Management Consultants have made an art form out of delivering insights and advice into how to deal with disruption in industries. Now Consulting itself is being disrupted and the changes are significant.
“Disruptive Innovation” a term coined by Clayton Christensen in 1995 was used to refer to the radical changes that caused a step change across an industry. Industries like manufacturing, music, television, advertising, airlines, publishing and many more have all been through disruptive innovation. The underlying economics of how that specific industry made money and sustained itself suddenly changed and in many cases new entrants were in a much stronger position than the incumbents..
Management Consulting is a $200B+ industry but it is mainly human driven, it is built on hiring intellectual capacity (brilliance), methodology, polish and global industry knowledge.
BCG, McKinsey, Bain and others hire the brightest and most technical business school students and this can be shown in the number of US MBA students that have increased from around 25,000 per year in 1970 to just under 200,000 in 2020.
And all of those students are taught the main tools and frameworks used to develop corporate strategy; the 2×2 matrix, the experience curve, SWOT, Porters 5 Forces etc.
“[W]e’re still early in the story of consulting’s disruption… More likely than not, alarms won’t sound until it’s already too late in the game.”
Clayton Christensen
When the management consulting firm is functioning most effectively, the consultant gives the client:
- Information: The data and analysis that take the client’s world, industry, and market position and make sense of it.
- Expertise: An experienced operator’s perspective on a problem and the different ways that it can be solved.
- Insight: The rigorous, analytical application of expertise to come up with insights that will help the company succeed.
- Execution: The roadmap to choosing and implementing the changes to be made.
Soren Kaplan (author on Business Strategy, Business Model Innovation) has explained, there are numerous factors in how management consulting works that would lend it to being vulnerable to disruption:
- It’s highly dependent on manual (computational) human labor — something that computers are doing more and more of.
- It traditionally has very high margins (and doesn’t bill based on outcomes but time spent).
- The value is largely time-bound, in the sense that the advice often gets outdated quickly.
- The value is largely driven by information asymmetry (knowing things other consultants or companies don’t), which is harder to maintain in the internet age.
“Sound managerial decisions are at the very root of their impending fall from industry leadership.”
Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail
The article author from CB Insights makes the case that todays tools such as Looker, Tableau, Microsoft Power BI, Qlik, SAS, and Domo allow companies to instantly generate reports and dashboards that would in the past required the expertise of Management Consultants.
Further that most companies these days have a much deeper understanding of their data and large firms are investing in data analytics, machine learning and automation to aid deeply informed rapid decision making.
“Disruptive technologies typically enable new markets to emerge.”
Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail
The big consultancies McKinsey, BCG, Bain and others recognise that they need to build powerful data analytics into their teams and have acquired firms to expand their capability and address this consulting disrupted. They have built new services that use the technology advances to bring depth of insight and support the services offered by their management consultants.
Emerging firms like Palantir, which specialises in large-scale data analytics applications, is one firm looking to disrupt management consulting. Founded in 2004 ( funded with early investments from the CIA) Palantir has grown to become one of the US federal government’s largest vendors.
But Palantir’s expertise extends beyond its big data work providing bespoke consulting services together analysis, insight and automation, they sound a lot like the next generation Management Consultant and that is Consulting Disrupted!
Will it work
Synopsis of an article from CB Insights Killing Strategy: The Disruption Of Management Consulting by Published: 8th October 2020 https://www.cbinsights.com/research/disrupting-management-consulting/