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Eating Their Lunch

Why strategy consulting is next on the menu

28Jan

Historically low entry barriers to starting a business and virtually unlimited access to technology have enabled small business and startups to disrupt entire industries in a matter of years. But what’s next? This concept has been the subject of much discussion around Treeveo. So we decided to do some research and put together a whitepaper to find out is a disruption of consulting is taking place. Here is a brief introduction of what we think is happening.

What's on the menu?

Industry dino’s have lost a major share of their revenue, or have even disappeared by failing to keep up. This has happened mostly in industries where services or products can be commoditized through technology. Large technology companies have disrupted or even created entirely new industries. You may think of a couple of the most obvious examples yourself. But now that the markets with “low-hanging disruptive fruit” have already been had, change is coming to markets whose tight regulation or heavy opposition from labor unions have managed to resist disruption to date. Here are a couple examples.

PRIVATE TRANSPORTATION

The recent introduction of Uber has stirred a storm of protests from taxi drivers. Uber’s strategy is to gain enough mass so that regulations ultimately have to be changed under popular pressure.

SHORT-STAY ACCOMMODATIONS

Airbnb has been very successful exposing a hole in the market. In many international cities, the previously tight regulations in the rental sector have been legitimized to allow rooms or apartments to be rented for up to 4 persons.

Disruption of consulting

Besides the labor unions and tightly regulated markets, there seem to be some industries that have not changed their underlying business model in over 100 years, most notably consulting and law. Clay Christensen has focused his work on why these industries have not yet been disrupted, and has mapped out the pattern of the disruptive process.

The consulting market has been resistant to disruption because of widespread market intransparency. Christensen found that intransparency has disabled customers to judge a firm’s performance in advance because they’re hiring an outsider with knowledge that they themselves lack. However, disruptive forces from other markets are slowly – but surely – trickling down to the consulting market. Companies are gaining knowledge because they’re hiring the consultants that were previously consulting for them with the large firms. Additionally, customers are becoming increasingly cost-savvy by cutting up the process and in-sourcing roles that they can do themselves. In the near future, the $500+/hour consultants will no longer handle the full strategy process from formation to implementation.

Some consulting firms have already recognized this and have specialized in high margin niches that others choose to ignore. Do you recognize the pattern? This is creating exposure in the middle market for tools and resources that add similar – or more – value for a fraction of the cost, and it’s in these middle markets where the masses lie.

Consulting firms may find safe haven in the exploitation of IT-tooling. Strategie execution tools like Treeveo  allows both customers and strategy consultants to communicate and track their strategy implementation. This is the gateway for strategy consulting firms to deal with increasing cost pressures and changes that are trickling down to the consulting market from their client’s markets. Treeveo, along with other initiatives, are attempting to remove the market’s price and quality in-transparency.

The long-term outlook

Christensen stated that the increased access of firms to big data and data analysis will level the playing field as information becomes more democratized. This makes further knowledge specialization a risky strategy for consulting firms.

Disruption in the consulting market will ultimately come from new consulting firms deploying more flexible organizational structures such as a flexible layer of freelance consultants, reducing unstaffed time of human capital, and offering similar quality against a lower price. Consultancies are also increasing leverage in IT to distinguish themselves from competitors. Performing additional services, such as big data analysis, or cost-effectively tracking strategy implementation with customers is part of the expanding services of these consulting firms.

This article originally appeared on Treeveo.com

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