Interventionism: the fourth way

Increasingly high-profile concerns over the difficulty of valuing the benefits of consulting services is putting pressure on the industry to provide tangible proof of its impact. At the same time, procurement people, whose focus on daily rates has blurred the distinction between consultants and contractors, are waking up to the need to build consulting projects around outcomes, not inputs.

The first implication of this is that it will split the “consulting” industry in two: on one side, we’ll have the firms that execute, who will sign up for delivering a specific result; and on the other, there’ll be those who, for a variety of reasons, stick with the traditional model of consulting in which an independent perspective and senior-level expertise counts. The foundations of this rift exist today, but we still have a group of firms in the middle which try to do both. This will become harder in the future, much as it did for firms in the late 1990s to do both consulting and large-scale systems implementation. The executers will corner most of the growth, but the advisers will – or should – have the higher margins.

Over time, this shift will have an impact on the basis of competition. The change will be felt least by advisory firms whose main challenge will be to maintain the space between themselves and interim managers (their margins will fall where they can’t). But execution firms will need to switch their focus from talking about the skills and competence of their individual consultants to focusing on what they can collectively achieve. Even the most cursory glance at the marketing material of most of the world’s biggest consulting firms shows what a huge shift that will be: ubiquitous statements such as “we work in partnership with our clients” will have to be jettisoned in favour of “we deliver 10% more value than our competitors”.

“Execution” firms will face two other important challenges: how to distinguish themselves from outsourcers and what to call themselves.

The line between consulting and outsourcing has always been blurred. In both cases, a client is inviting a third party to become involved in delivering something, the differences lie in the content and scale of the project, in the relationship between the client and the third party (consulting projects are more likely to involve a combination of internal and external staff), and in the amount of risk transferred from buyer to supplier. The consulting-as-execution model challenges the accepted paradigm – the scale of the project is likely to be smaller, but risk will be transferred – so there’s a danger everyone will get confused and revert to more familiar ways of working.

“Consultant”: never, I suspect, in the history of linguistics has a word been so abused.Even as the nature of consulting work has changed dramatically in the last 20 years, from pure advice into a mix of advice and implementation, consulting firms have clung to their soubriquet, partly because they felt it gilded their efforts, more recently because they haven’t found a better alternative. Assuming – and I think this is right – the term is reclaimed by the firms offering short-term advice (those in the bottom left hand corner of my matrix), what should we call those in the top left? “Executors” and “executioners” clearly have the wrong overtones. Answers on a postcard, please.

6th June 2010