Ashridge

Virtual Learning Resource Centre

Management consultancy in the 21st century

Bookcover

by Fiona Czerniawska, Macmillian Business, 1999.

Abstract

Consultancy is moving beyond its conventional boundaries to a deeper relationship with clients, who want real results as well as analysis. This book plots the path from merely advising to cooperation in implementation.

(Reviewed by Kevin Barham in April 2001)

(These book reviews aim to represent some of the key aspects of what the author has written. They do not necessarily represent the views of the reviewer or of Ashridge. Equally the author of the book reviewed must not be held responsible for any misperceptions of the reviewer.)

In January 2001, Andersen Consulting, one of the world’s largest and most influential consulting organisations, changed its name to Accenture. Why does an organisation that has been so successful to date feel the need to rebrand itself in this way? The firm itself says that the new name connotes putting an accent or emphasis on the future - it expresses not only what the organisation has become but also what it hopes to be. Its aspiration is to ‘transcend the definitions of traditional consulting and to bring innovations that will dramatically improve the way the world lives and works’. The firm says its goal is to become ‘the market-maker, architect and builder of the new economy’. That is a pretty ambitious statement for an organisation that we might think of as ‘advisors’ rather than as ‘doers’.

In fact, Accenture is a very good example of the changes in the consulting industry foreseen by Fiona Czerniawska, who here assesses the key opportunities and risks facing consultants over the next twenty years. Her book was published before Andersen announced its rebranding initiative. But the company’s change of name and redefinition of its purpose certainly confirm her predictions about the way in which consultancies will have to reinvent themselves if they are to deal successfully with future challenges.

The author is careful to define the term ‘consultancy’ as follows: ‘Management consultancy is an independent and objective advisory service provided by qualified persons to clients in order to help them identify and analyse management problems or opportunities. Management consultancies also recommend solutions or suggest actions with respect to these issues and help, when requested, in their implementation’. (So, although IT-related consultancy is considered here, computer hardware and software development are not included.)

We all, of course, know the joke that a consultant is someone who takes your watch and tells you what time it is. Despite such negative perceptions, management consultancy is one of the fastest growing markets in the world today and is also a highly influential and pervasive force in corporate life. Although the pace of growth looks set to continue, the future holds significant change for both consultants and the clients who hire them. For example:

Changing relationships with clients

One of the major changes is that the client-consultant relationship will alter with clients demanding more tangible benefits in shorter time-scales. The growing complexity of business means that the line which has traditionally separated consultancy advice from management action will become more blurred. Consultancy will have many opportunities to flourish but it must move beyond its conventional boundaries.

One of the main criticisms of consultants has been that they ‘hit and run’ - they submit a report and recommendations but leave before implementation of the changes starts. Clients are becoming much more demanding about the results that they expect their consultants to deliver. They don’t just want analysis, they want ‘real’ results. The result is that the traditional dichotomies of client/consultant, subjective/objective, advice/action are disintegrating. If clients in the past wanted consultants to tell them something new, now they want them to do something which they, the clients, cannot do themselves. The value of outside help lies increasingly in action rather than advising.

Take one example. Andersen Consulting’s (that is Accenture’s) Via World Network is a leisure and air travel consultancy whose mission is to transform the travel industry, making it more successful by delivering radically new industry processes and removing costs and complexity from travel product distribution. Via originally started as a deal in which Andersen outsourced a client’s ticketing facility. It then became a highly cost-efficient service which has been offered to other airlines. In essence, Andersen did something that its client could not do independently - develop a low-cost ticketing facility that could be delivered en masse. Via is a clear example of the way in which consulting firms are moving outside their conventional business, to become both more pervasive - touching new and different business areas - and more invasive - taking business where it has not been before.

These trends raise some important questions. For example, will the conventional operating approaches of consultancy (such as utilisation, time-based accounting and fees) still work when the distinction between consultant and client breaks down? Will consultancy still be based around highly talented individual consultants or will commercial pressure lead consultancies to become software houses whereby their intellectual capital is increasingly codified into packages that can be sold to many clients at once? And if consultancies become more like their clients, will clients continue to hire them?

Access to intellectual capital

If clients increasingly demand a continuous stream of new ideas from consultants and expect them to provide solutions much faster than in the past, consultancies will have to ensure they have access to new intellectual capital. This will determine not just their short-term success but, more fundamentally, which consulting firms will survive. And clients will not only want simpler solutions with innovative content and fast results; they will want to set more ambitious and more tangible goals for their consultants.

If ready access to a body of existing and/or newly-created knowledge is essential to meeting clients’ expectations, consulting firms will have to become much more conscious of their existing intellectual capital and the way it differentiates them from their competitors. They are therefore likely to spend much more time and effort in understanding, valuing and formalising their intellectual capital both to protect it and to justify their investment in it. One implication is that they will increasingly use legal means to defend their rights. The danger of increasing formalisation, however, is that they may marginalise the less formal knowledge they possess - for example, in intangible areas such as culture or behaviour or in new, emerging areas of business. This may not only be the basis of new formal knowledge products in future but may in reality constitute the bulk of their existing intellectual capital.

