Challenges And Opportunities In The Consulting Industry Essay.

Overview of the Consulting Industry

Findings and Analysis

Overview of the industry

Before jumping to the challenges, it is important to note that the industry as a whole is performing very well. Reports depict that in the year 2015, the UK consultancy industry grew four times fast than the economy of the country (Consulting UK, 2017). Even in the US, the consultancy firms are growing at a rapid pace leading to significant growth of the industry as well. The important issues that need to be addressed within this dynamic are that of lower acceptance to failure, high levels of employee attrition and the wide introduction of new business models.

Consulting industry shrank during the period between 2001 and 2003 (Financial Times, 2009). However, post that the market has relatively stabilized. With the advent of technology and the high reach of internet, the consultancy industry too has grown leaps and bounds. The increasing globalization has led to the creation of a flat world. Several leading consulting firms have taken advantage of this globalization and widened their horizons by spanning across different countries (Hitt, Ireland & Hoskisson, 2012). As of December 2016, the overall revenue from the industry grossed $229.9 billion. Between the period of 2016 and 2021, the industry is expected to grow at an annual rate of 2.4%.

The big four

PwC (Pricewater Coopers), Deloitte, KPMG and Ernst & Young are four leading organizations that are dominating the consultancy industry (Muller et. al., 2011). These four giant companies combined are known as the big 4. Their contribution to the industry at large is mammoth. Ideally these four firms are accounting organizations. They have a large pool of clients spread across different parts of the world. These four firms have been outperforming the market and growing at a rapid pace of 11.5% annually (Big Four, 2011). For every new organization that joins the industry, the big 4 pose a major threat making it difficult for new entrants to create a significant mark in the market.

Challenges within the industry

Digitalization of the world

The growing digitalization of the world has a lot of advantages. Business processes have become more organized and the overall efficiency within the market has surged. Owing to the growth of technology, the chances of human error have largely reduced. However, at the same point of time, the rampant digitalization of several industries has led to the introduction of new businesses (Fleisch et. al., 2015). The rise in entrepreneurship is being witnessed throughout the globe. This poses a threat for consultants across the world because they are not yet prepared for these new businesses. Most consulting firms do not have the right technology while most do not have the expertise to consult absolutely new businesses.

The Big Four Players

In order to address this issue, consulting companies must innovate a detailed and highly comprehensive strategy. They must enhance their focus on increased collaborations with smaller firms which uphold expertise on these new businesses. Innovation is the key for growth in any business (Drucker, 2014). Specifically with consultancy industry which is very highly client driven. It is important that organizations within the industry must be able to match up to the technological advancement of the clients of the business.

Stakeholder engagement is also an essential part of business growth. Brand positioning and customer retention largely depends on the extent of stakeholder engagement efforts put by the organization (Henisz, Dorobantu & Nartey, 2014). Consultancy firms must invest more in enhancing their levels of stakeholder engagement. This would keep them up to date regarding the changes occurring in the industries of their expertise. Moreover, enhanced level of stakeholder engagement can also help these businesses in gaining a better understanding about the client needs in advance (Ayuso et. al., 2011).

It has been noticed that the flow of innovation moves from the top to the bottom in any organization. Hence in order to consistently innovate and strategically devise ways to prepare themselves for the new business processes, consultancy firms must focus on increased innovation from the top leaders. The C level leadership in any organization plays a critical role in driving innovation.

Low acceptance to failure

Consultancy firms have a business of guiding businesses towards growth and profitability. As an industry, the organizations have a must lower acceptance to failure. This can cause a lot of resistance towards change that is required for growth. It is important for these businesses to understand that investing large sums of money is not equivalent to growth and may not necessarily lead to innovation. The lower acceptance towards failure reduces the growth rate of the industry at large. In order to overcome this, organizations within the industry need to adopt a ‘fail fast’ strategy where they can make mistakes and learn from them and move on.

The value of creativity must be placed much above accuracy. This is a cultural issue within the industry. Business processes are highly stringent that make it difficult for organizations to value innovation. Even employees are not given a free hand towards innovation and this leads to overall levels of reduced risk appetite and innovation in the industry. Innovative businesses can help provide greater value to clients (Szirmai et. al., 2011).

Digitalization and Innovation Challenges

Talent attrition

A high level of employee retention within an organization depicts a sign of a positive work culture. Organizations must effectively put efforts in ensuring that the employees associated with their firm stay with the firm for longer duration. This leads to overall increased productivity and lower cost of training and recruitment. A major problem faced by the consulting industry is high levels of employee attrition. Talented employees are recruited from the top universities and even then they are either poached by competing firms or they resign at their own accord. Most of the employees working in consultancy are over-worked and have little work life balance.

