Specialist firms

I’m back to my piece of string.

For those of you who are new to this idea, we’ve been talking a lot about how client perceptions are reshaping the consulting industry, essentially pulling it into two distinct markets. Low-cost consulting that, while it’s highly specialised, is familiar, repeatable and theoretically widely available; success here depends on depth of knowledge and efficiency. High-value consulting is far closer to traditional management consulting and depends of the ability to think and act in a creative and informed way about complex issues. The first market is by far the biggest, but it’s currently growing much more slowly than the second.

By Fiona Czerniawska

Clients love a specialist. In a previous article on this blog I’ve discussed how the extent to which clients’ rating of the quality of consulting work is very influenced by whether they see the firm concerned as a specialist. The more specialised a firm is seen to be, the higher the quality of its work is rated.

By Alison Huntington

No, this isn’t another article about why French women are so thin compared with us frites-loving Brits. Or about the ever-expanding waistline of Gérard Depardieu. It’s about how size matters when looking at the 2.4% growth notched up by the French consulting market in 2014. And it matters in several ways.

Could a need for specialism be pushing clients into the arms of academics?

Something has cropped up in a number of conversations with clients recently: the use of academics in place of consultants. It's a bit early to tell just how widespread the trend is (if it is, we'll report on it when we publish our next round of client research in 2013) but it seems worth mentioning because it's consistent with a number of other trends we've been observing for some time.

For some time now one of the truisms of consulting has been that you can either be a (big) brand or a (small) specialist; anyone in the middle ground will either be absorbed by a bigger player or dispersed among smaller ones.

Around a quarter of the 400+ clients we questioned recently were HR directors; most were significant buyers of consulting services.  The striking thing about talking to so many of them is how rarely they voluntarily talk about the big HR consulting firms, even though many use their services. This paradox appears to stem from the fact that they think of these firms primarily in terms of administration rather than “consulting”.  “We don’t use any of the big HR firms except on payroll and remuneration issues,” was one, typical comment.

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.

What on earth does the consulting industry have in common with the golden age of Hollywood? Quite a lot, I think.

It is tempting for large consulting firms to think they are immune from competition from independent consultants. The idea that a firm such as McKinsey might be threatened by a freelancer seems as laughable as a cartoon elephant standing on a chair above a tiny mouse.

But the truth is that competition has a domino effect – two domino effects, actually, depending on whether demand for consulting is growing or falling.

Let’s divide consulting firms into four groups: