Business models: the client view

Is the consulting industry guilty of talking too much to itself?

There are times I think firms’ big and on-going debate about business models are starting to sound like therapy sessions. Still traumatised by the upheaval of the financial crisis, the industry now finds itself in a comparatively benign environment: no longer scrambling to survive, firms have space to think and to talk. What they’re probably not doing – like the vast majority of psychoanalysis patients, I suspect – is listening. The discussion about business models has been almost entirely internal.

That could be a huge problem. If you boil an organisation’s business model down to its bare essentials then it’s about providing something its customers want (products and/or services) at a price they’re willing to pay for it – so the customer, let’s face it, plays a pretty integral role.

Our latest research on consulting business models focuses on what these important people have to say about how they want consulting services to be delivered, whether they prefer an integrated range of services or narrower specialisation, the extent to which they (the client) should be involved, and how they’d like to pay for consulting work.

The first thing to say is that clients are a fairly conservative bunch. Yes, they’re clearly frustrated by many aspects of the consulting process, but they’re often, especially in emerging markets, looking for incremental change rather than out-and-out disruption. The picture in mature markets is a bit different: here we can see more of an appetite for change but, even here, it may take a while before it really makes its presence felt. That means that, while consulting firms are right to be initiating the business model debate (emerging markets will follow where mature ones lead), they need to be careful not to turf the baby out with the bathwater. That’s particularly important at the moment as we see the consulting market splitting in two, with demand increasingly polarised between a low-cost ‘commodity’ market, and a high-value ‘luxury’ one. The latter is expected to grow more quickly in the future but it also represents something of a throwback to the classic consulting of the past, as clients look for intelligent, data-driven and innovative support. Clients’ cautious views about business model change may well be influenced by this.

But there are other points where clients’ views create a real challenge for consulting firms – and these are likely to lead to more disruptive change (whether clients want it or foresee it, or not). On average, 68% of clients say they want a consulting firm to provide services right through from initial advice to final implementation. However, only 46% say they’re willing to pay the same rate for both types of work – and that percentage is even lower in more mature, higher priced consulting markets. Clients want continuity everywhere – except on price. That’s quite hard to deliver in operational terms: if you keep the same team, but charge less for it during the implementation phase, clients get confused and are likely to think that they’ve been over-charged for the advice; put in a different, cheaper team and you risk destroying the continuity clients are looking for.

Disruption, we think, is more likely to occur in areas, such as this, where clients’ wishes are hard to reconcile with operational realities, than in simply finding ways to deliver a better product/service at a more competitive price (the latter offers up plenty of opportunity for improvement, but innovation is going to be more incremental). This means that consultants need to stop talking to themselves and listen to their clients.