Is Management Consulting becoming irrelevant? | Future of Management Consulting | Consulting #jobs
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In this weekend's special episode, I talked about the future of Management Consulting as an Industry. In this video, I covered the traditional ways in which consultants used to work, ways in which consulting industry got disrupted, and what takeaways we can draw from this. To start with a simple example of the problems that consultants solve. If the CEO of a grocery store chain is having a problem growing his business, he would reach out to consulting firms. Then a consulting firm would send 3-4 consultants to that specific client so that in 8-12 weeks these consultants would come up with a solution.
The recommendation or solution can be around introducing a new product such as organic products. Or it can be around improving marketing by dividing the customer base into different subsets and targeting them separately. Or it can be around introducing deliveries, scheduling pickups, and so on. A different problem can be a pharma company coming up with a new product and having a problem deciding the pricing for their product.
Consulting company would again send 3-4 consultants who would try to figure out ways to solve this problem. Recommendations can be around the size of the pack or how many pills i.e. include in each packet and what should be the price of each pack. Secondly, consultants can do research on the competitors and share the best practices across industries. So, in the traditional sense, Consultants used to only share recommendations and advice. They were not a part of the implementation.
Talking of human capital, each consultant works really hard on each client's side. They move from one client to another getting broad experiences. These people want to work in consulting because it is a well-paid job that offers a lot of quick learning. The most important one is the fast-track promotion that consultants receive in comparison to other industries. A consultant starts with being an associate, then becomes a manager, and afterward a partner. The partner or principal level role gives the consultant a share in the consulting company. Nobody knows how much these private consulting companies make. Nobody knows the mix of the clients and which industry is dominating.
7 to 8 years out of business school these people get ownership in one of the top consulting firms. The glamour associated with it is unparalleled. Even if someone owns 0.1% or 0.5% of a consulting company, they can expect to make a lot of money on top of their salaries and bonuses. These carrots are enough to encourage anyone to join a consulting company. And consulting is a relatively low-risk career path. As long as one works hard and sticks to a company long term, they will make a lot of money and become partners soon.
Coming to advice large organizations look up to consultants for advice because the CEO and board members need to be pushed. CEO and board members will not be pushed by their employees. This is why it takes an external person to come along and say how the industry is performing and what should be the future steps for the company. This important view is needed for the CEO and the board members. Nobody else but only consultants can give it. Secondly. Consultants are not a part of the implementation process which makes them come up with the best advice or an ideal solution without any other considerations. So, from the human capital and advice perspective both, consultants play a very important role in an organization.
This was the scenario until the early 90s before the data was democratized. Consultants couldn’t leverage early access to data anymore. Every company started collecting data and doing analysis by themselves. Companies started investing in tools that would help them syntesize the collected data. After 2005, data democratization called into question the value offered by consultants. But Consultants started evolving even before the clients questioned them. McKinsey came up with McKinsey solutions in 2007. After this, I talked about various other developments and disruptions in the consulting industry. And lastly, shared what we can learn from this scenario.
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Chapters
0:00 - Intro
0:52 - Pointers
1:07 - Problems Consultants Solve
3:18 - Human Capital
5:50 - Advice
7:45 - Disruption
10:48 - Takeaways
12:32 - Outro