Storm Clouds Ahead

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Storm Clouds Ahead

  1. 1. Fiona Czerniawska Storm clouds ahead? The future of management and IT consulting www.arkimeda.com
  2. 2. Storm clouds behind Fee income 1996-2003 (£m) and percentage growth rates
  3. 3. The growth in public sector consulting Percentage changes in fee income 2002-2003
  4. 4. The growth in outsourcing
  5. 5. The problem with (almost) everything else
  6. 6. Storm clouds ahead? Agenda <ul><li>Three challenges: </li></ul><ul><li>Enron and the tarnished reputation of consultants </li></ul><ul><li>An increasingly volatile market for management ideas </li></ul><ul><li>Offshoring and the organisational structure of consulting firms </li></ul>
  7. 7. Storm clouds ahead? Agenda <ul><li>Three challenges: </li></ul><ul><li>Enron and the tarnished reputation of consultants </li></ul><ul><li>An increasingly volatile market for management ideas </li></ul><ul><li>Offshoring and the organisational structure of consulting firms </li></ul>
  8. 8. (1) Enron and the reputation of the consulting industry The client context Enron has not materially changed clients’ attitudes towards the consulting industry, but has reinforced some of their fundamental concerns that: <ul><li>Consulting projects are most likely to go wrong when they involve end-to-end or bundled services </li></ul><ul><li>There is insufficient objective information available to clients </li></ul><ul><li>Aggressive selling is compromising the ability of some firms to offer the best possible advice and assistance </li></ul>
  9. 9. (1) Enron and the reputation of the consulting industry The 12 factors that “tip” small scandals into large ones <ul><li>Context </li></ul><ul><li>Economic turmoil </li></ul><ul><li>Perceived over corporate greed </li></ul><ul><li>Public concern </li></ul><ul><li>Evidence ignored </li></ul><ul><li>Stickiness </li></ul><ul><li>Scale </li></ul><ul><li>Systemic problem </li></ul><ul><li>Reputation of an entire industry is compromised </li></ul><ul><li>Perpetrators embody the industry </li></ul><ul><li>The law of the few </li></ul><ul><li>Coherent agenda for change </li></ul><ul><li>Evangelists </li></ul><ul><li>Political mileage to be gained </li></ul><ul><li>Opposition in disarray </li></ul>
  10. 10. (1) Enron and the reputation of the consulting industry Feedback from clients <ul><li>Context </li></ul><ul><li>Consultants add value if projects very large or very focused </li></ul><ul><li>Minor criticisms crystallizing around recession and the generation gap </li></ul><ul><li>Stickiness </li></ul><ul><li>Most clients see themselves as responsible unless they have been deceived </li></ul><ul><li>Difficult to see as systemic because of lack of information </li></ul><ul><li>Branding has been counterproductive </li></ul><ul><li>The law of the few </li></ul><ul><li>Better information </li></ul><ul><li>Codes of practice </li></ul><ul><li>Accountability </li></ul><ul><li>Scarcity of evangelists </li></ul>
  11. 11. (1) Enron and the reputation of the consulting industry How close to tipping? <ul><li>Economic turmoil </li></ul><ul><li>Perceived over corporate greed </li></ul><ul><li>Public concern </li></ul><ul><li>Evidence ignored </li></ul>1 2 3 4 5 6 7 8 9 10 <ul><li>Economic turmoil </li></ul><ul><li>Perceived over corporate greed </li></ul><ul><li>Public concern </li></ul><ul><li>Evidence ignored </li></ul>1 2 3 4 5 6 7 8 9 10 <ul><li>Economic turmoil </li></ul><ul><li>Perceived over corporate greed </li></ul><ul><li>Public concern </li></ul><ul><li>Evidence ignored </li></ul>1 2 3 4 5 6 7 8 9 10
  12. 12. (1) Enron and the reputation of the consulting industry The options The consulting equivalent of the prisoners’ dilemma Firm B Firm A’s position Firm B’s position Does not act Acts Acts Does not act Freeloads on the action of others Freeloads on the actions of others Damages own reputation Damages own reputation Everyone wins Everyone wins Everyone loses Everyone loses Firm A
  13. 13. Storm clouds ahead? Agenda <ul><li>Three challenges: </li></ul><ul><li>Enron and the tarnished reputation of consultants </li></ul><ul><li>An increasingly volatile market for management ideas </li></ul><ul><li>Offshoring and the organisational structure of consulting firms </li></ul>
  14. 14. (2) The volatile market for management ideas Management ideas have life-cycles <ul><li>Management fashions introduced in recent years: </li></ul><ul><li>have shorter life spans </li></ul><ul><li>are broader-based </li></ul><ul><li>require greater implementation effort </li></ul><ul><li>are abandoned more quickly (because they’re more difficult?) </li></ul>Re-engineering Quality circles PERT Fashion 130 2.6 1990s 121 7.5 1980s 44 14.8 1950s-1970s Average number of articles on fashion during peak year Average number of years between fashion introduction and peak Decade during which fashion emerged
  15. 15. (2) The volatile market for management ideas The life-cycle of management ideas Level of benefits and costs Costs Benefits Time
  16. 16. (2) The volatile market for management ideas Innovation <ul><li>Never has been the core competence of most consulting firms </li></ul><ul><li>Need to avoid monolithic ideas – but there’s no economic incentive for individual firms to do so </li></ul><ul><li>Need to reinvent the wheel more often – has implications for resources and cost structures </li></ul>
  17. 17. Storm clouds ahead? Agenda <ul><li>Three challenges: </li></ul><ul><li>Enron and the tarnished reputation of consultants </li></ul><ul><li>An increasingly volatile market for management ideas </li></ul><ul><li>Offshoring and the organisational structure of consulting firms </li></ul>
  18. 18. (2) Offshoring and the organisational structure of consultancies The pyramid firm Junior consultants Senior consultants Partners
  19. 19. (3) Offshoring and the organisational structure of consultancies Ripe for disintermediation? “ Once I’ve found the people I want to work with, what value is the firm?” <ul><li>Brand? </li></ul><ul><li>Knowledge sharing? </li></ul><ul><li>Training and quality assurance? </li></ul><ul><li>Network? </li></ul>
  20. 20. (3) Offshoring and the organisational structure of consultancies Factors determining supplier impact Direct access to clients Private sector client base Pressure on margins Offshore (low cost) Onshore (high cost) Public sector client base Changing definition of offshore-able Perceived level of risk
  21. 21. (3) Offshoring and the organisational structure of consultancies Four scenarios Scenario #1 Scenario #4 High Low Low High Level of interaction between client and service provider Perceived level of risk Scenario #3 Scenario #2 Constant confrontation Profitable distrust Offshore rules Onshore returns
  22. 22. (3) Offshoring and the organisational structure of consultancies The diamond firm Junior consultants Senior consultants Partners
  23. 23. Film studio Director Script writer Cameras, make-up, catering, lights, set designers and builders, costumiers, location scouts, finance managers …. Film stars Producer Client Creative agency Proposition development specialists Enabling specialists Programme manager (3) Offshoring and the organisational structure of consultancies The future of consulting?

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