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Commentary

Commentary on Trends in Consulting

By Jim McGee, Independent Consultant

Although people tend not to look there, recent trends in the legal profession bear watching for other professional services firms [e.g., consulting]. The economic slowdown affecting all organizations including consulting firms may be obscuring more important structural changes in the industry.

Consulting firms are becoming one of many specialized suppliers to organizations and those organizations are beginning to pursue strategies of tapered vertical integration. There is no reason other than inertia to believe that professional services firms are any less vulnerable to integration threats or to the innovation threats that Clay Christensen details in The Innovator's Dilemma.

The legal profession has seen the rise of corporate counsel and internal legal departments. Law firms are having to design new working relationships with clients that presume a collaborative approach to the work. Much of this work redesign has been ad hoc. More recently, firms have to become more thoughtful and explicit about how projects are managed and how work products are shared. This will force more attention to how electronic tools can support work that is shared between organizations. E-mail and attached documents rapidly run out of steam and interfere with finding creative solutions. At the same time, no one has enough control over the environment to dictate a solution.

Corporations have been bringing other professional skills in house including specialty IT skills and strategy skills. Yet, professional services firms have not built effective relationships with their internal counterparts. By and large, outside consulting firms view their internal counterparts as a threat to their livelihood, to be avoided and circumvented at all costs. Make the fairly simple assumption that this trend is irreversible. Corporations will not eliminate their internal consulting departments to return to the days of unlimited outside consultants.

What opportunities does this present to a small firm of experienced consultants? There appear to be three. First, there is an opportunity to help internal consulting departments develop better planning and reporting systems, to help them become more professional. Second there is an opportunity to help organizations develop more systematic ways of managing and evaluating all the professional service providers they use. Finally, there is an opportunity to work collaboratively with internal consultants to develop their specific consulting skills.

Several very successful organizations already have robust and well-run internal consulting functions. Many others, however, are much earlier in their development of these capabilities. While these groups will likely contain a number of ex-consultants from the outside, it is less likely that these will have been senior level consultants with experience or responsibility over managing a consulting practice. Thus, they are not likely to understand the relevant gages and levers for monitoring and managing professional service activity.

Although the trend toward in-sourcing professional services activities is clear, the end state is not likely to be the demise of outside consulting firms. There will continue to be particular skills and knowledge that is scarce or specialized enough to support an external market. Managing this market for idiosyncratic skills more effectively, in terms of both cost and impact, would certainly benefit from systematic management. Improving vendor management in this particular area would call for assessing current usage of consultants, integration with existing reporting and budgeting systems, and developing longer-term strategies for managing the mix between internal and external providers of specialized skills and knowledge.

If you forge a solid relationship with a developing internal consulting group (whether an IT group or a more general internal strategy group), you have the opportunity to pursue a collaborative working model. This model more effectively leverages your time as an outside expert and provides additional value to the client in the form of coaching and development of internal consultants.

One of the attractive aspects of this market opportunity is that larger firms are effectively locked out of this work given their economics and leverage models. It nicely uses their size to their disadvantage.

Jim McGee, September 2002

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Links to other articles at KCG's website

Innovations Articles

• Measures of Success for Internal Consulting Orgs (NEW!)
• Consultative Selling (New)
• Trends in Consulting
• Commentary on Trends in Consulting
• Marketing of Consulting Services
• Skills and Competencies of Successful Consultants
• Consulting Skills Development Experience
• Effective Uses of I.T. Staff as Internal Consultants
• Strategy Implementation
• Organizational Due Diligence (Mergers and Acquisitions)
• Principle Driven Operations
• Change Management
• Education's Role in Change Management
• Communications and Change Management
• Value Disciplines
• Role of IS Strategy in Making Market Leaders
• Strategic Planning and Change Mobilization
• Project Management
• Grow Your Own Consultants

Archive Articles (below)

• Designing Executive Information Systems
• Executive Information Systems: An Overview of Development
• Implications of Transition From an Industrial Era to One of Information
• Critical Success Factors Techniques can Apply to Team Management, Too
• Decision Scenarios Ensure Information System Meets Business Needs
• Critical Success Factors : Helping IS Managers Pinpoint Information Needs
• Combining Quality and Reengineering for Operational Superiority
• Steering IS Committees Straight
• Internal Consultants and a Consultative Approach
• EIS Plays Critical Role in Reengineering

Kendall Consulting Group is an international general management consulting firm specializing in strategy execution, change management, and executive education. We invite you to contact us for how we might help you and your company grow and prosper.

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© 2002 Kendall Consulting Group of Sarasota, Inc. All Rights Reserved.