Innovation is essential for businesses to remain competitive and keep up with changing customer demands. In the past, consulting firms such as McKinsey, Boston Consulting Group and the Big Four had a monopoly on specialized knowledge, making their offering invaluable. Nowadays, much of this information is available online and former students from top-tier consulting firms are widespread. As a result, clients have more influence than in the past and demand greater value and flexibility at lower prices.
A Deltek survey found that 54% of operations managers said that their biggest challenge was to offer more value at the same cost. Another survey conducted by Deltek revealed that increasing scrutiny over cost control was the top priority for consulting executives, followed by improving working capital and limiting budget overruns of projects. New technologies are allowing companies to do more with less, leading to new players entering the consulting market and alternative business structures being deployed. The increase in competition is also proving to be a major challenge.
Boutiques and specialized firms are not the only form of competition that is increasing; independent consultants are also becoming a major competitive force. In the United Kingdom, there are now more than 2 million self-employed workers and that number will continue to grow. The ten largest consulting firms in the world now have a 56% share of the industry, while the top 200 have about 80%. Both percentages have been increasing since the beginning of the century. The quality of customer service often makes the difference between a successful business and a struggling business.
Consulting firms help their clients in many ways, from helping them to formulate strategies to providing advice on how to implement them. However, there are many challenges that consultants face when working with clients. The Deltek survey found that 55% said that addressing growing competition in the sector was one of the top business priorities, while 33% of chief operating officers said that “defining competitive advantage was one of their top three priorities for the next five years”. In addition, 47% of management consulting firms were concerned about changes in the way buyers buy services due to an increase in online searches, social networks and other non-traditional channels to find and evaluate consulting firms. The emerging technologies behind automation and artificial intelligence (AI) are also proving to be a major challenge for consulting firms.
In one section of the study, respondents discussed their perspectives for the industry for the next 3 to 5 years, as well as how they planned to respond to those challenges. Automation and AI were the third most anticipated business challenge according to companies across the professional services spectrum. Finally, many CEOs believe that they know everything there is to know about their business and the sector in which they operate, but this is not always true. Companies tend to believe that a consultant is a magician who can solve any problem in a very short time. This eliminates the need for professional services firms to act as intermediaries. These are some of the challenges that business consultants face when working with clients.
From increasing competition to changes in buyer behavior and emerging technologies such as automation and AI, consultants must be prepared for anything.