consulting functions have been taken in-house by more forward-thinking companies. They believe their internal consulting teams can match it with more expensive external suppliers, who they considered were no longer bringing new thinking to the table.

From an industry focused on disseminating top business advice to corporations, it became one focused on growing profit margins and delivering whatever work needed to be done. This included augmenting staff into a client’s business and executing day-to-day tasks alongside the client’s employees. None of this is really high value, strategic impact consulting.

From an industry focused on disseminating top business advice to corporations, it became one focused on growing profit margins and delivering whatever work needed to be done.

Since the turn of the millenium, it feels like the more years one spends consulting, the further away from clients and their wicked problems one gets. More senior consultants have become absorbed in managing the mechanics of the consulting firm instead of actually consulting, becoming slaves to spreadsheets and back-office admin teams. It all feels a million miles away from where it all started.

In 2021, the world is facing one of the most fascinating and challenging economic environments in decades: COVID has shocked the global system and fundamentally shifted belief systems and expectations across multiple parameters. These include the role of small and large businesses, of different sectors and industries, societal and cultural networks, inter-personal relationships, the mandate of government, cross-border commerce, globalisation, and technological advancement. We do not yet know the cost and impact of all these on the world and our environment.

Now, organisations have an urgent need to tap into deep expertise born of experience in order to compliment their internal skills and knowledge as they navigate the white water ahead. The typical operating and commercial construct of many organisations and the environment they operate in has shifted and the delta is large. Words like transformation and simplification and re-engineering won’t be enough to navigate the shift.

The cumbersome, one-size-fits-all consultancies are struggling to mobilise the right skills quickly enough to meet their clients’ challenges. Genuine strategic thinking based on the tripartite structure of frameworks, expertise, and judgement itself — often mined from years of experience — is in scarce supply.

Genuine strategic thinking based on the tripartite structure of frameworks, expertise, and judgement itself — often mined from years of experience — is in scarce supply.

The management consulting model has morphed into a provider of technology driven consulting or implementation services. This lends itself to pyramid models of junior staff generating the volume of chargeable hours needed to keep the lights on, with the more senior experienced practitioners “managing” the operation.

The original thinking and strategic advice that once powered consultancies has been buried under the weight of outsourced process work and many existing consulting firms have built models incongruent with a more strategy-led approach. They have become victims of their own success in building a headcount-heavy, transactional, systems-implementation driven approach.

A renewed ability to orchestrate experts and specialists across multiple disciplines with proven and deep experience is the key to the rebirth of business advisory services. Bringing these experts and their strategic insights together on a technology-enabled platform, removing the friction of collaboration while enabling the sharing of information and commercial outcomes, will accelerate engagement and execution. This offers up the Holy Grail of allowing teams of experts with deep experience to engage directly with clients on their most challenging problems.

A renewed ability to orchestrate experts and specialists across multiple disciplines with proven and deep experience is the key to the rebirth of business advisory services.

The result of this will be a new and flexible value-based revenue model where both the client and expert share the benefits commercially and organisationally. Done right, this will see a return of management consulting to its original purpose, where external expertise was acknowledged, respected appreciated, and valued.

Experts will get back to doing what they actually want to be doing — solving the world’s most wicked problems. In turn, clients will get what they actually want — access to world class knowledge to compliment their internal capabilities as they grow and redirect their businesses.