No consultancy is an island

Relationships between consulting firms will become much more complex as new alliances are created between traditional rivals in order to address new markets. Although many mergers have taken place within the consulting industry in the past, consulting has still been an ‘isolationist’ activity and even the most integrated of firms has continued to be run on a highly individualised basis with partners responsible for their own fiefdoms. Many firms have tried to break down internal barriers and develop a common sense of purpose in order to withstand intensifying competition. The motivation, however, has been largely defensive. The challenge of the future is different. Co-operation, networking and business ‘ecosystems’ will provide unparalleled opportunities for consulting firms to develop a wide range of new services that can be delivered to different markets and to form mutually supportive groupings that will be able to change the nature of competition both inside and outside the consulting industry. Consulting firms of the future will seek to create ‘ecosystems’ of their own to differentiate themselves, to gain access to new types of intellectual capital, and because of the possibility of creating instant critical mass and taking control in new or emerging markets.

New marketing approaches

Consultancies have never been very good at differentiating themselves from each other; their traditional approach to differentiation has been specialisation but this has been prone to change. Creating a brand in future will demand a different approach. In particular, consultancies will be more concerned to identify and promote the values embedded in their organisation which set them apart from their competitors, and they will use those values to attract clients with similar values. This means finding new or different ways to provide concrete evidence externally of these internal, intangible values. It also means giving much more attention to under-utilised assets such as the knowledge possessed by their people or their relationships with clients, and giving more emphasis to the marketing function (which in many consultancies has in the past been little more than a glorified corporate communications team). The major problem is that a differentiated brand will only be possible if it is supported by a cohesive value system - something which many consulting firms with their individualised cultures will find difficult to realise in practice.

From advice to action

The boundary between the roles of the clients and consultants will become much more blurred, with consultants ‘doing’ as much as ‘advising’. The most consistent criticism levelled against consultants is that they are ‘all talk and no action’. Statements by consultants about working in partnership with clients will no longer be enough. Today’s catch-phrase is ‘implementation’. We will see a growing number of joint ventures between consulting firms and their clients where each side shares the doing and advising roles. One result of this increased demand is that consultancies will favour assignments with a generic element where intellectual capital can be easily redeployed elsewhere. They will be more reluctant to undertake one-off assignments for an individual company. The length of time required to set up such ventures will be equally important. A joint venture may take years to be successful - ie the ‘doing’ services of tomorrow are already being developed in assignments today. The firms that recognise this and start to focus time and investment on these opportunities will stand to gain massively in the next decade. Those that do not will find it impossible to make up lost ground.

The consulting industry depends not only on growing its intellectual capital but also its ability to transfer it to clients. But how will knowledge transfer work in an age where ownership has become a contentious issue? One solution is to trade intellectual capital - instead of giving away knowledge for a fee, consultancies could ask clients to give back some of their own knowledge. Knowledge will not be a monologue but a series of dialogues between consulting firms and organisations. It could also result in consulting firms demanding premium fees for doing perhaps in the form of equity from their clients. This means that consulting firms will have to be very astute in identifying clients in which they wish to invest. An equity stake could generate a much higher return than conventional time and materials-based consulting, but it also carries higher risk. At the moment consultants are usually paid whether their clients succeed or not. Shareholding changes that.

The move from advising to doing raises other important issues. Consultants are supposed to be independent outsiders and that integrity will be compromised if they identify too closely with their clients. The potential for conflict between client and consultant will also become much higher. More seriously, most consultants are ill-equipped for action. By necessity, they seek to create and sustain a reality that persuades clients of their value in the same way that actors seek to create a theoretical reality. Can they move, asks the author, from the ‘fictional’ to the ‘real’ world without ceasing to be consultants?

Globalisation

In the past decade, globalisation has been the cure-all for consultants’ problems. Globalisation was initially justified on the grounds that clients who were increasingly operating on a trans-national basis expected their advisers to do the same. There has, however, been increasing realisation that the rationale for global consulting firms is as much internal as external. Having a genuinely global network of resources allowed a firm to move consultants out of areas or markets which were hit by recession and into more healthy economies. It is also an advantage to be able to pool investment in the infrastructure necessary for expansion (intellectual capital, knowledge-sharing, technology, etc) across countries. While Andersen/Accenture is seen as having led the way in global integration, for most consulting firms there is still a long way to go before the ideal of the global firm becomes a reality.

Globalisation poses a particular threat. If having the ability to provide services that are built around an understanding of how companies operate on a trans-national basis is the key to success in the global consulting market, it is not just consultancies who possess that ability. Traditional consulting experience will count for less than managing on a truly global basis. The organisations who are most skilled in this area are clients themselves, and it follows that clients may start to enter into competition with the consultants.

The future is full of opportunities and threats for consultancies. But it is not just the future of the management consultancy market which is at issue. If intellectual capital is to be the key asset of the economy in the coming decades, it means that consulting firms may be the major players in every market, not just their own. This is what Accenture’s ambitious mission statement is all about. As Fiona Czerniawska says, ‘the future of consultancy will be all our futures.’ She has written a highly insightful book which will be of great value for both consultants and for people who hire or work with them.

Back to the top