Organizations must focus on employee retention as a critical part of their human resource management (Cardy & Lengnick-Hall, 2011).Consultancy firms are slowly starting to shift focus towards different recruitment markets. Other than visiting top universities and ivy league colleges, these firms are also starting to recruit college dropouts and other students who are fresh graduates but possess the right skills for the business. The workplace environment needs to be a bit more relaxed. Businesses must focus on creating a work environment which fosters innovation and promotes a culture of open communication. These efforts will help in understanding employee grievances and provide them with an environment to address the issues that they are facing with the organization.

Need for effective collaborations

Organizations within the consulting industry also need to enhance their levels of effective collaborations. Most of the large businesses may or may not possess the right infrastructure, technology, resources or talent to consult every new business that is being introduced. The need for existing organizations in consulting to collaborate with niche businesses in order to enhance their own expertise will become all the way more important in the days to come. Consulting firms will therefore need to form partnerships with businesses outside the consulting industry including but not limited to academicians, digital agencies and technology firms. A lot of the large consultancy firms have shown a lot of resistance towards collaborating with SMEs in the past. It is this resistance that needs to be addressed in an effective manner so that businesses can collaborate and deliver greater value to clients. A lot of smaller businesses work in efficient collaboration with each other. Their relationship is based on mutual dependency and trust. Such businesses too can pose threat to leading organizations if the resistance to collaborate outside the industry continues in these organizations.

Low Acceptance to Failure

In the given scenario, a lot of crowd sourced consulting firms are emerging in the industry. These firms are impacting the industry as these are driven by better technologies, effective collaborations and new clients. These firms possess the ability to source talent and expertise from small firms or freelancer. Thereby reducing their cost and enhancing the value delivered to clients. These crowd sourced organizations seem like a way forward and a positive future to the industry.

Area of focus for the consulting industry

Technological advancement

Technical evolution is the reality of today. Artificial intelligence, machine learning, machine automation or internet marketing are examples of recent technological advancements that have led to the evolution of the world. Therefore it is safe to say that technology plays a very important role in the present business scenarios. In the consultancy industry too, technological advancements has allowed increased automation within the business. Organizations within the consulting industry are able to effectively manage their clients and enhance operational efficiency within the business.

Organizations are focusing on combining business, deep industry insight, innovation and technology in order to deliver value to customers (PwC, 2018). The big four organizations are specifically focusing on cyber security and data analytics in order to ensure data preservation. Technological growth has helped the businesses by largely assisting in their reach to customers as well as engagement with them (Guffey & Loewy, 2012).

Social trends and shifts

Digital innovation has also helped businesses in devising improved strategies of performance evaluation and customer engagement. One of the biggest gifts of the advent of technology is the growth of social media. Organizations within the consulting industry are also resorting to social media marketing in order to leverage the wide reach and the improved customer engagement strategies of social media. Social media marketing refers to the process of marketing a service or product through social media channels like Facebook, Instagram and Twitter etc (Tuten & Solomon, 2017).

With the growth of social media, even a small consultant anywhere in the world can reach out to customers across the globe. Social media’s reach is massive and hence businesses are shifting towards enhancing their presence on these social media platforms. This growth of social media and shift in the social trends of the society are beneficial for both consultants as well as clients. Consultants have better ability to reach out to customers while customers are better aware of available consultants across the globe. This social shift has also enhanced the level of communication between businesses and customers (Kaur, 2016). This eventually leads to better communication and hence improved understanding of customer needs leading to enhanced value delivered.

High Employee Attrition Rates

Industry globalization

Globalization in the world has led to a free flow of technology, resources, people and information from one part of the world to another. As discussed before crowd sourced consultants are on a rise. Globalization plays a significant role in the growth of such organizations. Increasing globalization within the industry has its pros as well as cons. This has led to increased competition among organizations owing to large reach of every business (Crane & Matten, 2016). Competition among several firms leads to increased value delivered to customers.

Globalization has also allowed clients to take consultancy services over specific issues from different sources. Moreover, the entire idea of online consulting or distance consulting is a result of industrial globalization. Today, expertise can be sourced from different parts of the world. The need for consultants is on a rise and this is why the entire industry has observed high levels of growth. However, the increasing globalization has also enhanced the level of stakeholder engagement within consultancy firms. Globalization is a boon and bane. The delivered value is consistently increasing but the competition is on a rise. Hence it is the need of the hour that these consultancy firms continue to consistently innovate and focus on offering additional value to customers.

Possible implication of emerging themes on strategic and operational business decision making

The consultancy industry as a whole is going through several changes. These trends have a positive as well as a negative impact on the organizations working within the industry. The impact of these trends also largely depends on organizational philosophy and the mindset of the C-leadership existing within the business. The predominant trends as discussed in the report are switching to newer talent acquisition sources, emergence of crowd funded consultants, increase in the number of freelancers and growth of new businesses owing to increasing technology (Lehner, 2014).

