Digitization: who stands to gain?

Big data, analytics, cloud, mobile: they’re all now converging on a single point – digitization.

Although cynics may argue this is simply the latest in a series of ideas hyped by consulting firms, our conversations with clients tell us that they're as keen on the concept as anyone.  The idea that easier, cheaper and more accessible data and technology could provide new ways to engage customers and to work with colleagues without raising costs is just too tempting a prospect for most organizations, especially when all other avenues of growth appear to have been exhausted.

But if digitization represents a significant opportunity for consulting firms, it’s unlikely to benefit them all equally.

Over the last 50 years the business world has been hit by several waves of technology-related change, each of which shares two common characteristics.

The first similarity lies in the direction of travel.  US businesses are early adopters of technology change: they create a wave which travels across the Atlantic, west to east.  Although it’s true that consumers in different countries may sometimes react more quickly than their US counterparts, and that the ability of countries’ infrastructure to take advantage of the new technology may vary hugely, US businesses typically get there (wherever there is) first. What was true about mainframe technology and then the internet is now equally true where digitization is concerned.  Even where the hardware or software has been developed elsewhere (think SAP in Germany in the early 1990s), it’s still American corporations which grasp its potential and proselytise its use.

The second similarity is that some consulting firms will miss the boat, and even (which is more worrying if you’re running a consulting firm) that some of those which are currently on the boat will fall off it.

The never-on-the-boat syndrome is only to be expected.  There were plenty of firms, many of them big ones, which failed to anticipate the demand for ERP software.  Some caught up in the later, commodity stages; others remain scarred, emotionally and financially, by the opportunity they missed.

You have to look harder to see the on-the-boat-but-falling-off pattern, but it’s just as salutary.  Index, a firm which has now largely faded from consulting history, made its mark 20 years ago as the foremost proponent of business process re-engineering, only to see its share of the market dwindle to negligible proportions as other firms, notably Andersen Consulting (as it was then) seized the initiative.

So what determines who stays on the boat and who falls off?  Up-to-date technical knowledge will clearly be one deciding factor – and puts firms of all types on notice to sort out the relationship between their technology and business consulting practices.  Big data / analytics will be another.  But the early adopters have two advantages.  Having pre-existing ‘assets’ (proprietary data or software, for instance) will be a key differentiator, provided those assets are substantial (an app a bright intern knocks together in an afternoon won’t be enough).  Their track record will also be important: clients may be snatching at the promise of digitization, but that doesn’t mean they’re totally convinced: fear (about what could go wrong) is as much of a motivator as hope (about the what could be achieved) and they need to hold the hand of a firm they feel safe with.

But early adopters shouldn't get too complacent because the very facets which give them an advantage will also make them attractive acquisition targets. Want to know what happened to Index?  It was bought by CSC in 1988.