storm clouds ahead

© Fiona Czerniawska, 2004

Fiona Czerniawska

Storm clouds ahead?The future of management and IT consulting

Storm clouds ahead?The future of management and IT consulting

www.arkimeda.com


Storm clouds behind

1.702.00

2.723.08

3.72

4.354.53

5.1135%

18%

36%

13%

4%

17%21%

13%

-

1.00

2.00

3.00

4.00

5.00

6.00

1996 1997 1998 1999 2000 2001 2002 2003

£bn

0%

5%

10%

15%

20%

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30%

35%

40%

Like-for-like fee income (£bn) Like-for-like growth (%)

Fee income 1996-2003 (£m) and percentage growth rates


The growth in public sector consulting

-4%

13%

9%

86%

8%

46%

-20% 0% 20% 40% 60% 80% 100%

2001

2002

2003

Private Public

Percentage changes in fee income 2002-2003


The growth in outsourcing

0

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Q2

97

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98

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98

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98

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99

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99

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04

Management consulting I T-related consulting Outsourcing-related consulting

0

100

200

300

400

500

600

700

Q2

97

Q3

97

Q4

98

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98

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Q2

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Management consulting I T-related consulting Outsourcing-related consulting


The problem with (almost) everything else

-56%

-49%

-49%

-37%

-22%

-20%

-14%

-14%

6%

17%

70%

150%

-100% -50% 0% 50% 100% 150%

Econ/environ.

Operations

Financial

Marketing/corp. comms

Strategy

E-business

P rogramme/project mgt

IT-related consulting

Human resources

Change mgt

Outsourcing-related consulting

Business process re-engineering


Storm clouds ahead?

Agenda

Three challenges:

Enron and the tarnished reputation of consultants

An increasingly volatile market for management ideas

Offshoring and the organisational structure of consulting firms


(1) Enron and the reputation of the consulting industry The client context

Enron has not materially changed clients’ attitudes towards the consulting industry, but has reinforced some of their fundamental concerns that: Consulting projects are most likely to go

wrong when they involve end-to-end or bundled services

There is insufficient objective information available to clients

Aggressive selling is compromising the ability of some firms to offer the best possible advice and assistance


(1) Enron and the reputation of the consulting industry The 12 factors that “tip” small scandals into large ones

Context

Economic turmoil

Perceived over corporate greed

Public concern

Evidence ignored

Context

Economic turmoil


Public concern

Evidence ignored

Stickiness

Scale

Systemic problem

Reputation of an entire industry is compromised

Perpetrators embody the industry

Stickiness

Scale

Systemic problem

Reputation of an entire industry is compromised

Perpetrators embody the industry

The law of the few

Coherent agenda for change

Evangelists

Political mileage to be gained

Opposition in disarray

The law of the few

Coherent agenda for change

Evangelists

Political mileage to be gained

Opposition in disarray


(1) Enron and the reputation of the consulting industry Feedback from clients

Context Consultants

add value if projects very large or very focused

Minor criticisms crystallizing around recession and the generation gap

Context Consultants

add value if projects very large or very focused

Minor criticisms crystallizing around recession and the generation gap

Stickiness Most clients see

themselves as responsible unless they have been deceived

Difficult to see as systemic because of lack of information

Branding has been counterproductive

Stickiness Most clients see

themselves as responsible unless they have been deceived

Difficult to see as systemic because of lack of information

Branding has been counterproductive

The law of the few

Better information

Codes of practice

Accountability

Scarcity of evangelists

The law of the few

Better information

Codes of practice

Accountability

Scarcity of evangelists


Economic turmoil


Public concern

Evidence ignored

Economic turmoil


Public concern

Evidence ignored

1 2 3 4 5 6 7 8 9 10

Economic turmoil


Public concern

Evidence ignored

Economic turmoil


Public concern

Evidence ignored

1 2 3 4 5 6 7 8 9 10

Economic turmoil


Public concern

Evidence ignored

Economic turmoil


Public concern

Evidence ignored

1 2 3 4 5 6 7 8 9 10

(1) Enron and the reputation of the consulting industry How close to tipping?


(1) Enron and the reputation of the consulting industry The optionsThe consulting equivalent of the prisoners’ dilemma

Firm B

Firm A’s position

Firm B’s position

Does not act Acts

Acts

Does not act

Freeloads on the action of others

Freeloads on the actions of others

Damages own reputation

Damages own reputation

Everyone wins

Everyone wins

Everyone loses

Everyone loses

Firm A


Storm clouds ahead?

Agenda

Three challenges:





(2) The volatile market for management ideas

Management ideas have life-cyclesFashion Decade during

which fashion emerged

Average number of years between fashion introduction and peak

Average number of articles on fashion during peak year

PERT 1950s-1970s 14.8 44

Quality circles

1980s 7.5 121

Re-engineering

1990s 2.6 130

Management fashions introduced in recent years: have shorter life spans are broader-based require greater implementation effort are abandoned more quickly (because they’re more

difficult?)



The life-cycle of management ideas

Level of benefits

and costs

CostsCosts

BenefitsBenefits

Time



Innovation

Never has been the core competence of most consulting firms

Need to avoid monolithic ideas – but there’s no economic incentive for individual firms to do so

Need to reinvent the wheel more often – has implications for resources and cost structures


Storm clouds ahead?

Agenda

Three challenges:





(2) Offshoring and the organisational structure of

consultancies The pyramid firm

Junior consultants

Senior consultants

Partners



consultancies Ripe for disintermediation?“Once I’ve found the people I want to work with, what value is the firm?”

Brand?

Knowledge sharing?

Training and quality assurance?

Network?



consultancies Factors determining supplier impact

Direct access to clients

Private sector client basePressure on margins

Offshore (low cost)

Onshore (high cost)

Public sector client base

Changing definition of offshore-ablePerceived level of risk


Scenario #1

Scenario #4

HighLowLow

High

Level of interaction between client and service provider

Perc

eiv

ed

level of

risk

Scenario #3

Scenario #2

Constant confrontatio

n

Constant confrontatio

n

Profitable distrust

Profitable distrust

Offshorerules

Offshorerules

Onshore returns

Onshore returns


consultancies Four scenarios



consultancies The diamond firm

Junior consultants

Senior consultants

Partners


Film studioFilm studio

DirectorDirector

Script writerScript writer

Cameras, make-up, catering, lights, set designers

and builders,

costumiers, location scouts, finance

managers ….

Cameras, make-up, catering, lights, set designers

and builders,

costumiers, location scouts, finance

managers ….Film starsFilm stars

ProducerProducer

ClientClient

Creative agency

Creative agency

Proposition development

specialists

Proposition development

specialists

Enabling specialists

Enabling specialists

Programme manager

Programme manager


consultancies The future of consulting?

storm clouds ahead

Business

consulting projects

consulting equivalent

consulting industry

management ideas innovation

volatile market

reputation damages

future of management

monolithic ideas