Digital Transformation In The Consulting Industry
This is a collection of content related to digital transformation (DTX) and the consulting industry, both for clients and for consultancies themselves.
Click to jump to a section: DTX impact on business models | 12 Benefits | What They Said
You may be asking … why do you, 9Lenses, have anything to say on the consulting industry?
Simply put, it’s one we’ve worked closely with since our inception. Some of the largest consulting firms in the world use our platform for more consultative selling, assessment-based insights, and dynamic customer experiences that add value in many ways.
You may find the 9lenses platform for consultants of interest!
Without further ado, let’s jump into the first topic:
DTX and its impact on consulting business models
Years ago, the Harvard Business Review published an article that predicted the disruption of the consulting industry as a result of the evolving digital economy. Over the past few years, we’ve seen that disruption start to develop. Consultants are adding digital service offerings to their portfolios and adopting digital tools to enhance their capabilities. They are testing new consulting business models.
Adoption will inevitably be slow in an industry that has not changed much since it’s inception. However, firms are now seriously rethinking the current billable hour model. Many are also struggling to keep up with talent attrition.
Soren Kaplan does an excellent job of laying out the challenges firms have. Their model is largely at odds with how their clients want to work. Customers in the digital economy are increasingly demanding value from day one and customized solutions unique to their specific problems. At the same time, new upstart competitors leveraging data and technology are beginning to make waves.
Their clients are starting to ask questions and, as an IBM partner recently offered, “Our clients are seeking a partner that embodies the characteristic of the Digital Enterprise that they seek to become.”
Could we be at a tipping point in the consulting industry?
Our view is that firms need to begin testing new consulting business models that leverage digital applications before they are disrupted. We’ve collected a few of our favorite examples for review.
New Consulting Business Models
Bloomberg’s Data-Based Consulting Model
Digitization revolves first and foremost around data. Bloomberg has entered the consulting market by offering marketing strategy, communications, and brand consulting advice. They are staffing up with big firm talent, but they are also leveraging their extensive data set from the terminal to ground their advice in a big data-based approach. Their model is the convergence of a number of business models including media, ad spending, and consulting, all of which are grounded in data. They’re not alone; many established consulting firms, like Accenture, are moving to agency services.
Accenture’s Expanded Value Proposition
Fjord, a global design consultancy recently acquired by Accenture (which has been a 9Lenses client), provides an excellent illustration of the expanded value proposition. Fjord coaches clients on how to use design to improve their businesses. It also makes user-centered design a core part of its own strategy and value proposition.
Fjord CEO Olof Schybergson recognized how “elegant simplicity” contributes to more than just the design of a powerpoint or a user interface.
Design should be central to every system and process, as it allows for maximum return from minimal effort. Consulting firms of the past have certainly understood the importance of design in their deliverables. But Fjord’s view of design demonstrates how expanding the traditional value proposition can both open the door to new business sectors and improve internal operations.
Related: Everything to know about asset-based consulting practices
McKinsey’s Productized Approach
McKinsey Solutions was born from questions about whether the firm was getting the most out of their intellectual property. Firm management took a step back to understand how they could best leverage their collective knowledge of important issues and capitalize on the tools being created across the firm. Today, the firm has over 20 solutions that combine data, analytics, software, and advice. They’ve laid the groundwork for a new consulting business model that evolves with digital opportunity.
Eden McCallum’s Consulting Meets the Gig Economy
Eden McCallum demonstrates how breaking consulting into the freelance world can be highly attractive to both clients and consultants. The London-based firm has established a network of independent consultants who can be matched to clients with hyper-specific needs. The partners of the firm take care of managing client relations and identifying new engagements. Meanwhile, the consultants themselves simply execute the projects. This approach allows for much more transparency and client control.
Additionally, it also offers consultants freedom to control how much they work. While still relying on billable hours, this model eliminates corporate expense and allows support at a much lower rate. Consultants are then able to work more closely with clients and focus on delivering successful outcomes.
GLG Introduces the As-A-Service Model
Digital transformation is providing consultants with nearly 40% of their revenue. It also presents an opportunity to explore new as-a-service consulting business models. For consultants, the as-a-service model might involve more long-term, smaller volume projects rather than large-scale projects for a fixed period of time. Subscription pricing, rather than billable hours, might be the new financial model
Offering on-demand services will undoubtedly play a role. While we haven’t seen many top consulting firms going this route yet, some more niche firms are exploring the as-a-service possibilities. Professional learning services company Gerson Lehrman Group (GLG) offers one example. GLG provides on-demand professional learning services to clients in a wide variety of industry sectors. The subscription-based service grants clients access to experts through GLG’s network of independent professionals and thought-leaders.
