Consulting industry braces for disruption

It was only inevitable that the consulting industry -- which has long been telling everyone else they were being disrupted -- would be disrupted itself.

Clayton Christensen, the Harvard professor who defined the disruption paradigm, teamed up with co-authors Dina Wang and Derek van Bever to look at the near future of the consulting industry.

Until now, consulting firms, which are structured to be agile, have been relatively immune from disruptive forces, unlike more rigid businesses such as automobiles and steel. This is about to change, Christensen and his co-authors write in The Harvard Business Review. Typically, industry leaders tend to cede the lower ends of their markets to upstarts, while they are chased upstream to the higher-margin customers.

Accordingly, Christensen and his co-authors observe, the biggest consulting companies -- McKinsey, Bain, and Boston Consulting Group (BCG) -- are seeing fewer large strategic engagements, and more "value-based pricing" arrangements.

For a prime example of what will likely happen to consulting, look to the legal industry in recent years, Christensen and his co-authors point out.  A new generation of upstart legal services, offering 24-hour service and menus of commodity-priced items, has already usurped large segments of the market.

Consulting businesses face competition from upstart firms which subcontract project work to freelancers, who are often experienced consultants themselves. These alternative firms also take on smaller clients not served by the large consulting firms.

The authors see four scenarios unfolding for the consulting industry: consolidation, growing bases of smaller clients, more cross-disciplinary firms (such as the big four accounting firms offering a wide range of professional services}, and increasing adoption of big data analytics.

This post was originally published on Smartplanet.com