Hyper-specialisation in consulting

I’ve written a lot in this blog about specialisation, particularly clients’ relentless quest for expertise in a world that has become increasingly flat from a skills point of view. But a recent article in the Harvard Business Review had made me wonder how far it will all go, or – less positively – where it might all end.

The Age of Hyper-specialisation argues that technology enables us to break knowledge processes up into ever smaller components which can then be farmed out to independent, internet-based workers by an agent such as InnoCentive, Mechanical Turk or eLancer. Although not without negative implications, this approach – the article posits – results in higher quality work, done more quickly and more cheaply.

So what are the implications for the consulting industry? It’s already polarised between a small number of big generalist firms and a large number of niche specialists – and I’ve written elsewhere on how this may evolve into something that looks a bit more like the film industry. But the questions posed by hyper-specialisation are really around how specialised is specialised. Simon Kucher has grown successfully on the back of its reputation as a worldwide expert in pricing, but what if a firm emerged that focuses on the pricing of new drugs? It might sound an attractive proposition if you’re GSK or Pfizer: why would you go to a pricing “generalist” when you can work with someone who focuses on your industry,

But there are problems. One is about sustainable expertise. Hyper-specialisation works where you can complete the same task over and over again, getting better each time you do it. But – in this scenario – would there be enough pricing projects in the pharmaceutical sector for our putative drug pricing specialist? Without sufficient volume of work, consultants’ skills atrophy. The second problem relates to conflict of interest – an issue that more broadly-based consulting firms are able to skate around. If you only work on pricing drugs, then there are a limited number of companies you can work for. Yes, you’ll know the market very well, but it will be difficult to ensure that your knowledge of one company doesn’t change how you work with another. We also have to recognise that many of the best ideas come from making connections between different things – thus, the pricing of insurance policies might suggest an innovative approach to pricing drugs, but a firm that specialises in just the latter wouldn’t know that. Finally, our drug pricing firm would be dangerously exposed to macro-economic crises, unable to shift its business to a more resilient sector when times are hard.

A consulting firm can specialise in a sector or an issue, but not both. The more it hyper-specialises – by which I mean, the more it focuses on a subdivision of a sector or service – the wider its coverage of the other has to be. The narrower it defines it services, the broader range of sectors it has to work in, and vice versa. Although clients inevitably find the concept of hyper-specialisation an attractive one, the choice about how specialised a consulting firm is involves a compromise between giving clients precisely want they want and building a sustainable business.