Is Consulting on the Road to Disruption?

Leading Harvard Business School Professor Clayton Christensen and his co-authors wrote that it is in their article for Harvard Business Review, "Consulting on the Cusp of Disruption".

The article offers evidence of early signs of change and examples of new consulting industry models. It notes that "incumbents are showing vulnerability" and, " Big consulting is also questioning its sacred cows". They also note, "Management consulting's fundamental business model has not changed in more than 100 years".

The authors go on to suggest that to date opacity and agility have made it immune to disruption, and the "solution shop model" produced recommendations "created in the black box". Additionally, the many external factors make it hard to judge success or failure, or to identify a responsible party for either. As a result, clients rely on brand reputation and 'social proof' as substitutes for measurable results, giving incumbent agencies an advantage.

The solution shop model has served the incumbents well but could be the cause of their demise. They are "structured to diagnose and solve problems whose scope is undefined", and deliver value, "primarily through consultants' judgement rather than through repeatable processes".

Pointing to evidence of disruption already underway in the legal profession, the authors suggest services are likely to be unbundled, to be delivered by independent specialists who are found and co-ordinated by in-house or external facilitators. These specialists will then collaborate closely with in-house strategy teams or executives in management functions.

They offer evidence that the buyers of services are increasingly sophisticated and "no longer rely on the easy assumption that price is a proxy for quality". The consequence is less reliance on Solution Shops. Instead, they "funnel work to individuals or firms most appropriate for the specific job", leading to an, "increased modularization of the industry". This change will allow clients to access the advice they want, when they want it.

Within this context, there is a role for the firms that act as the curators of experts. A few already exist. And, clients will no longer have to pay the fees of big consulting firms, because the curators of modular services do not carry huge overheads. Clients will also have far more control over outcomes.

These developments will make the same quality of expertise and advice available to smaller and medium-sized businesses and organisations, previously un-served by the large consulting firms whose services they could not afford. The result will be growth in the overall size of the market for advisory services.

The authors warn that incumbent consulting firms will struggle to change because their current model has served them well for so long. This may be so, but as the authors also said, consulting firms have been quite agile in the past. I think a bigger problem will be their entrenched industrial-era ways of thinking, and the outdated management theories and approaches that they cling to. These problems are reflected in their own structures, systems and cultures.

The large incumbent consulting firms are designed to push the products, services and advisers they have, according to the classic consulting industry matrix of "industries served" and "services lines" offered. In my view, a better approach would be to design the advisory firm around client needs, or what Clayton Christensen calls, "jobs to be done", which are usually related to situations being faced. Those situations and possible response options are usually very closely linked to the stage a company is at in the typical business lifecycle.

The reason it's important to focus on situations related to the business lifecycle become clear if you consider research showing a large majority executives believe the root causes of their failures, or their inability to grow, are internal, not external. And, the problems are almost always linked to situations associated with the stage of development of the business, so are also predictable. Many of the most important options for addressing the situation are also linked to the stage the business in their business lifecycle, although not all are.

On the one hand, these predictable problems may be the cause of a crisis. On the other hand the fact they are predictable means they are also a potential source of competitive advantage if handled correctly. This is especially true given that the vast majority of competitors will fail to predict them.

You may wonder why predictable problems are so often overlooked, and you may be wondering whether the statement is even true? Well, you only need to look at the data on failure rates to answer the second point. As for why they are overlooked, it relates to a focus on the "external story" rather than the "internal story" as two partners of Bain & Company put it.

The external story is a "narrative that plays out in the marketplace in the form of quarterly earnings, returns to shareholders, market share shifts and profitable growth". It's the more visible and easier to read narrative. By contrast, the internal story is less visible and harder to read. "It's the story of building the business, expanding and retaining a quality workforce, strengthening the culture, upgrading the systems, learning from experience, adapting the business model, holding down costs, and mobilising the people to carry it out perfectly again and again".

The internal story is the story of what I call the Value System; the system designed to deliver the customer value proposition in a sustainable way. It must be congruent, not only aligned. The difference being that congruence suggests balance and harmony, not just synchronisation - of the internal with the external, of the strategy with the resources; of strategy with the situation of a business at a given point in its lifecycle; of the culture, values, incentives etc.

Alignment is the fashionable buzz word in management theory but, in my view, it is too limited. It links to the old analogy of the business as a mechanical system that must me fine tuned. As an analogy, it is at best too simplistic. Or, as I would argue, it is fundamentally wrong. Business should be viewed as a social system where people are seen as more than "human resources" or "human capital".

People are the flesh and blood, the minds, the spirit, the personality and the life of businesses as systems of value creation. They come in the form of customers, employees, managers, directors, investors, suppliers and distributors. And when they operate in harmony, as part of a congruent system of value creation, they have the power to create tremendous wealth and prosperity. These are some of the principles of what I call Valueism.

A lack of congruence can see value being destroyed, but that's the tip of the iceberg. The bigger problem of incongruence is the degree to which it undermines the potential to add value, and that represents the great invisible mass of the iceberg.

Recently I started to establish the Faculty of Independent Strategic Management Experts (FOISME). Members share a similar belief in the principals of Valueism, and a desire to help companies that wish to focus on creating customer value. They are companies that view profits as a byproduct of delivering customer value, rather than it being their focus which leads to value extraction. We can recommend individual experts or rapidly assembled expert teams, to respond to the situation-specific needs of businesses and organisations.

All experts in the faculty have at least ten years senior level experience in dealing with situations within businesses or organisations. They have "walked the talk" and are qualified to offer practical advice in how to deal with challenges, and how to manage businesses that create customer value in a way that achieves sustainable growth.

Unlike most large consulting firms we won't be obsessed with the idea of winning large long-term consulting projects to boost earning. Consulting will be just one service we offer when it is needed, but the faculty will offer their expertise as a wide choice of other advisory products and services. The faculty experts are advisors, speakers, trainer, writers, coaches, mentors and researchers. They offer advisory services in the form of consulting, workshops, masterclasses, boot camps, courses, events and content for publication.

We'd like businesses and organisations to consider us the "go-to" source of expertise that can be accessed "just-in-time", to address situation-specific needs. And as the provider that can help meet those needs in a variety of ways, to the highest standards, at a reasonable price.

If consulting is not on the road to disruption we think it should be, and we would like to be one of the firms to help disrupt it. For more information visit the FOISME website

We're also looking for more experts to join the Faculty. Details can be found on the website.