As the consulting industry changes will you be the disrupter, not the disrupted?
Will you be the disrupter, not the disrupted? This is the question that came to mind as I read Consulting on the Cusp of Disruption, by Clayton M. Christensen, Dina Wang, and Derek van Bever, in the October 2013 issue of the Harvard Business Review (HBR). With an online subscription, you can read it here.
Disruption means industry leaders are responding to the changes in customer demands and global economics by making fundamental changes in their approach to services, service delivery, engagement models, and the economic model on which their industry is based.
As an example of disruption, the HBR authors open by discussing the McKinsey & Company move to develop McKinsey Solutions, an offering that is not “human-capital based”, but instead focuses on technology and analytics embedded at their client. This is a significant departure for a firm known for hiring the best and the brightest, to be tasked with delivering key insights and judgement. Especially when the judgment business was doing well.
The authors make the point that the consulting industry has evolved over time.
Generalists have become Functional Specialists
Local Structures developed into Global Structures
Tightly Structured Teams morphed into spider webs of Remote Specialists
However, McKinsey Solutions was not evolutionary. In its way, it was a revolutionary breakthrough for McKinsey. While McKinsey Solutions’ success meant additional revenue for the firm, and offered another means of remaining “Top of Mind” for the McKinsey Solutions’ client, the move was really a first line of defense against disruption in the consulting industry. By enjoying “first mover advantage” McKinsey protected their already strong market position, and became the disrupter, not the disrupted.
What is the classic pattern of disruption?
According to Christensen, et al,
New competitors with new business models arrive; incumbents choose to ignore the new players or flee to higher-margin activities; a disrupter whose product was once barely good enough achieves a level of quality acceptable to the broad middle of the market, undermining the position of longtime leaders and often causing the “flip” to a new basis of competition.
Cal Braunstein, CEO of The Robert Frances Group, believes that IT needs a disruptive agenda. In his research note, Cal references the US auto industry back in the happy days when the Model “T” completely disrupted non-production line operations of competitors. But when disruption results in a workable model with entrenched incumbents, the market once again becomes ripe for disruption.
That is exactly what happened to the “Big 3” US automakers when Honda and Toyota entered the US market with better quality and service at a dramatically lower price point. Disruption struck again. Detroit never recovered. The City of Detroit itself is now bankrupt. Disruption has significant consequences.
Industry leaders may suffer most from disruption
In his work “The Innovator’s Solution” HBR author Clayton M. Christensen addressed the problem of incumbents becoming vulnerable to disruption, writing
An organization’s capabilities become its disabilities when disruption is afoot.
The disruption problem is worse for market leaders, according to Christensen.
No challenge is more difficult for a market leader facing disruption than to turn and fight back – to disrupt itself before a competitor does… Success in self-disruption requires at least the following six elements:
An autonomous business unit… Leaders who come from relevant “schools of experience”… A separate resource allocation process… Independent sales channels… A new profit model… Unwavering commitment by the CEO…
So, it will be tough to disrupt yourself if you are big, set in your ways, and don’t have the right CEO.
Being the disrupter, not the disrupted
The HBR authors characterized three forms of offering consulting, ranging from the traditional “Solution Shop” to “Value-added Process Businesses” and then to “Facilitated Networks”. The spectrum ranges from delivering pronouncements from gifted but opaque expert practitioners charging by the hour through repeatable process delivery charging for delivered results to dynamic and configurable collections of experts linked by a business network layer.
In my experience, the expert network form is the most flexible, least constrained, and most likely to deliver value at an exceptional price. It is at once the most disruptive, and presently the least likely form to be destabilized by other disruptive initiatives.
The Bottom Line
If you are in the consulting industry and you don’t recognize that disruptive forces are changing the industry and your market’s expectations as you read this, you will surely be the disrupted, not the disrupter.
On the other hand, disrupters can be expected to provide a consulting service that will deliver much more value for a much lower price point. We are talking here of more than a simple process improvement 10% gain. It will be a quantum jump. Like McKinsey, that may come from embedding in some new solution that accelerates the consulting process and cuts costs.
Now is the time to develop situational awareness. What are the small independent competitors doing? Yes, the little firms that you don’t really think will invade your market and displace you. Watch them carefully, and learn before it is too late. Those readers who man those small, agile, and disruptive firms should ensure they understand their prospect’s pain points and dissatisfaction with the status quo. As physician Sir William Olser famously said “Listen to your patient, he is telling you his diagnosis”. Do it now!