The biggest positive impact of these trends is that it would lead to increased value delivered to clients and all stakeholders associated with the business. The emergence of a large number of crowd sourced consultancies is making the market highly competitive. In order to gain an advantage over other players in the industry, organizations need to deliver value to customers. Every time there is high competition within any industry, customers are the primary beneficiaries of the same. Similarly, increasing number of crowd funded consultants will aim at delivering the same value to clients at a much lesser price. Since these consultants have no resistance towards collaborating with smaller agencies or freelancers, the overall productivity of the business is higher than large consultants who are limited to their in-house teams.

The Need for Effective Collaborations

Another advantage of these trends and specifically growing technology and social media is stakeholder engagement. It is important for businesses to engage effectively with their stakeholders in order to build and sustain long term relationships with them. Stakeholder engagement has also helped businesses in understanding customer needs and deliver value (Andriof et. al., 2017). The growth of organizations to a large extent is a contribution of all their stakeholders combined. Therefore engaging them in an effective manner is imperative for the long term sustainability of the business.

Increased efficiency due to technology is another advantage being witnessed by the consultancy industry. Organizations are able to enhance their levels of efficiency and improve their data management tactics with the help of increasing technology. Technology has also provided businesses with the much needed reach to their customers located in different parts of the world. Another predominant advantage of technology is better communication with customers and hence better understanding of their needs leading to increased value and improved relationships existing between the business and its customers.

A major trend that is being observed is that of effective collaborations. A large number of businesses are collaborating with a large number of other smaller ventures in order to gain more expertise and widen their horizons. Organizations are also effectively collaborating outside the consultancy industry. This includes tying up with digital media agencies, technology firms and other academicians. These collaborations are increasing the level of value delivered to customers but at the same time they are posing a threat to already established consultancy firms by creating direct competition for them (Freedman & Nutting, 2015). These small firms associate with experts from across the world for mutual collaborations and the overall value received by the client is much higher.

These trends have certain cons as well for the industry. At the foremost front, the increasing competition within the industry is posing a threat to existing businesses. The high level of competition will not let small players survive. There are advantages as well as disadvantages of this competition. Therefore it is now mandatory for businesses to gain a competitive advantage. However, one of the biggest effects of competition is often a price war. The first step taken by competing firms is to reduce their prices. In the face of such a competition, it is possible that there might be a price war. If that happens, not only with the value delivered to customers fall short but a number of good players from the industry will be eliminated.

Crowd Sourced Consulting Firms

Another trend that may have negative impacts is the adoption of a different recruitment strategy. The change in talent market and innovative talent acquisition from college dropouts may create a negative example in front of people. Recruiting people without a strong academic background also adversely impacts the brand’s positioning in the minds of its stakeholders (Rostker et. al., 2014). Large businesses specifically must not take this risk. Recruiting this talent will definitely cost much lesser to the company but at the same time, if organizations consistently hire these professionals because of their lower cost to company then the overall talent pool of the organization may not remain as effective.

There are pros and cons to the trends that are being witnessed in the consulting industry. It remains the choice of the organization to deal with the trends and use them to their best advantage. Even so, it is essential for new trends to emerge for the growth of any industry and hence imperative that such trends are observed, identified and accepted for the overall development of the industry.

Be open to change

The foremost recommendation to organizations within the consultancy industry is to be open to change. Resisting change whether to recruit dropouts or collaborate with smaller agencies will lead to reduction in the overall productivity of the business.

Active leadership

The C-level leadership within any organization must take the active front and lead the whole team by creating a culture of acceptance, respect and trust. It is the top management that should be open to the idea of recruiting people from different colleges. They must bring in the culture of collaborating with smaller agencies in order to enhance their area of expertise.

Embrace the competition

The last recommendation for the firms would be to embrace the rise in competition and pull up their socks in order to sustain it or get ahead of it. Competition and specifically healthy competition must be appreciated, accepted and created within an industry for sustained growth of overall industry and value delivered to clients.

Conclusion:

Consultancy industry is highly customer centric and the changing needs and demands of customers would directly lead to changes within the industry. There are several changes that the industry is witnessing as well as the challenges that are being posed to the business. The impact of each of the new trends is positive as well as negative. It largely depends on the organization whether they can make the best of the change of not. As an industry, the players need to be more accepting towards change, make their leadership active and embrace the competition that is coming their way. This would lead to overall growth of the industry as well as increase the value delivered to customers.

The Area of Focus for the Consulting Industry

Management consulting is a practice of helping and guiding organizations in order to improve performance. Ideally, consulting firms are appointed to identify problems with an existing organization and develop plans for improving the same (Kipping & Clark, 2012). Various leading organizations resort to consultants for improved performance. This growing trend has led to the creation of a mammoth industry. Consulting industry is growing leaps and bounds since its inception.

Consulting industry is largely client driven and it is imperative that the offering of the organizations in this industry change along with the changing needs of clients (Kipping & Kirkpatrick, 2013). The industry is labor intensive. This report throws light on the changes that are being observed within and outside the industry that need to be addressed. The industry at large is currently facing numerous challenges that need to be addressed in an effective manner. Since its inception, the consultancy industry has witnessed a large number of changes owing to the changing business scenario globally.

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