Literatuur Management Consultancy &
Policy Advice Hodges
Week 1
Hodges H1 The nature and value of consultancy
Key points
- Consultancy is important for organizational change
- Sustaining change through people and building and maintaining relationships
- Organizational development (OD) → initiating, implementing and sustaining change
- Value of consultancy is subjective
Introduction
→ Conceptualizing consultancy, OD and organizational change
The structure and dynamics of the global consulting world
The growth of consultancy
Consultancy is a global business sector, that evolved quickly starting with strategy
consultancy in the 1960s and growth of global consultancy firms in 80s and 90s →
consultancy market exploded. Strategy consulting firms applied a fact-based integrative and
analytical approach to solving clients’ issues
- The industry is successful: it can deliver high-quality services that create sustainable
value to organizations
There is also a critical view: consultants benefit from crisis and underperformance of clients,
ready to provide solutions and salvation → so consultancy sector benefits from economic
decline and moves counter-cyclically to economy.
- Armbruster: not the case, consultancy moves with highs and lows of general
economy, depending on blossoming or recovering clients, rather than crisis.
- Hill: demand for consultancy comes from improving economic conditions, market
depends on buyers of consultancy, not the sellers.
- Sink or swim: drive to succeed and to increase buyer demand shapes the
organization of consultancy firms. High pressure, high rewards
There are signs of disruption evident by competitors with non-traditional business models:
change from judgment-based diagnoses towards knowledge asset solutions. 6 trends
causing change and disruption (Christensen):
1. Context: globalization causes growth and simultaneously reshaping industry
2. Purchase: increasing use of multinational purchasing models impacts historic
influence of relationships
3. Resources: clients staff more internally
4. Delivery: competitions is not only between firms anymore, also freelancers
5. Outcome: firms sit now in the middle between advice and implementation
, 6. Margin: clients expect lower fee rates and higher value for return on investment
→ and digital transformation should be added
The impact of the digital transformation on the consultancy profession
Digital revolution fuses technologies and blurs lines between physical, digital and biological
and results in transformational behavioural changes across the world. Digital consumers
expect the same level with companies, digitization of products and services impacts
business models across various industries.
- Purely digital companies developed business models to accommodate digital
consumers, proving disastrous for traditional business models
→ Consultancy industry is diversifying rapidly
- Hybrid consultancy: benefits of strategic consulting along with digital knowledge or
big data expertise and more digital technology specialists.
- This leads many consultancy firms to form alliances with software, telecom or
communications providers, to provide broader services and extend reach and
expertise.
Organizations have relied on consultancy firms to go beyond the company’s knowledge, but
with the digital revolution the services needed from consultancy are evolving: from best
practices and innovative solutions to more in=depth transformative improvements and
solution implementation support
- The digital economy has allowed for free sharing and quick access of information,
that was previously black-boxeed to consultancy firms
- Consultancy has to adapt and innovate to address global trends
The growth of internal consultancy
Organizations build their own internal consulting teams to address their issues and control
costs, sometimes even offering services to outside clients.
‘Gig’ consultants
Significant trend: increase in consultants setting up own businesses becoming part of the
‘gig’ economy → organizations contract freelance workers. This is enabled by online
platforms enabling individuals to offer specific services and experience directly to
companies. These people compete for contracts.
- Supports shift of disruption of using alternatives to big companies.
- What attracts to independent consultancy is flexibility, but gig consultants need to be
able to handle this by being resilient and tapping into the network for jobs.
- → Transformation of nature of consultancy
Case study: Kamales Lardi
The impact of digital disruption on consulting
- Due to digital revolution types of services needed is evolving: knowledge is
democratized and information accessible. Clients need transformative improvements
and solution implementation support.
- Big-name consultancy firms are still strong, but there are signs of disruption from
competitors with non-traditional models.
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,Triggers for change
The digital disruption triggered a.o. the following changes:
- Unbundling of consulting services: no longer traditional model of integrated solution
with all aspects of cliënt engagement, but towards specialized online content,
in-depth, modular and specific expertise
- Disrupting in consulting customer journey: buyer model is disrupted, lists of potential
cliënt contact managed internally, now available to everyone online, f.i. all top
company executives are on linkedin.
- F.i. Lardi & partner Consulting LPC was founded, new relationships found
online and through social media
- New niche companies: entering global market. Offer flexible operating f.i. in teams at
a fraction of the cost of larger firms. Cannot offer entire value of large traditional firm,
but offers topic experts and practical implementation knowledge. Price is assessed,
as well as precise jobs that need to be done.
- Access to technologies and platforms: in all industries new technologies and
platforms are adopted, f.i. social media, big data analytics and apps, that provide
companies new access to consumers and insights about their needs. Consultancy
firms are forced to become tech-savvy to stay relevant and competitive.
Consulting in the digital age
Consultancy industry has proved agile, which they must remain to initiate fundamental
changes to respond to the flexibility and threats of disruption
Modularize business model
Consulting firms have been traditionally structured as “solution shops”, bundeling services
into 1 high-priced package. But due to cost and knowledge access these services are
unbundled into modular links in the value chain. This is rolled out on technology platforms,
human capital is used for highly complex, transformational projects.
Keeping up with new technology trends
Success of consulting firms will depend on ability to stay on top of the latest technology
trends and understanding their impact on companies.
Update consulting skillsets
Impact of digital technologies goes beyond functional boundaries. forcing companies to
change through digital business transformation to compete in the digital economy. This is not
only creating an app or website, but transforming the business model to meet the needs of
traditional and digital customers. Consultants need an understanding of the digital
technologies and their impact to provide answers.
Open to collaboration and partnerships with specialized players
Open collaboration is the key to success in the digital economy, with strategic collaborations
and partnerships with specialized (smaller) companies or topic experts.
Summary
Consulting industry needs to update traditional business models to meet the needs of the
digital economy.
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, Theories of consultancy
There are 2 schools of thought
- Functionalist school
- Consultancy is carrier and transmitter of management knowledge
- Methods to generate data and information outside and inside an organization
constitute the primary driver of consultancy
- Systematic knowledge management enables consultancy firms to stay up to
date on practices and information, allowing them to distribute this to
conventional organizations.
- Consultancy is adding value by providing knowledge clients do not have
- Critical school
- Consultants exert opportunity for opportunistic behaviour
- Not to doubt usefulness, but it’s too narrow to just say that consultants are
experts providing knowledge → they are persuasive opinion formers imposing
solutions and methods on clients that maybe don’t need them but are
powerless to resist.
- Consultancy is persuasion with compelling images to persuade clients of their
quality and work
Limitations
- Functionalist: lacks analytical grounding why clients hire external consultancies
rather than themselves
- Critical: lacks acknowledgement of economic processes and rational deliberations of
clients.
Consultancy
What consultancy is and isn’t
Consultancy has impact on all of us, but the concept can mean different things and is not
easy to define
- MCA: consultancy is the creation of value for organizations through application of
knowledge, techniques and assets to improve business performance. Through
rendering objective advice or implementation of business solutions
- Generally, providing help, but this mean the term consultancy is overused
Differentiation between
- True consultancy: based on interaction between people, re-establishing self-esteem
of cliënt, reducing dependency between helper and cliënt. Requires unique skills and
expertise as well as personal qualities.
- OD orientation.
- Other forms of help
Change
Organizations face pressure to change within complex and increasingly global environment.
Amount and speed of change can be overwhelming. Change: altering something by
introducing something new/different, opportunity to make new improvements. Change
comes in various shapes and sized and be proactive (responding to anticipated threat or
opportunity) or reactive (responding to factors already occurred)
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