The massive management consulting industry continues growing, but not without pains. It has yet to integrate big data or automate processes, making it scalable only so long as qualified individuals continue to move into the industry. While 2018 and 2019 saw the industry dip its proverbial toe into the waters of high-tech, it needs to enhance its digitization in numerous areas in 2021 to continue its rather unprecedented growth.
These top ten trends and top ten statistics in management consulting will apprise you of the areas your consultancy must focus on to continually grow and land new clients.
Top 10 Trends
Expect to see continued digitization and a digital response to the growing need to more quickly adapt to client needs vis a vis operations, structure and terms of services. While management consulting continues as a labor intensive business service, other industries already moved to digitization. Consulting services have just begun to shift from reliance on humans for research, analysis, process and management as well as facilitation. This trend will transform consulting from its current billable hours, time-based business model into a flat-rate system.
Legislation Shaping Business
Changes in legislation continue to affect how management consulting in the UK and the US do business. In the UK, Brexit continues to affect business conduct. In the US, continued decisions in the areas of work for hire and intellectual property as well as “claims made” vs. “occurrence” liability insurance coverage continue to affect day to day conduct of business. These legal issues must be clarified so business can run smoothly.
As management consulting grows, it continues to split into two market divisions – one, a low-cost, commoditized sector and, two, a high-value, specialized consulting sector. This division forces each consultancy to devise ways to address both markets causing transformation in the areas of business models, pricing structures and brand architecture.
Management consultancies continue to experience coping issues with digital technologies and the new business models that have developed. The 2021 trend will be for consultancies to develop comprehensive digital strategies and revamp the existing business and operational models in a manner that continues to connect the C-level with stakeholders.
Fail Fast Methodology
Consultancies will adopt an agile development mentality leveraging the “fail fast” notion. While digitation comprises part of the business growth, the industry will continue to realize that money on its own does not buy innovation. While kaizen typifies most manufacturing lines today, the management consulting industry will continue to adopt relevant pieces of its tenets to adapt to the growing automation and changes in business models and operations.
Recruiting New Talent
Recruiting new talent continues to move from traditional top tier universities to focus on skill sets. While a Bachelor’s degree continues as an entry-level requirement, consultancies continue to look past only the top few schools’ graduates, instead of investigating who has the top skillset. Recruiters discover people through presentations and posters at relevant academic conferences and from those completing internships in the area. As retention becomes an issue, consulting firms will continue to move from a people to a product standpoint.
Both a challenge and a trend, the management consulting industry continues moving into a multi-sourcing mode. This refers to them working with niche firms and other similar consultancies. Multi-sourcing takes many forms including large generalist firms partnering with small niche specialists; management consulting firms partnering with consultants outside the industry; consultancies partnering with academics, digital agencies and technology companies.
These partnerships bear similarity to, but differ from, crowdsourced consulting firms, a disruptive business model that lets clients hire piecemeal from niche firms or freelancers that quickly turnaround necessary products and services to them with little to no overhead. Crowdsourcing beats the large firms on price, turnaround time and often, quality.
Consulting Firm Selection Process
Related to that, clients have changed the method of vetting and choosing consultants. They now use online services that let them perform research to determine which consultancy best serves their needs. The speed of these services and the decreased cost of leveraging these Internet databases concerns many larger consultancies since it makes it easy for clients to find a subject matter expert (SME) quickly. It eliminates the “who you know” aspect and referrals and reduces the act of hiring to pure expertise. It also eliminates the reputation aspect of choosing a consultancy. An established firm with a reputation that required decades to build may be passed over for an SME with specific knowledge. A related trend is that of building in-house teams from former consultants. These internal “SWOT teams” eliminate the need for external consultants.
Between changing business models, digitization, freelancers and SMEs entering the competitive field, business management consulting continues to require new consultants and analysts with developing skill sets. These individuals can continue to burgeoning innovation in the field and meet the pace of technological change in the industry. All individuals in the field must transition to a practice of constant education if they do not already adhere to a continuing education mindset. This education relates to more than their specific knowledge area and includes embracing new skills such as big data analysis, data mining, data cleansing and data strategy.
10 Must-Know Statistics
The old saying goes, “It is all about the numbers.” The transition from 2019 to 2021 differs in no way. Here are ten must-know statistics on the topic of management consulting.
- Today, the management consulting industry has a net worth of $250 billion. This massive, highly profitable industry continues to grow globally with industry hotspots in the UK and the US.
- Globally, more than 700,000 consulting firms provide a range of services including general consulting and those focusing on niche topics such as finance, information technology (IT), human resources (HR), operations, strategy and taxation.
- The UK continues to enjoy some of the most rapid growth, nearly four times faster than the UK economy in 2015. In 2016, it grew 8.2 percent from £6.02 billion to £6.79 billion. The growth trend has continued and should continue to do so in 2021.
- The US management consulting industry exhibited similar growth during the same time period, growing 7.7 percent to $55 billion. In the US, the trend toward businesses leveraging consultants, thus causing industry growth continues.
- The largest consultancies, known as The Big Four – Deloitte, EY, KPMG and PwC – outperformed both high-growth markets and the overall consulting market. Those four consultancies exhibited a growth of 11.5 percent to £2.55 billion.
- The UK will get competition for its hotspot in Europe from three countries – Austria, Germany and Switzerland, also known as the DACH region. That region continues to position itself as the place for consulting firms to locate. In the two years of 2015 to 2016, the management consulting sector in the DACH region has grown by €1 billion and has a current value of about €8.7 billion. Expect that growth to continue and compete with the UK consulting sector.
- Globally, the management consulting industry also continues to grow. In the past year, it exhibited a 4.1 percent growth rate. Expect this to continue as niche consulting firms pop up to serve clients locally and as the freelance consulting industry grows online with the cloud providing ready access to SMEs in virtually every topic.
- Governments continue to spend significant amounts on management consultants rather than leverage their internal SMEs. In 2018, the US federal government spent $25,270,552,818 in the management consulting industry, awarding 27,813 contracts to 5,609 firms. These contracts had an average per company value of $4,505,358.
- In 2018, the median pay for a management analyst/consultant was $83,610 per year or $40.20 per hour.
- The rate of job growth in 2021 for management consulting and analysts is 14 percent, much faster than the average job outlook.
2021 continues as a growth year for the management consulting industry. While the US and UK exhibit the fastest and largest growth rates, the DACH region of Europe isn’t far behind.
Of course, far more challenges and opportunities exist for the industry. Adjusting to digitization presents its largest challenge. While many industries from marketing to health care utilize big data and business automation processes, as discussed, this has not reached management consulting yet. This transformation must occur for the industry to continue to grow. As other industries grow by leveraging automation, those consultants directing business processes cannot remain behind the times.
2021 needs to provide a swift transition to modern ways for the industry to continue its expansion. An overreliance on humans has created the need for consulting firms to develop new talent recruiting methods. The pool of qualified candidates remains small and reliance on human workers only creates inflated costs to achieve completed workloads. Leveraging big data to grow their businesses and devising ways to leverage it for clients leads to better decision-making overall.
The management consulting industry must develop its big data analysis techniques including data mining using both data lakes and data warehousing, as well as data modeling. Its integration of automated analytics will speed the process of business process improvement.
Until recently, the data management industry has dragged its feet in the technology realm. That has caught up with it and now the industry faces a do or die situation. The overarching most important trend will be vaulting forward in the use of automation and big data to begin catching up with the industries for which they consult. This trend must continue in perpetuity for the industry to continue its runaway growth.