Driving Forces of Business Consulting Today

What do you call someone who, when mentioned a 7 o’clock meeting, will ask, “AM or PM?” Or someone who can spell the word ‘paradigm’ and actually know what it means? That’s right, a business consultant.

Drawing on my experience of working at a consultancy, I find the picture below so true (sorry to some of you who saw it already, it just perfectly fits in the subject). Additionally, here you can find some other witty ‘observations’ made on consultants I found on the web.

Management consulting firms started appearing in the previous century and were initially focused on general management and technology advisory services. Glass-Steagall Act and subsequent banking sophistications of the mid-20^th century triggered a new wave in the development of the consulting industry. This gave rise to industry-specific consultancies, such as tax-, HR-, operations- and other specific ones. Later it went even deeper, as the rise of industries (such as aviation and IT) brought forth those respective consultancy firms.

The business environment of consultancies today seems to be quite saturated. Some major companies like GE, Toyota, and Lufthansa have their own consultancies providing services within their respective groups as well as to other firms in the industry.

The 21^st-century business consulting is now a whole industry which increasingly has to face new paradigms (no, I just can’t escape using this word in this context). From the conception of the industry until today, the paradigms (or driving forces shaping the industry) for consulting businesses around the world have shifted. Therefore, let me discuss some of the new driving forces I came up with which form the consulting reality today.

The original business focus has become harder to maintain over time. One reason for this is increased competition. From 5 consulting firms with over 1000 employees in 1980, the industry grew to well more than 150 such firms today. As to the industry consultants which are typically smaller firms, the aviation industry alone has over 15 well-defined consultancies just in Europe.

Another reason is that project types have changed and grown in scope. That said, clients search for consultants who are able to present comprehensive project treatment. Instead of providing one service per project (say, a growth plan), a consulting company is expected to spill the service over to other branches of a client’s firm (say, advisory on operations optimization and implementation thereof). The former ‘big 8’ merged into the ‘big 4’ to expand their services and strengthen the existing arms (audit, tax). For this same reason, the cohort of smaller industry-specific consultants eyes widening the offered services.  One example is a German construction consultancy, which extended their services from construction advising to airport master planning.

Industry standards are getting increasingly scalable. Although typically business consulting is thought to be hardly scalable, in the recent years competition forced many consultants to implement result-based fee structures. In order to succeed in having their proposals accepted, consultants need to pledge to achievement of pre-specified results in order to qualify for payment. This paradigm drives to the third one, which is:

Traditional business structures may need to undergo changes. Under the new industry standards and client expectations, consultancies not only need analysts and consultants, but also ‘executors’. This can mean a shift from a traditional ‘matrix’-structure consultancies to ad hoc teams and project-specific working groups, as already practiced by some industry consultants. This can also imply the necessity for consultancies to team up with a common goal of project risk sharing.

These and other driving forces are important for a consultant to bear in mind. The industry is quite vibrant and is almost destined to evolve. Therefore, if you ask me several years from now What the driving forces of business consulting are, I’ll probably give you a different answer.