10 simple keys to decipher the new Management Consulting

Key Takeaways

In the US, Micro-Consulting firms represent 87% of all consulting firms. However, the remaining 13% of Consulting firms with over 10 employees generate more than 90% of the total revenues in the industry.

Consultants now strive to stay on the cutting-edge of knowledge. But by evolving and enhancing their expertise

Transcript

Hello and welcome back to Smart Consulting Sourcing, the only podcast about consulting procurement.

I am Hélène and today we will be talking about the transformation of the management consulting market. But before that, let me give you a recap of last week’s podcast.

I talked about how the top 5 spending industries are leveraging consultants.

?  Podcast | How the top 5 spending industries are leveraging 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. And by looking at how they leverage consulting, you can learn how to do it in your industry and your organization.

However, this week, I wanted to talk about the transformation in the management consulting market.

The management consulting market is resilient

Consulting has always followed the ups and downs of the economy. The industry is quite adaptable and has been through rough phases but always recovered.

It will probably be the case again after the pandemic crisis. Actually, according to Source Global Research, “the preliminary numbers for 2021 suggest the year was one of exceptional growth, with revenues increasing due to a combination of pent-up demand from 2020 and a wave of investment from clients that have emerged from the crisis with more ambitious corporate goals.”

But talking about the transformation, the change had already started before 2010, and the wave will continue to strengthen and profoundly modify the industry. Let’s have a look at what’s happening in the management consulting industry right now.

What about now?

So, when you think about direct purchasing, would you source from the local neighbors or take advantage of the global marketplace. Would you always use the same suppliers? You would probably play with some competition to ensure you get the best supplier.

Consulting abides by the same rules, and the supply options are almost unlimited once you get to know the market.

Another good way to approach the complexity of the management consulting market is to look at the size of the consulting providers. As a rule, large firms offer a broad range of services, while small firms specialize in a narrow domain.

The bulk of the consulting providers is tiny boutiques with less than 10 employees. In the US, for example, they represent 87% of all consulting firms. However, the remaining 13% of Consulting firms with over 10 employees generate more than 90% of the total revenues in the industry.

In recent years, the management consulting industry was shaped by 3 major trends: Digital transformation, Technological disruption, and Cultural shifts within the industry due to globalization. Right now, the future holds exciting promises as well.

The expertise topics offered to Clients expand and multiply even further in niche markets. Digital agencies and Consultants’ capabilities, for instance, further overlap, as they provide converging expertise.

A market active on the M&A front

Let’s talk about all the mergers and acquisitions, as an exciting trend going on for the past 15 years or more. Since 2006, the consulting industry has observed roughly 500 yearly acquisitions or mergers of management consulting firms of all sizes by more prominent players in the Management Consulting Industry.

The reasons behind these moves can be to access a new client base, venture into a new capability or a new industry, or strengthen an existing practice. The Consulting Landscape reflects that continuous M&A activity.

It is also a way for partners to monetize their relationships with a nice payday every couple of years. So they sell, continue as part of the new firm and start again a few years later.

Compared to the average, the Management Consulting Industry has 60% fewer small firms between 10 and 50 employees and almost three times more firms with over 500 employees.

The Consulting Industry is clearly a large market with robust growth. All thanks to the globalization transformation.

Some interesting trends in the management consulting industry

If we talk about different levels of consulting, it’s interesting to note that the scope of “consulting services” continues to expand. The top-level offering is a highly skilled advisory with a proven reputation and higher fees.

The 2nd level of Consultancies is made of specialty niche technology services that have a specific price range. And the 3rd level comprises highly skilled niche experts hired on specific projects. Consulting firms are now also venturing into the learning space, offering programs competing with business schools.

And we are all familiar with the growing trend of freelance services; the transformation has helped Micro-Consulting firms and freelance consultants to rise to new heights. The concept refers to getting expert help, in short, targeted projects for clients. So it differs from a months-long engagement and a team of Consultants working together.

It’s also interesting to mention that according to recent surveys, most Freelance consultants like to stay independent and enjoy the flexibility of their work.

On the other hand, the freelance economy continues to affect the consulting industry as well. Online marketplaces for consultants and available experts offer Clients a multitude of choices when they need expert advice.

You can also find methodologies and training online for do-it-yourself models that become non-consumption for the Consultants.

But, why should the transformation let consultants have all the benefits? Right? It has also shaped a path for new billing models to emerge out of the shadows: More and more clients now have the technological capability to slice and dice every expense.

And they can analyze their spending on Consulting while evaluating the ROI. Performance-based billing is also popular among consultants… and clients.

These pricing styles can prove mutually beneficial to Clients and Consultants alike, reducing the chance of unexpected fees and setting up a well-defined benchmark for Consultants to prove the value they bring.

In conclusion,

The fast pace of innovation is affecting all industries. Consultants now strive to stay on the cutting-edge of knowledge.

But by evolving and enhancing their expertise, Clients are not the only beneficiaries of this trend. Consultants are, too, since they can build better portfolios and ensure long-term success.

The flexibility of the gig economy also brings consulting firms and client organizations alike access to expert knowledge in a very short period. Consulting is growing beyond its initial boundaries and reshaping its offerings. Exciting times indeed.

And that marks the end of our podcast, folks. Next week, I’ll talk about the negotiation of consulting services. So, stay tuned.

Till then, stay safe and happy sourcing!

If you have other questions about the transformation of the consulting market, 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!

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