Business process outsourcing (BPO) was a next big thing. So was enterprise resource planning (ERP). Both kept consulting firms’ phone lines jammed and their bank balances juicy.
Unfortunately, despite a raft of technological leaps forward, the 21st century hasn’t been a great giver of next big things from a consulting perspective. Set aside the Y2K bonanza and the dot.com boom, and the biggest feature of the last 15 years has been the response to the global financial crisis. That created a wave of cost-cutting, which was good news for consultants – up to the point where they became one of the costs to be cut – but it was never going to be the foundation upon which a decade or more of growth was built.
But then digital transformation hovered into view, and all was well again. Suddenly every client started eyeing the potential of things like big data and analytics, or robotic process automation, to turn what used to be a pipe dream – higher growth with lower costs – into a reality. Digital promised to facilitate and accelerate their business agenda, and consultants’ phones started ringing again.
Over the last few years digital transformation has turned into a $23bn (£18bn) global consulting industry. That makes it twice the size of the UK’s entire consulting market and five times the size of China’s. But to think of it as a pre-packaged opportunity that’s come down the conveyor belt to be unwrapped by gleeful consultants would be to miss an important point. Digital transformation has been most successful in markets where the consulting industry itself has been most successful – like the US (where it represents 20% of the entire consulting market), the UK (21%) and Australia (21%). In other words, clients aren’t digital self-starters. They may be interested, excited or even afraid, but consultants are persuading them to act.
So, what are consultants persuading their clients to do, and which types of consulting firms are benefiting the most? The first answer is much clearer than the second. The first phase has been about redesigning the interface between an organisation and its customer, giving the latter a digital experience that measures up against the best they experience in any industry. They want to pay taxes the way they bank, and bank the way they buy.
The next phase - now in full-swing in most mature markets - sees digital move from front to back office, as the implications of all those changes to the interface become clearer. Beyond that lies more fundamental transformation of business models, as companies start to understand the potential of digital to change not only how they do things, but what they do, and even who they are.
Who wins? To date, no particular type of consulting firm has stamped its authority on the market. Deloitte has the biggest share (12%) but it’s followed by Accenture, a firm with a strong technology heritage, and strategy giant McKinsey, rather than its Big Four peers. But as business model transformation moves up the agenda, so a firm’s strategy credentials and reputation at board level are likely to be critical. This, after all, isn’t just the next big thing for consultants; it’s the next big thing for their clients, too, and they want a safe hand to hold when they go through it.
Edward Haigh is a director at Source Global Research, the leading research and strategy firm for the global management consulting industry.