Consulting Magazine: A New Focus for Consulting Firms
Physician, Heal Thyself!
After talking tech transformation with clients for years, consulting firm leaders are finally starting to look within
Whether at a cocktail reception before one of Consulting’s recognition dinners, a lunch or an unsolicited phone call, consulting firm leaders often like to pick my brain about what’s going on the industry, what’s running on the rumor mill or about the profession. Probably not surprisingly, these conversations often turn to their own business: their firm’s pipeline, performance and ultimately, profitability.
And while these conversations can, and often do, go in many different directions, I’ve noticed a shift over the last few years. In the past, these conversations focused on market opportunities and clients—I’m sworn to secrecy!—when discussing their own businesses. That type of shoptalk has been around forever and isn’t going away anytime soon. However, a lot of firm leaders, I’ve noticed, lately have begun to zero in on their internal operations more than they have in the past.
Why? It seems after years of advising clients on digital disruption and technological transformation, consulting firms are finally starting to take a look at how they run their own business internally, and many feel like they might be missing out on those same opportunities their clients have. They’re realizing, better later than never, their own firms are also being disrupted and transformed and let’s face it: many firms still are being run like they were more than a decade ago. It seems very few firm leaders have the insight into their own business they should. A troubling theme has emerged—leaders often seem frustrated by what they don’t know about the inner-workings of their own firms. It concerns them; and it should.
What I’m sensing is not just anecdotal: Analysts with ALM Consulting Intelligence indicate they’ve had these same conversations with firm leaders who are busy trying to quantify the impact of outdated operations and business processes. Correcting these inefficiencies would translate to better operating margins. In fact, well-run firms can increase their pre-tax profit by 10 percent, but probably more, via more efficient operations. According to Naples, Fla.-based SPI Research, more than half (about 55 percent) of all professional services firms are in the ad-hoc (make it up as you go along) or application specific (CRM and project management) stage when it comes to automating and integrating their business processes. And all but about the top 10 percent of all firms could realize significant improvements.
This is a big problem, and it seems to be common among firms regardless of size, scope or sector. Although I must say, fast-growing smaller firms seem to have the biggest needs, but even the largest and most sophisticated enterprise firms struggle with transparency across the organization, often overcome with information overload. Smaller firms, meanwhile, have the advantage of knowing where the bodies are buried, but usually are woefully under-automated on how to find them when they need them.
Most firm leaders, of course, know the most important aspects of running the business—profit margins, key clients, capabilities, utilization rates etc.—but the intelligence behind those metrics is often missing or misleading. Connecting the dots to make informed and real-time decisions is difficult when there are too many or too few dots. Or when you only see some of the dots; or the wrong dots. Technology can, and is, solving some of those problems for some firms, but most still aren’t using technology tools as they could or should be… or as they’re advising their own clients to use them to solve their biggest issues.
It’s tricky—consulting firms are busy places. The economy has been humming along for almost a decade now and with so many clients and client industries being disrupted, who really has time to focus on firm management and internal efficiencies? After all, the client comes first! And usually second third and fourth…
Running a consulting business is no easy task, but with margins growing thinner all the time, smart firm leaders are looking inward to gain some advantages over their competition. Does one part of the firm know what the other is doing? That transparency and integration used to be considered a luxury, but no more. Physician, heal thyself! New clients, new markets and new geographies are essential to growing a consulting business, but the profession is long overdue for a little self-examination… that could lead to a lot more profitability!
Joe Kornik is Publisher and Editor-in-Chief of Consulting® magazine. In this role, Joe oversees the editorial operations and overall execution of the publication and the Consulting brand. He is also responsible for the magazine’s Web site and all live and virtual events.