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Friday, February 28, 2020

CEO Insider

Traditional Management Consulting Giving Way to Crowdsourcing

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A lack of innovation or evolution from sector-leading companies tends to be the most insightful indicator as to whether an industry is in need of disruption. As technology evolves and new methods and models emerge, companies that traditionally dominate an industry often neglect innovation in favor of complacent and overly conservatives business practices. Stubborn adherence to the status quo, as we have seen across all economic sectors, leads to smaller, motivated and ultimately better services emerge to pick up the pieces.

Management consulting is no exception to this trend and is currently undergoing a sharp disruption poised to remodel and refine the industry. While the sector enjoys an impressive $70 billion valuation in the United States, cracks are beginning to appear in the woodwork globally.

Indeed, an entrenched oligopoly dominates most of the management consulting marketplace and has little incentive to evolve and innovate. Companies like Deloitte, Ernst & Young, PwC, KPMG, and McKinsey are ubiquitous names in consulting.

While early pioneers of the industry, these institutions have also created an inefficient status quo that harms the broader market by removing incentives for innovation, limiting the need for transparency, and ultimately reducing competition.

The next few years will prove significant for the industry which is becoming increasingly unfriendly to those who favor complacency over innovation.

Complacency is Encouraging New Players

Despite the strong numbers and positive forecasts coming from the management consulting sector, the industry is facing a challenge that could redefine how it operates. The problems that threaten firms today are not new, but rather the culmination of years of issues that have accumulated without proper attention; the most pressing of which is the consolidation of market share into a few major corporations.

The sector’s leading institutions employ tens of thousands of employees and work with, and are even integrated into, the world’s largest corporations. They have built for themselves a slow-moving juggernaut that is as large as it is flat-footed.

While the industry continues to turnover billions, overall revenue growth has actually steadily declined over the past 5 years. After a 7.5% growth in 2014, 2018 saw 3.6% expansion, and the forecast for 2019 is even lower at 2.5%

Moreover, these institutions favor a certain type of corporate-centric employee, meaning firms’ worker base tends to possess a one-dimensional outlook on global and business affairs.

Corporate business executives
The commercial consequence of this is that companies are characterized by a homogeneity of ideas and a lack of creative or innovative solutions to an increasingly diverse and globalized marketplace. Indeed, striving to fit employees within a predefined mold means that industry turnover is high, leading to significant supply and efficiency issues.

Also stifling industry growth is the lack of effectiveness and depth of actual consulting services. Large institutions tend to favor a more generalized problem-solving approach, where overly streamlined workflows demand that large and obvious symptoms be dealt with first, often ignoring the deep issues that cause them.

Making matters worse, large players are said to continue to hold antiquated business views that are entirely counterproductive to business efficacy. Perhaps most concerning is the continual and deliberate lack of transparency that is offered to clients.

Consultants’ solutions are often presented as absolutes, without adequately balancing a solution with potential unforeseen outcomes. Further, the core reasons behind potentially profound business changes are not often explained to clients.

business conference

Fortunately, new and ambitious players are entering the arena and ushering in new technology paradigms such as crowdsourcing and Big Data/AI, allowing consultants and clients to leverage a more advanced operating apparatus. Wikistrat and GLG are two such companies attempting to change the way business consulting works.

Indeed, in a nod to the effectiveness of innovation by smaller firms, many of management consulting’s traditional players are outsourcing their most challenging work to companies like GLG and Wikistrat who can provide more technical, insightful, and ultimately more accurate solutions to clients.

According to Wikistrat’s CEO, Oren Kesler, “We continue to see growing demand from clients and consultancy partners alike, all seeking something different. These days, both governments and corporations want to be innovative and more creative in how they interact with vendors. And it just makes more sense to leverage some form of virtual crowdsourcing where talented professionals compete to think creatively about the future and brainstorm solutions…”

Business people

Breaking the Glass Ceiling

While some sense that management consulting is becoming less effective, the sector still very much exists – albeit within the framework of a stagnant status quo. Major sector leaders are indeed losing ground to smaller, more agile competitors who have embraced highly technical solutions and revamped business models.

Two of the biggest factors driving this change forward are the emergence, on a global scale, of the gig economy and the rising popularity of crowdsourcing as a feasible alternative to small and finite groups of professionals.

These trends have ushered in an era for innovative management consulting and offer several advantages over its traditional model. Crowdsourced management consulting, for example, incentivizes consultancy companies to innovate and provide new and unique insights.

An exponential increase in competition and a plethora of new perspectives mean that traditional consultants cannot expect to continue working the same way and see strong results. Growth in competition also means clients have a larger pool of consultants to choose from, giving them a better chance to find a professional with the specific expertise needed.

Business Team

This strategy is working for Wikistrat who already boasts a networked platform of thousands of consultants in a variety of fields of expertise. The firm has recently developed an innovative simulation system where a client’s problem is disseminated to various groups of consultants who compete against each other to find optimal and insightful solutions.

The company has found that a competitive problem-solving environment delivers uniquely comprehensive and previously unobtainable results. The firm now has both private and public sector clients including large technology and mining companies on the Fortune 500 list.

Wikistrat is not alone, however, with company GLG also sporting innovative credentials. GLG works with hundreds of thousands of experts and deploys a point-to-point interview model known as “Expert Calls” where clients can specify the precise parameters of what they are seeking, and receive highly relevant solutions.

These models are ideal for companies that are looking for more effective and faster solutions so they can focus on growth and not on expensive and cumbersome processes.

Simultaneously, the rapid rise in AI and Big Data allows ordinary people to gain exceptionally deep insights into swathes of complex information. This allows smaller consultancy practices, and even individual freelancers, to compete with established corporations who have entire floors devoted to business intelligence.

That said, some large corporations are already feeling the pressure to innovate as they begin to face the reality of their ineffective business models. Deloitte, for example, is making its mark and distinguishing itself from its peers as it finds new tech-driven solutions for its clients. The company appears to borrow from its smaller rivals in creating the Pixel Unit – a crowdsourced consultancy platform for business solutions.

A New Era

It is clear that traditional management consulting is becoming obsolete. Companies that gave birth to the industry have remained stagnant for too long with smaller, more technical and niche firms beginning to take their place.

Thanks to crowdsourcing, AI, and other data-driven technologies, management consulting – which used to be a luxury for rich and established businesses – can now grow into a mainstream tool to be available to all businesses small or large. Indeed, the entire industry can see enormous progression if only it would adopt the strategies and models of its youngest companies.



Maartje (Martha) De Vries
Maartje (Martha) De Vries , Asset Management Specialist at AAGL Investments. Maartje (Martha) De Vries is an opinion columnist for the CEOWORLD magazine. She can be found on Linkedin.
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