Here are five inherent qualities of the management consulting
industry that make it susceptible to technology-driven disruption:
1. Labor intensive.
Most consulting services rely on humans as the fundamental source of research,
analysis, recommendations, process definition, process management, and
facilitation.
2. Billable time-based
business model. The fee structure underlying most consulting services is tied
to billable hours or days, which encourages lengthy, overstaffed engagements to
maximize revenue.
3. High margins. The
cost of "goods" in consulting refers not to products but to people.
The billable rates of junior consultants in most large firms far exceed what
they are paid by the firms in which they work. Value pricing models also
dramatically increase the profitability of many projects and firms.
4. Time-bound value.
With the increasing pace of change, the moment a research report, competitive
analysis, or strategic plan is delivered to a client, its currency and
relevance rapidly diminishes as new trends, issues, and unforeseen disrupters
arise.
5. Knowledge
commoditization. The models, templates, and tools of the consulting trade have
historically been kept "secret" by consultants and locked away as intellectual
capital. The "democratization" of just about everything, including
management information and knowledge, will continue so that anyone can access
and apply "best practices" on their own.
Paradoxically, even with these fundamental flaws -- all of which
are contrary to the best interests of clients -- the industry continues to
grow. Last year, for example, the management consulting industry saw a 4.1
percent growth rate.
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