Is the traditional consulting model still relevant or is there a better way?
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Having previously worked with external consultants during my corporate career and now leading a management consulting practice during an pandemic and economic downturn, I have discussed with many clients the extent to which the traditional consulting model is being disrupted. All this reflection reminds me of one of my favourite Dilbert cartoons on the consulting profession.
I remember reading late last year that advisory services in Australia would turnover over close to $6b in 2020 with an ongoing compound annual growth rate of 7%(1). I wonder what today’s revised forecast would be? If advisory services are a part of the solution, surely now, more than ever, leaders are looking for trusted advice on how to navigate the toughest environment in our lifetime? But can they afford it.
In addition to industries like insurance and financial services, which have traditionally leveraged management consulting services, sectors like health are now also looking for assistance due to increased demand and operational challenges. The longer restrictions are in place to combat the community spread of COVID-19, the more likely the associated shifts in consumer behaviour will become permanent. This is creating a need for organisations to quickly respond to these changes, but also an opportunity for truly customer-focused organisations to thrive.
Adapting operating models
Clearly organisations are under pressure to reduce costs and focused on short term business continuity plans. However, there are also companies recognising the opportunity to be agile and bold, taking a strategic approach. They could come out the other side stronger, with a better culture, offering new and innovative services for their customers. Just look at David and Goliath; the corner coffee shop to Bunnings. Both have shown leadership and courage to transform how they serve customers in a safe and innovative way while protecting their employees. They have influenced government and health authorities by adapting their operating model, winning the hearts and minds of their customers
Issues confronting businesses before COVID-19 haven’t gone away, they are now just magnified. So, if leading a business is more challenging than ever before, but costs are under mounting pressure due to the associated economic slowdown, is the traditional consulting model still relevant, or is there a better way?
Having held several client-side CEO roles, I have been privileged to work with many tier one consulting companies and some of the smartest people I have ever met. They have provided fresh and independent strategy and problem solving, shared their global benchmarks and case studies, built beautifully crafted and compelling fact-based strategies and business cases. However, I, like many business leaders, sometimes questioned the fundamental value proposition.
Did the high cost of the service lead to sustained benefits for the organisation?
Ever thought about the high day rates for consultants, many of whom have never worked in business and have less experience than you and your team?
Often the lead consulting partner you have engaged, and are paying for, spends minimal time on the project. Instead high rates are charged for more junior staff, to fund the consulting company’s partner remuneration model. These less experienced consultants, often new to the category, can over engineer analysis, rely solely on data, often replaying the clients view of the issues and solutions, rather than discovering new, unique insights and pragmatic actions.
Don’t judge me until you’ve walked a mile in my shoes
It is also hard for career consultants to fully understand the internal context, dynamics and culture of their client. I think the phrase “Don’t judge me until you’ve walked a mile in my shoes” equally applies in business. Leadership teams today need to be across every aspect of their business and manage a growing list of stakeholders, with expectations from board, shareholders, consumer groups, customers, staff, competitors. Then there is the need for greater regulatory and risk oversight. And that was before COVID-19, decentralised work forces and new cultural challenges that are here to stay, for better or worse.
The corporate restructure treadmill
Lack of client-side experience can lead to solution design that is predominately cost focused, has not considered culture dynamics or the competing priorities in a complex and changing environment. How many times have you seen the external consultant's restructuring proposal destroy value by exiting of experience and capability, decimating unique muscle within the organisation. A couple of years later those roles are re-hired, re-trained and the costs return, driving the corporate restructure treadmill.
I have now been on the other side of the fence for a couple of years and that has only reinforced my views. The cost of the traditional consulting model must be under more scrutiny than ever before.
A low-cost value model for consulting
What could a low-cost value model entail? There are two key components in any value equation: quality and cost.
Quality advisory comes from consultants that can unearth key insights, developing strategies, problem solving, stakeholder management and executing solutions. However, engaging the right people, not just the board and senior leaders, is still an underappreciated consulting skill. How do you know if the solutions you are developing will work, if you don’t collaborate and test with those that will be responsible for implementation?
Engagement of key influencers and leaders deeper in the organisation builds acceptance of change and avoids the all too familiar “approved board paper” that no one supports and can’t be executed.
Experience client-side increases capability and intuition in all these critical areas.
The Triple Play
These practitioners can look at the issue from three dimensions; culture, customer and commercials. I call this the 'Triple Play' (fig 1) and believe that the most important of these three dimensions is people and culture. I will have to leave this topic for another opinion piece, but a philosophy of ‘happy staff, happy customers and happy shareholders’ has brought success to many organisations. I am yet to see a company with a poor culture and unhappy customers thrive and create lasting enterprise value.
fig 1. The Triple Play (2)
(2) Triple Play is The Bridge International’s model approach to strategy development and problem solving.
Only pay for what you get?
In my view, the client should only pay for the consultants that are working on the project. In the traditional tier one model, daily rates can be exorbitant, as they need to cover the project's distribution fee to other partners in the firm. Could you call this a pyramid scheme?
In addition, this margin must cover high overheads, including some of the most expensive commercial real-estate leases in the city. Does this prestigious address add value to the client, as they are paying for it? Would the client have made the same decisions in their own business to pay staff for work they didn’t participate in or for the overheads that their customers would consider excessive when built into the pricing of their services?
In the value based model, there is no margin added for partner distribution fees or expensive real estate. This results in lower day rates, often with more relevant and experienced consultants on accounts, who have walked in the shoes of their clients.
Fast track problem solving and solution design
High performing consultants should be able to fast track problem solving and solution design because of their intuition as well as their ability to focus on the data and analysis that really matters, reducing the cost and length of an assignment. This again comes from experience.
Most businesses strive for the best quality service at the lowest possible cost. Savings of up to 40% - 60% can be achieved by a fairer and more transparent value-based model, whilst delivering high quality business outcomes, as opposed to high quality produced PowerPoint packs..
I now believe the traditional consulting model is broken and organisations will increasingly migrate to a more transparent, lower cost model, based on experienced consultants and practitioners offering better value for money advisory services.
Hopefully this will see Australian corporations supporting home grown advisory firms, rather than just favouring the US originating, global practices.
For complete transparency, I decided to walk the talk, continue my passion for building challenger businesses and left corporate life to co-found ‘The Bridge International.’ This management consulting business is based on low cost value model principles.
I hope this article creates a constructive conversation about the future of an industry that employs over 15,000 people in Australia (1). A healthy and innovative professional services model will in turn continue to help businesses of all shapes and sizes grow profitably and employ even more Australians. I look forward to hearing your views.
Stuart Blake: MD and Co-founder The Bridge International
The Bridge International - ‘An alternative, innovative and non-traditional approach' We're the Bridge between where you are and where you want to be
The Bridge International is a non-traditional management consulting team operating in Australia and internationally, with deep client-side experience within the financial services and other industries.
We pride ourselves on being practitioners; experienced executives that have worked successfully in business, rather than career consultants.
We have built a fairer value model of advisory services that offers better outcomes at a lower cost for our clients. We achieve this by fast tracked discovery, insights, strategy and problem solving as well as helping execute pragmatic solutions that drive real value.
We believe in ‘progress not perfection’ and our Triple Play philosophy ensures that you always get the whole picture – culture, customer and commercials. Our services span strategic advisory services, customer and operations, commercial, culture & risk and program delivery.