Five options for growth in 2012

Today sees the launch of our short report, Planning for Growth in an Uncertain Market, which looks at the main five options consulting firms have to grow their businesses and at which segments of the industry are likely to gain or lose ground in 2012.

Unquestionably, 2012 is going to be a challenging year, much more so than consulting firms - and we - expected back in January.  Then, the recovery seemed sluggish but there were signs that private sector clients outside the financial services sector were finally increasing their expenditure on consulting.  Since then, even this sluggish growth has stalled, as companies worry about the unfolding Euro-zone crisis.  Moreover, the financial services sector - the undoubted engine of growth in the consulting industry in 2010 - has started to rein back its expenditure on consultants to more normal levels.

If you were to add up the collective ambitions of consulting firms going into the New Year, they would far exceed the levels of growth likely in the market.  So where will growth come from?

For all but the biggest brands, success will depend on specialisation and innovation.  This is a bitter pill for many to swallow.  Mid-sized firms have to admit that they will probably never have the scale and status of their larger rivals; smaller firms have to relinquish new markets.  Yet the opportunity here remains enormous: even the most cash-strapped clients want genuinely world-class expertise.  Tier One consulting firms have been able to grow through diversification: strategy firms have stepped into operational work, operational firms have moved into strategy and technology - the list goes on.  This remains a viable strategy but consulting firms will over time find themselves over-stretching their price points as much as their brands.

The volume of work done by standalone consulting firms is shrinking as niche firms are absorbed by larger ones, so cross-selling between consulting and non-consulting practices in a single business may be an important source of growth.  Yet a long list of failed acquisitions is testimony to how difficult this is in practice.  Equally challenging from an internal perspective is being able to respond to the consulting opportunities in globalisation and, in particular, to tap into client demand for integrated international teams.  Astute firms won't simply reconfigure their organisations to make knowledge-sharing and multinational teams easier, but will look at how they can change their business model, redefining consulting.

Five options for growth: which will you choose?