According to Linus Benjamin Bauer, managing director of Bauer Aviation Advisory, the reshaping of the consulting industry as a result of the pandemic-related shift is opening up new and more competitive avenues for boutique consulting firms in the Middle East and beyond.
The rise of the big consulting firms and the management consulting industry is a textbook history of corporate development. Over the past 60 years, major consultancies have grown and asserted their status through prestige, branding and long-standing client relationships.
In particular, the world’s largest consulting firms have relied on three key growth drivers: managing complexity, deepening their engagement model, and international expansion.
The current Covid-19 crisis has led to one of the deepest recessions; Ultimately, the largest consulting firms are no more immune to the forces of disruption than any other industry. The consulting industry is primarily people-driven, and the golden rule of this industry is to charge clients hourly rates rather than outcome- or value-based rates.
Consulting is much more than trading advice for money. It’s more of a bundle of different types of services and features rolled into one prestigious, expensive package.
As a customer-oriented industry with constantly changing customer needs, the consulting industry is forced to quickly adapt to services, structures and processes. This has arguably never been clearer than during the current unprecedented global crisis, in which Covid-19 has coincided with a global recession. This time, the combined situation has exposed many companies to a unique set of challenging stresses. They turn to advisors for support.
However, the consulting industry has become inefficient, inflexible and unadaptable in recent years – even if large consulting firms have already survived existential crises. In addition, increasing technological change means that advisor recommendations become outdated almost as soon as they are made.
Digging deeper into the portfolio of services that major consulting firms offer their clients today, it becomes clear that the consulting industry is being hit by disruption just as it has (and is still) hitting many other sectors.
The consultant is a specialist
One of the conventional criticisms I’ve heard from several executives and managers is that most consulting firms send generalists into companies to do an expert’s job. Most of the largest consultancies lack expertise – at least not at first.
In the past few decades, large consulting firms have always practiced the situational “it depends” consulting style. Clayton Christensen, a former Harvard University professor, described today’s most reputable consulting firms as black boxes. Companies bring them a problem and they produce a solution. However, the visibility of what happens during this process could be described as minimal.
As a result, it can be difficult for clients to assess the impact and value of a consultant’s recommendations and work.
Typically, around 75 percent of clients think that the quality of the work of the largest consulting firms can be rated as “very good” or “good”. However, the perceived difference between the quality of work done by the top and bottom rated companies is seven percentage points.
The laggard (underperformer) group has a notorious image of offering “off-the-shelf solutions” that have already been tried and tested but are not specifically tailored to a customer’s needs. Increasingly, these offers do not meet customer requirements. The so-called “one-size-fits-all model” is a decreasing business model.
Until recently, the big consultancies were the only places where expertise from all possible directions was pooled. Today, access to technical experts with industry know-how is possible via small and medium-sized consulting companies or consulting/expert networks. For example, flying in an expert with in-depth knowledge of aviation is no longer the exclusive territory of large consultancies.
Master the complexity
The more complex the industries become, the more complex the needs of the companies that rely on consultants. Consultants today are expected to understand clients’ operational realities and provide customized services that match the industry, functional and client context. This, in turn, enables consulting firms to deliver value to clients.
The client-consultant relationship works best when the consultants, as subject matter experts, provide information, expertise, insight, execution and implementation support to the client. Additionally, clients today are often more interested in sharing the risk of change programs by working with consulting firms—rather than hiring consultants on an hourly, “no-service” basis.
In times of changing customer requirements and expectations for customized services, a vast network of subject matter experts helps boutique consultancies to develop better value-added and customized solutions for their clients and partners (e.g. other consultancies).
The company I founded, Bauer Aviation Advisory, is one example. We work with internationally recognized aviation industry experts, which allows us to be a trusted sparring partner for industry leaders. Meanwhile, our deep specialization means we partner with larger consultancies and bring subject matter expertise to their (often) larger client workflows.
While generalists have historically been successful in the consulting landscape, consulting work needs to be more industry specific and trusted. The current Covid-19 crisis is laying the groundwork for boutique consulting firms potentially emerging with an advantage in terms of expertise and focus, which in turn can help them thrive in the landscape and the broader ecosystem.
About the author: Linus Benjamin Bauer is the Founder and Managing Director of Bauer Aviation Advisory, a Dubai-based consultancy specializing in the aviation sector. He is also a visiting lecturer at the City University of London.