We may not know yet exactly what the ultimate end-product of digital transformation will look like for consultants. What we do know, however, is that the new digital economy demands change to the traditional consulting business model. The good news is that there are a number levers consultants can be testing to meet these demands.
12 Benefits of DTX On Consulting and Its Models
1. Decreased Time to Value
The market for consultants to come in to a client organization and spend weeks of billable hours just getting to know the business is dwindling. Digitization of the client discovery process allows consultants to gain this knowledge in a fraction of the time, enabling them to bring the client value in the form of initial recommendations from day one.
2. Create a Knowledge Library
Rather than allowing knowledge to stagnate, consultants can use digitization to build on their expertise. By using a digital platform to house their questions and frameworks, they can easily track their performance and identify the best options. Thus firms can continuously improve on those questions and frameworks, thereby improving their thought leadership and credibility with clients.
3. Scaleable Engagements
Today’s clients expect consultants to increase speed to insight without sacrificing the quality of the outcome. As a result, consultants will need to use digital capabilities to make engagements scalable. Digital interview platforms can help consultants ask detailed questions in a structured way while still querying thousands of people at once. Digital analytics platforms can help consultants quickly turn that data into useable insights. With these digital tools, consultants can do more work with fewer resources.
4. Business Growth
By making engagements scalable, consultants free up resources that can be used to grow the business. For smaller firms, digitization may allow consultants to take on more clients than resources previously allowed. For larger firms, digital capabilities can help them bid more competitively and win more business.
5. Differentiation from Competition
On that note, consultants can use digitization as a distinct differentiator. Because the majority of the consulting world has yet to go digital, digitization is a prime way for consultants to set themselves apart from competition. Many clients today expect consultants to use digital methods, particularly when the consultants themselves are helping their clients to go digital.
6. Increased Margins
By using fewer resources to accomplish more, firms are effectively increasing their margins. By using 9Lenses to digitize the discovery and analysis process, for example, one of our clients reduced time spent from eight to three weeks and the number of analysts needed from four to two. As a result, the firm raised the margin for that engagement by 10%.
7. Repeatable Engagements
Digitization of content allows for easily repeatable engagements, allowing consultants to build recurring “pulses” into their service offerings. Consultants can track client progress with little additional effort and cost, creating recurring revenue streams.
8. Better Collaboration with Colleagues and Clients
Multitudes of tools are available today to help ensure that teams are communicating effectively with each other. What many consultants are missing, however, is a single platform that allows them to actually work together on analyzing a data set, rather than analyzing data in disparate spreadsheets. Moreover, most consultants lack a means of collaboration with the client.
Clients are usually only privy to the presentation that the consultant delivers at the end of an engagement. If they cannot understand it, the likelihood of retention is slim. With Digitization, consultants can create a traceable path of client data and frameworks edits to improve relationships with their colleagues and clients.
9. Increase Efficiency
Similarly, digital capabilities that allow consultants to better collaborate will end up increasing efficiency overall. Consultants working in silos frequently end up duplicating work, creating a framework or a set of questions that has already been created in another practice or even within the same practice. A digital platform that houses all frameworks and data sets will allow consultants to create digitized service offerings that can be deployed again and again across multiple practices without duplicating work or recreating the wheel every time.
10. Increased Client Stickiness
Client stickiness must be listed as its own separate benefit, since there are so many ways that digitization can boost it. Collaboration, speed to value, and better results all play into the likelihood of whether or not a client will stick around. Digital Consulting benefits include extending relationships by speeding time to value and assessing + monitoring progress after an implementation.
11. Make Confident, Data-Driven Recommendations
Digitization allows consultants to examine more data in more intricate ways than manual methods allow, which in turn allows them to delve much deeper into the data. Successful digitization of the analysis process will allow consultants to easily slice and dice the data in order to quickly find the root causes of issues and identify appropriate solutions.
12. Secure IP
Data security is an area of consulting that is vastly overlooked despite the data breaches that have occurred in several industries within the past few years. Consultants today may be overlooking the potential breaches of their clients’ data exists solely on spreadsheets and hard drives, which are notoriously insecure.
Not only is client data susceptible to malicious attacks, but it can be easily misplaced or lost when an employee leaves the firm. Data stored in a central cloud can be far more easily monitored and its usage tracked.
Related: What is innovation consulting?
