Transformation from without and from within

This isn’t my idea: it came from Simon Harris at Oliver Wyman (for my money, one of the best thinkers in the consulting industry), and it certainly got me thinking…

We’ve estimated that the global transformation consulting market was worth around $20bn in 2015 (that’s excluding software, hardware, systems development and integration, etc.) In the biggest market (the US) transformation work accounts for just under $12bn, 21% of the total consulting market (as we define it). In Australia and the Nordics region, it accounts for an even larger percentage of the total.*

However, throughout this year we’ve had a sense that the transformation agenda is shifting. To date it’s been driven from outside organisations, either by game-changing disruption or by radically-evolving consumer expectations. Most of the changes sought are dramatic, because they’re aimed either at transforming how individuals interact with an organisation, or at completely rethinking its underlying business model. But increasingly we’re hearing clients talk about transforming their organisations from within: using the same out-of-the-box thinking and new technologies to redesign internal processes in order to achieve greater efficiency. This is change at the micro-level. It might be finding a new solution to a very specific bottleneck, much as fintech start-ups are doing; a small percentage improvement in performance that, once aggregated across a global organisation, yields a high return. At the heart of this is the Internet of Things, the idea that an explosion in our ability to “sense” what’s happening in an organisation creates new opportunities to tweak at scale: adjust the timing of one flight departure there; reconfigure a single truck’s delivery route here. None of these changes were available in a world where management decisions were taken on high-level data, but new technology and the ability to capture, process, and analyse unprecedented volumes of data at a detailed level open up new possibilities. The distinction between the executive’s “view at 30,000 feet” and the weeds disappears here: small decisions will turn out to be just as strategic as big ones.

But what does all that do for consultants? If the outside-in transformation model blurred the between traditional management consulting firms, creative agencies, and design companies, what will the inside-out model do? In the first place, it will accelerate the convergence between consulting, technology and data/analytics: it’s almost impossible to conceive of a project that doesn’t involve all three elements. It squeezes the design element (so creative agencies are likely to lose out), but opens the door to greater operational expertise. But it also creates a challenge.

Consulting firms have benefited from outside-in transformation because they’re on the outside, better-placed than people within organisations to see competitor threats emerging, etc. But what advantage will they have over clients when it comes to inside-out transformation? Transformation from within depends on identifying a very precise combination of factors, unique to each organisation, so consultants bearing data about trends and/or best practice from elsewhere are likely to find their arguments falling on deaf ears. Instead, successful firms are likely to be those that provide tools to help clients locate and analyse their pain points. They won’t differentiate themselves through their knowledge of the outside, but through their ability (their speed, thoroughness, and accuracy) to gather data on the inside.

*We recently published a short, free report on the market for transformation consulting. Follow this link to download a copy.