Hello and welcome back to Smart Consulting Sourcing, the only podcast about consulting procurement.
I am Hélène and today we will be talking about how the top 5 spending industries are using consultants. But before that, let me give you a recap of last week’s podcast.
I shared my thoughts on how consultants bring a significant amount of value to the project that they are hired for.
And that value can be defined along two dimensions which are Technical value and Political value.
The technical value is often linked to the in-depth expertise the consultants can bring, and most operational projects fall into that category.
The political value is more difficult to appreciate. But anyone that has been around for a bit knows the importance of company politics. In troubled times, Executives can look for support to legitimate a decision, enforce unpopular changes, or be the scapegoat. It can also take the shape of facilitating the convergence between the stakeholders or acting as a sounding board.
But it is important for procurement and their internal stakeholders to be clear on what value they expect on a project to refine the requirements and identify the consulting firms that can deliver on that value.
👉 Value Created by Consultants
However, this week, I wanted to talk about how the top 5 spending industries are using consultants?
Actually, the spend on consulting is closely related to the magnitude of the changes and disruption happening in an industry or a function. It shows that, indeed, executives turn to consultants to support them in solving some strategic issues.
Today, the top 5 spending industries in consulting are Financial Services, Public Sector, Health & Life Sciences, Manufacturing, and Energy & Environment. So let’s have a closer look at what is happening in these industries.
How is the financial industry using consultants?
The first one is the Financial Industry, which is traditionally one of the largest users of Management Consulting.
From Banking to Insurance or Wealth Management, the industry faces unprecedented challenges from both traditional and tech players.
New technology is enabling new business models and rendering old platforms obsolete. Besides, most companies are shifting from a product to a customer-centric model.
Being customer-centric is not just about listening to how your customers want to interact with you but about understanding what they value beyond your products and services, so your company can identify the whole brand-customer relationship and further develop in meaningful ways.
The big winners in Fintech disrupting the industry are those who operate from an end-user perspective rather than a product perspective.
So how does that translate into consulting projects?
It could be designing a new incentive scheme for the commercial branch to drive customer and value-oriented behaviors in Retail Banking. Another one would be building a roadmap to modernize the business model from implementing self-service to sharing capabilities across businesses and digitizing processes to spur efficiency in Capital Markets. A company might want to benchmark the IT performance and investment priorities amongst Asia-based Insurers. And there are always reviewing the Risk Function Operating Model to increase agility in Banking!
The public sector is a major client for consulting services
Coming to the second industry which is the public sector, namely government and administrations, a very large segment of the consulting industry. The types of consulting projects can vary greatly depending on the level of development of the countries. Governments in all economies ask for help to drive national investment strategies or fiscal policies favoring economic development.
They also need support to analyze and anticipate complex situations like the Brexit, for example (according to Sky News, Britain spent £75M with the largest consulting firms for Brexit preparation)
Many developing economies need support to manage large infrastructure projects. Western economies leverage consultants to drive the simplification and productivity initiatives in public services. In recent years, the pressure is mounting on Governments the reduce the cost of consulting engagements. Even the IMF recently recommended for developing economies to reduce the utilization of Blue-Chip consultancies. Actually, while I am speaking, both in France and the US, some senators are questioning the use of consulting by the government.
Let’s have a look at a few examples, shall we? Sometimes the government needs actionable advice to support its efforts in accelerating economic development. Or it could be designing the end-to-end logistics process for a ministry of defense. An Asian government could be looking for help in developing policies and strategies to support Fintech and financial inclusiveness. Or a commission or association an expert analysis in case of potential Antitrust situations.
Now Health and Life Sciences
Third industry is Health and Life Sciences, in its largest definition, and it represents a good portion of consulting industry demand. This significant share is indeed no surprise if we take a better look at it. Pharmaceuticals, Medical Technology, Healthcare payers, and delivery systems are experiencing invigorating changes and face several challenges as well.
Healthcare costs are exponentially growing in many countries. In the US, they are close to 20% of GDP. Healthcare Payers are under pressure to reduce costs while providers need to increase their efficiency. Pharmaceutical companies have to navigate vast R&D portfolios as their shareholders expect significant returns.
Besides, they have to deal with a complex ecosystem that includes a challenging tryptic user (patient), prescriber (physician), and a third party (payer).
For instance, a Healthcare company might need help to develop strategies to accelerate the shift from Volume to Value. A Pharmaceutical Strategy group will ask a consulting firm to create an M&A Pipeline to refresh and dynamize innovation. A healthcare Payor might want to build actuarial models to optimize growth vs. profitability. Or a government Transform a national healthcare system to ensure better coverage of citizens.
The manufacturing sector is using consulting to increase competitiveness
Now coming to the manufacturing sector that also makes a significant share of consulting investments. Manufacturing must be noted, is made of several distinct industries, rarely mentioned as such. Our definition of manufacturing includes Automotive, Aerospace, Consumer packaged goods, Electronics, and Process industries.
All these industries are facing growing headwinds, competitivity challenges, and an aging workforce. They are also challenged to embrace new technologies that can completely disrupt their value chains.
Furthermore, as the national economies become more global, we also observe regional customization and personalization of products and services. This phenomenon leads to an acceleration of innovation cycles and a growing complexity to manage. Last but not least, the wage gap between Western and Eastern economies has reduced with more possibilities for automation at an affordable cost.
Most companies are rethinking their global footprint and supply chain to adapt to tomorrow’s challenges. They might want to scan the Manufacturing Start-up ecosystem to identify the right partners to reduce maintenance costs or implement a new procurement framework and systems to operate seamlessly with strategic suppliers. It might take the shape of embarking all manufacturing plants in a transformation mixing lean and digital for a motorbike company or leveraging Concurrent Engineering and Spiral Development to reduce costs and shorten development times with late customization in Aerospace.
Finally the Energy sector
Last but not least is the energy and environment sector which is closely linked to the public interest. Oil and gas, energy, utilities, renewable energy are at the center of intense dialogue between the public and public interest groups and private companies operating in this space.
Companies in Energy and Utilities face increasing customer demand, high capital investment, increased competition, and more stringent regulations. In contrast, companies in Oil and Gas continue to cope with the new “normal” like lower prices, higher volatility, and shorter cycles.
Most companies focus their efforts on maximizing their investments’ short-term returns, improving resource productivity, and lowering total operating costs.
An interesting new trend is the growing utilization of data analytics to support operations and leverage the massive amount of data available.
What could projects look like?
That could be leveraging IoT to increase network reliability thanks to predictive maintenance or mapping the value pools post-crisis in Unconventional Oil & Gas. Other can be redesigning commodity trading systems to speed up decision-making while managing risks or lastly using big data analytical techniques to maximize returns in Energy Retail.
Of course, this is just a glimpse of how to leverage consulting to increase your competitive edge and accelerate your transformation. The trick is to cherry-pick the projects that make sense and build your own consulting strategy.
And that marks the end of our podcast, folks. Next week, I’ll talk about the transformation of the management consulting market. So, stay tuned.
Till then, stay safe and happy sourcing!
If you have other questions about how companies can leverage consulting to accelerate their strategy, remember you can contact me directly on LinkedIn or by email because I am always game for a chat!
Bye and see you next week! Au revoir!