What Consultancies Have Said
We aren’t the only ones talking about this. Here’s some leading consulting firms and their opinions, with links to sources.
Accenture
Accenture, a 9Lenses client, said in their 2017 Digital Transformation Initiative collaboration with the World Economic Forum notes that in order to be successful, transformation must be all-encompassing. Businesses must become digital enterprises that rethink not just their operations but also their business models, talent acquisition, and metrics for defining success.
“Disruption may not be bankrupting incumbents, but to succeed in the digital era, they will need to become digital enterprises, rethinking every aspect of their business.”
World Economic Forum, “Digital Transformation Initiative in Collaboration with Accenture, 2017”
Deloitte
A study by Deloitte, another 9Lenses client, highlights the need for efforts towards culture transformation, risk taking, and intentional effort to transform.
“[P]rivate and mid-market companies need to explore new portfolio approaches, in which innovation is happening in a variety of different contexts and failure is encouraged provided it offers opportunities to learn.”
“[C]reating an effective digital culture takes an intentional effort. Digitally maturing companies are constantly cultivating their cultures, by engaging in efforts to bolster risk taking, agility and collaboration.”
Deloitte, “Digital Disruption in 2017”
Bain and Company
A study by Bain found that majority of companies are not achieving the payout they expected from their digital transformation efforts. As a result, leaders are often reluctant to fully embrace the transformation. Many end up underinvesting in the kind of broad changes necessary to truly transform.
“The true digital leaders pull away from the competition by linking a bold strategic ambition to the specific inner game capabilities and behaviors that they will need to achieve it. First they translate their strategy into a clear set of digital initiatives that point the organization toward a clear vision of full potential. Then they invest heavily in the fundamental changes to their ways of working and culture that allow them to develop those initiatives rapidly and execute them at scale.”
Bain & Company, “Orchestrating a Successful Digital Transformation”
Boston Consulting Group
According to a guide to digital transformation by the Boston Consulting Group, success in digital transformation starts at the top and must be organization-wide.
“The success of a transformation depends on an organization’s leaders, especially the CEO. In digital transformations, the CEO is even more critical because of the magnitude of change, the degree of disruption, and the power of inertia.”
Boston Consulting Group, “A CEO’s Guide to Digital Transformation”
Microsoft & Forrester
In a study commissioned by Microsoft, Forrester found that organizations that do not build out a full digital transformation strategy are unlikely to succeed. Silos are of the biggest barriers; transformation must be cross-functional and technology thoroughly integrated.
“Not taking the opportunity to fully embrace transformation presents challenges. Those pursuing a limited digital transformation strategy — Bolt-Ons — tend to focus on smaller, more tactical initiatives, seeing digital as a project. Meanwhile, those that embrace the full possibilities of digital transformation to reinvent their companies — Transformers — understand digital is more comprehensive, and they focus on shifting the entire business culture.”
Forrester, “Accelerating Digital Transformation with Technology”
Capgemini
Capgemini highlights the importance of culture transformation in digital transformation. Collaboration must be consistently encouraged, and creating a consistent mindset is key.
“Digital technologies can bring significant new value, but organizations will only unlock that potential if they have the right digital culture ingrained and in place.”
Capgemini, “The Digital Culture Journey:All On Board!”
Harvard Business Review
A recent Harvard Business Review article found that companies that have top-driven digital efforts are more successful.
“Overall, the companies that give CIOs a seat at the table, make IT a part of their strategy, and realize that the fate of their IT investments and business goals are intertwined will be most ready to face the challenges of tomorrow — and the next decade.”
Harvard Business Review, “How the Meaning of Digital Transformation Has Evolved”
Gartner
According to Gartner, the key to digital transformation is building digital dexterity throughout the entire organization.
“[T]he key to speeding through the trough of disillusionment and creating value at scale is all about people.”
Gartner, “Embrace the Urgency of Digital Transformation”
Institute for Digital Transformation
The Institute for Digital Transformation emphasizes the comprehensiveness and urgency of digital transformation. But the ultimate goal of digital transformation for every business is simple:to grow the business in a digitally evolving world.
“The ultimate goal of digital transformation is the growth and sustainability of your business. Plain and simple. Your company has to transform in order to survive. Your customers, your business ecosystem, your competitive landscape, and your employees are rapidly changing – and the pace of that change is accelerating. This isn’t about making slight adjustments. It requires a true, focused transformation affecting every aspect of your business.”
Institute for Digital Transformation, “Digital Transformation: It’s About the Business!”
