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17/02/2016 Back

Who wins in today’s consulting market?

Garden fencing contractors or landscape designers? This allegory of Michael McLaughlin (Thriving in the chaos, Mindshare Consulting LLC) reflects what differ consulting services and shows where potentials for the future of consulting and the value for customers in the use of consulting firms are located.

How to differentiate consulting firms

Consulting firms traditionally and most commonly differentiate through expertise (skills and services in a particular area). When contemplating an engagement of a consulting firm, it is critical to differentiate between the types of firms in existence. The term “consulting” is used to cover a wide array of activities, so the work you will undertake with various types of consulting firms can be quite different. This can have major impact on your project success. Breaking the consulting industry down into strategy consultants, consultants specializing in functional topics such as marketing, sales or production or IT consulting and full-service firms allows for a rough distinction and differentiable positioning. There are also major differences between the capabilities of small and large firms when it comes to market presence, branding, and number of consultants or delivery capacity, respectively.

But is this really what the customer needs to find the right consultant? Any first search for consulting companies ends (almost always) in a very wide range of potential consulting firms that are suitable for a project. Because all these consulting firms most probably will demonstrate the expertise one has come to expect from high caliber management consultants in a particular (the searched for) area. But it is still difficult for clients to see which consulting firm is compellingly different and perfectly right for them or the project, respectively. To be able to distinguish the capabilities of different consulting firms, clients have to consider what business the firm is in, what services it provides, and how it delivers and communicates those services in such a way to demonstrate that it's compellingly unique.

Less demand for routine work

Nowadays consulting clients have several options for handling the work that consultants have been doing for them. Routine work or “standardized consulting services” such as business analysis, process management or application development are either done by the clients themselves or, based on the large number of available suppliers, awarded to the cheapest provider or can even be handled by sophisticated software tools.

Best price-performance ratio

For many standardized (“commoditized”) consulting services the market is saturated, i.e. consultant supply exceeds the demand. In addition, for such services new and innovative offerings of existing or “industry-near” consulting companies arise outside the traditional project-based model, supported by software and technology-based analytics and tools (“asset-based consulting”). These business model innovations allow consulting clients to choose a “best-of-breed” approach: The best solution for the best price.

Added value by solving undefined problems

There are consulting clients who are looking for support for defined problems and challenges. In these cases, the customer knows both: the problem and the solution (“the garden fence”). The consulting client is looking for a consultant which is able to offer the defined solution. There is nothing to object, this kind of demand and supply will still exist in the consulting market. However, the price will play a big role in the selection of the service provider.

The situation is different if the customer doesn’t know the solution to his problem. A consultant must in this case be able to show the client the way to solve the problem, clarify conceptual and methodological issues in early stages of the project and develop a tailored solution which is most suitable for the customer. Not all consulting firms are able or want to offer these types of services – they require a lot of knowledge, extensive experience and solid “project design” capabilities in order to help clients figure out what they need and lay out a project plan. The added value of the consultant goes beyond mere service delivery (or implementation of defined solutions), consulting firms elevate the value they offer by being solution providers (“landscape designers”).

(Even) more transparency needed

If the selection and evaluation of a consulting firm for complex projects initiatives cannot be solely based on the consultant’s professional skills and specialization (so to speak, the “technical WHAT”), but must involve the assessment of the consultant’s problem-solving skills (so to speak, the “methodological HOW”), transparency about which consulting firm perfectly fits is even more difficult to gain. Because a consultant’s brand recognition and brand reputation, international footprint or specialization does not yet reveal anything about a consultant’s abilities to act like a “solution designer”.