Micro-disruption in consulting?

The disruption promised in consulting has been a long time coming. Perhaps we’re thinking about it in the wrong way.

Clayton Christensen et al.’s 2013 article in the Harvard Business Review,?Consulting on the cusp of disruption , argued that, “the same forces that disrupted so many businesses, from steel to publishing, are starting to reshape the world of consulting”. Fast forward to 2021, the problem with this statement is obvious: While many aspects of consulting have changed in the last eight years—the rise of managed services, the increased use of outcomes-based pricing, etc.,—none have truly disrupted the industry. If, as Christensen argues, disruption is measured in terms of the wholesale movement of customers to a new supplier (from an NYC yellow cab to Uber, for example), then the consulting industry has not been disrupted. Give or take the odd name change, the big players back then remain the big players now.

The reason lies in the words, “the same forces […] from steel to publishing”. Unlike either of these industries, or the software companies cited in the article, consulting is a people business, and the factors that create the conditions ripe for disruption are therefore different. Yes, technology obviously plays an important role, but so too do changes in the organisational structure of client companies (jobs that disappear usually create opportunities for consultants to help with the transition). Clients can also change suppliers relatively easily: Yes, there’s upheaval if you move a large-scale, long-term outsourcing contract to a new supplier, or decide that now’s the time to change financial auditor—and that can depress innovation, but the fact that you can move at all reduces the likelihood of pent-up frustration translating into more radical change.

Perhaps the problem here is that we’re thinking about disruption in the wrong way. We’re imagining that it will be on the same scale as disruption in other industries, but consulting is a highly fragmented market. Maybe nothing will disrupt consulting because “consulting” doesn’t exist: It’s too heterogeneous an activity.

That’s not to say that disruption won’t take place, but rather, that it will happen on a different scale. The greatest impact of AWS, for example, won’t lie in its position as a supplier of cloud services, but in the extraordinary scale and depth of its information on consumer buying behaviour, which no conventional consulting firm could begin to compete with. Retail clients, looking for help with forecasting online shopping trends, would have to have AWS on its shortlist.

Consulting firms, I think, need to stop looking for the one-disruption-fits-all scenario, and start looking for narrowly defined markets where they can create a competitive advantage that will result in them having a quasi-monopoly position. By defining their market too generously, they reduce the chances of ever being able to come up with an idea that could be genuinely disruptive.