Killing Strategy: The Disruption of Consulting
Former Boston Consulting Group consultant and Harvard Business School Professor, the late great Clayton M. Christensen (1952–2020), first used the words ‘disruptive innovation’ in the mid-1990s when Google was just another search engine.
In his best known work, The Innovator’s Dilemma, Christensen outlined his theories about the impact of disruptive innovation on large companies.
This book catapulted him to superstar status as a management guru.
The alternative title to his book could have been: “When doing the right thing can be the wrong thing.”
To understand why, here in a nutshell, is how disruptive innovation works:
Large companies focus on growing revenue and fattening profit margins, so they develop products to satisfy the demands of their most sophisticated customers
This looks and feels like a successful strategy, but it ignores the needs of the less sophisticated customers, who may eventually form a larger and more lucrative market
A start-up can introduce a simpler product that is cheaper and gain wide adoption
Through agile and lean innovation, the start-up can refine its product and capture more of the market, thus disrupting the original company
Becoming captive to your current customer base is a double-edged sword … you might just end up falling on it!
In September 2019, CB Insights published a white paper with the same title as this blog. It is the best and most honest examination, that we at Mindhive have seen, of the strengths and weaknesses of traditional management consulting, by which we mean the type of consulting practised by BCG, Bain, LEK, McKinsey, Deloitte, EY, KPMG, PwC and other global professional services firms.
This type of consulting firm rose to prominence in the 1980s and dominated the board rooms of the 1990s. Every Baby Boomer and Gen X knows these names.
Not so much the Millennials and Gen Z. And herein lies a problem. With the oldest Millennials about to enter their 40s, these consumers are the mass market. Their needs and expectations are centred around 24/7, always-on, contextual, personalised, digital delivery, preferably via a smart phone app. They make purchases that align with their values and social conscience. They want to be emotionally comforted by their chosen vendors and rewarded for loyalty but they can also be fickle.
The traditional 6-12 month strategy planning cycle with PowerPoint presentations full of market research, competitor analysis, 2x2 matrices, charts and graphs, belongs in the 20th century.
We can’t solve today’s problems with yesterday’s tools let alone tomorrow’s problems.
At Mindhive, we don’t think consulting is dead. But we do think that traditional consulting can be inefficient and inflexible. It needs new methods and tools, otherwise traditional consulting will have a major fight on its hand to stay relevant. Consulting is no more immune to the forces of disruption than any other industry.
According to CB Insights, the industries that have proven the most vulnerable to disruption have been those with:
One or a few major players
Relatively outdated business practices
Slow technology adoption
Oddly, management consulting is rarely named in discussions about industries vulnerable to disruption (unless you ask Christensen), despite the fact that it meets all of the above qualifications.
The CB Insights white paper points out that there is a lot about how management consulting works that would lend it to being vulnerable to disruption:
It’s highly dependent on manual (computational) human labour — 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 also largely driven by information asymmetry (knowing things other consultants or companies don’t) which is harder to maintain in the internet age when data is being democratised
Nonetheless, consulting is still a gazillion dollar industry and it hasn’t been meaningfully disrupted yet. The CB Insights report digs deeper into each of the above four vulnerabilities to understand what the post-disruption future looks like for the consulting industry’s ability to gather information, demonstrate expertise, generate insights and design the right execution roadmap.
According to Christensen: “We’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.”
Consulting will fight back. Mindhive is excited about the opportunities to partner with large traditional consulting firms who can use our platform to amplify and accelerate their processes.
As our CEO Bruce Muirhead told AusBiz TV’s The Pulse on Wednesday 13 May 2020, there is no one right way to solve a problem. Sometimes the best insights are found in the least likely places. The combination of thousands of smart humans, a platform that gives them access and speed, leveraged up by super tech, is unbeatable.
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