Innovation and customer demands are two of the most difficult aspects of consulting. Two decades ago, consulting firms such as McKinsey, Boston Consulting Group, and the Big Four had exclusive knowledge and advice on best practices, making their offering invaluable. Nowadays, much of this information is available online for those who are willing to research. In addition, former students of top-tier consulting firms are now widespread, meaning their experience has been disseminated throughout the industry.
As customers are more willing to seek consulting services, they will have more influence than in the past and demand greater value and flexibility at lower prices. In a Deltek survey, 54% of chief operating officers said that their biggest challenge caused by the “change in customer behavior” was to provide more value at the same cost. In another Deltek survey, researchers surveyed consulting executives about how they think they could increase the company's profitability. Increased scrutiny over cost control came first, followed by the improvement of working capital through better management of incoming and outgoing flows, and the limitation of the number of budgetary cost overruns on projects, especially in the case of fixed-price projects. Driven by new innovative technologies that allow them to do more with less, new players are entering the consulting market and alternative, digitally savvy business structures are being implemented. In the Deltek survey, 55% said that addressing growing competition in the industry was a top business priority, while 33% of chief operating officers said that “defining competitive advantage was one of their top three priorities for the next five years.
Boutiques and specialty firms aren't the only form of competition that's on the rise. The increase in the number of independent consultants is also proving to be a major competitive force. In the UK, there are now more than 2 million self-employed workers and that number will continue to grow. Most of these independent consultants work in the field of professional services, consulting and project management. They are putting pressure on prices because they operate without the same overheads as larger companies and can charge well below what established consultancies can charge.
Today, in the United Kingdom, a fifth of the more than 10 billion pounds sterling in management consulting jobs goes to independent consultants. Elsewhere, at the top of the market, the biggest players only grow. The ten largest consulting firms in the world now have a 56 percent share of the industry, while the top 200 own around 80 percent. Both percentages have been rising since the turn of the century, driven by the Big Four and the growing number of operations in the industry as a means of growth. As a result, the professional services sector is facing increasing “medium pressure”, as companies too large to be considered specialists and too small to compete in the highest positions are under significant pressure. The complexity of projects also comes with a cost.
It makes it more difficult for project managers to plan ahead, which means that the volatility of their resources has increased. It can also put a company's results at risk, as unplanned changes are often required at the end of a project. 71% of respondents admitted to Deltek that they are not paid for all change requests they have either because customers refuse or because they have strategically decided not to transmit them. In Europe, the introduction of General Data Protection Regulation (GDPR) last year placed more emphasis on doing cybersecurity well. In addition to entailing serious economic sanctions, negative publicity would harm companies' reputations and could affect their ability to get jobs in future.
Many consulting firms have already suffered consequences from not complying with GDPR resulting in hundreds of thousands pounds in fines and loss of current and future contracts. Embracing digitalization and automation involves more than just using technology. Software engineers introduced us to “Agile” (or “Lean”) methodology based on Agile Manifesto which prioritizes people over processes, collaboration over negotiation and responding to change instead of following a plan. Companies will have to use wide range of marketing strategies to adapt to growing market challenges move forward and stay on top. Instead I urge consulting firms to bundle their expertise into content designed to help their potential customers overcome their challenges and share it widely on web. This new definition of marketing which uses consulting knowledge and experience to help clients overcome their challenges is natural extension of what companies are already doing as consultancies.
With right mindset and right tools consulting professionals will be well-equipped to address challenges modern business landscape. According to industry report by Deltek “Insight to Action: The Future Of Professional Services Industry” consulting practices must consider strategies to address these challenges if they want continue succeed. However despite this growth there are growing number challenges consultants face. Looking ahead more than half consultants surveyed (52%) believe increasing complexity projects will be main challenge for project management next five years. Among challenges faced by consulting firms there is one general challenge stands out above rest: delivering project faster more efficiently with tighter budgets while still meeting customer needs. To remain competitive in this ever-changing landscape it is essential for consultancies to stay ahead of trends by innovating new ideas that meet customer demands while still providing value for money. Companies must also embrace digitalization and automation through Agile methodology which prioritizes people over processes and collaboration over negotiation.
Additionally consultancies must ensure compliance with GDPR regulations or risk facing serious economic sanctions or negative publicity which could harm their reputation or ability to get jobs in future. Finally it is important for consultancies to bundle their expertise into content designed to help their potential customers overcome their challenges and share it widely on web as part of their marketing strategy.