Innovation in Consulting

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Joe O'Mahoney, lecturer in Management Consultancy at Cardiff University, talks to the Institute of Consultancy on how innovation can thrive in consultancy.

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  • Over the next 40 minutes we’ll discuss some of the following. Want a conversation more than a lecture.
  • Client’s aren’t happy
  • The key challenge that analysts have focused on for the last 18 months has been the decline in consulting revenues. If one compares the period 1998 – 2008, where there was a fourfold rise in revenues, with the next couple of years, this is an obvious issue.
  • However, the industry is also facing more long standing problems and it is these that we focused on in our research. I will now highlight four of these.
  • Sources within IBM
  • OK. In pair I’d like you to come up with two top reasons clients use consultants……[Discussion]
  • Pressures on innovative practice.
  • Innovation in Consulting

    1. 1. Consultancy Innovation A Report Dr. Joe O’Mahoney Lecturer, Cardiff Business School Fellow, Advanced Institute of Management www.consulting-ideas.com
    2. 2. <ul><li>Business Process Re-engineering, time-motion, Lean, value-chain analysis, TQM, system dynamics, outsourcing, Six Sigma, benchmarking, balanced scorecard, SSADM , UML, DSMS, Agile, Porters Five Forces, Industry Lifecycle, 4Cs, 4Ps, Culture Change, Organisational Learning, 7-S Framework, Forcefield analysis, Core competence, Emotional Intelligence, Management by Objectives, Performance management, Portfolio management, Growth Share Matrix, Portfolio analysis, ADL Matrix, BCG Matrix, Innovation Management, Cash ratio, DCF, EBIT, Cash-flow, PLA, ROI, P/E Ratio, seven habits, continuous professional development, SWOT, Cost-Benefit Analysis, PEST analysis, brain-storming, Innovation adoption curve, 6 thinking hats (De Bono), Product / Market Grid , human capital index, game theory, governance models, strategy mapping, Schein’s levels of culture, dimensions of change, risk management, Capability maturity model, theory of reasoned action, Soft Systems Methodology, Kepner-Treqoe Matrix, Cost-Benefit analyses, absorption costing, contingency theory, groupthink, core groups, strategic business unit design, results orientated management, root cause analysis, Kaizen, diamond model, parenting styles, levers of control, change phases, planned behaviour, the OEM cube, cost benefit analysis, change management, the matrix of change, risk management, statistical process control, Systems Dynamics, scenario planning, organisational development, Scenario Planning. </li></ul>
    3. 3. Overview <ul><li>The Problem </li></ul><ul><li>The Project </li></ul><ul><li>Key Findings </li></ul><ul><li>Insights </li></ul><ul><li>Innovation in Practice </li></ul>Consulting Innovation
    4. 4. The Problem
    5. 5. Literature <ul><li>“ Standard roles” not creative. </li></ul><ul><li>- Sturdy (2009) </li></ul><ul><li>“ Agents of stability, not change” </li></ul><ul><li>- Furusten (2009) </li></ul>COMMODIFICATION ‘ the industry badly needs a “New Big Idea”…Previous consulting booms were built on ideas such as TQM and BPR. But, at the moment, consultants have no successor to such money-spinners’.
    6. 6. Why Clients Use Consultants
    7. 7. Clients aren’t too happy.
    8. 8. Long term trend…… EU Consulting Revenues Euro (Bn)
    9. 9. Context Global Consulting Revenues (Kennedy Information 2009) $Bn
    10. 10. The Project
    11. 11. Research Questions <ul><li>What does innovation mean to the consultancy sector? </li></ul><ul><li>How and why is innovation changing in the industry? </li></ul>
    12. 12. Methodology <ul><li>70 interviews </li></ul><ul><li>3 case-studies </li></ul><ul><li>Primary survey (n=399+) </li></ul><ul><li>Secondary UK CIS analysis (n=130) </li></ul>
    13. 13. Key Findings from the Data
    14. 14. Findings <ul><li>Size, Sector & Ownership </li></ul><ul><li>Innovation lifecycle </li></ul><ul><li>Type of Innovation </li></ul><ul><li>Making Innovation Stick </li></ul><ul><li>Increase / Decrease </li></ul><ul><li>Co-innovation </li></ul><ul><li>Constraints / Enablers </li></ul><ul><li>Procurement </li></ul>
    15. 15. Findings <ul><li>Size, Sector & Ownership </li></ul><ul><li>Innovation lifecycle </li></ul><ul><li>Type of Innovation </li></ul><ul><li>Making Innovation Stick </li></ul><ul><li>Increase / Decrease </li></ul><ul><li>Co-innovation </li></ul><ul><li>Constraints / Enablers </li></ul><ul><li>Procurement </li></ul>
    16. 16. Innovation is increasing due to increased competition in the market. But lower margins and higher utilisation mean there is less time and money for it. This is causing increased levels of co-innovation, especially with clients. This creates local rather than big-name innovations. But raises issues around economies of scale and intellectual property. Argument
    17. 17. Innovation is Increasing Did you introduce new or significantly improved services? Has innovation in your consultancy increased or decreased over the last 5 years? 45% 34% 33% 2009 2007 2005 26% 16% 60% Neither Decreased Increased
    18. 18. Why? <ul><li>Competition has increased  Differentiation (29%) </li></ul><ul><li>Clients are demanding new ideas to help them in recession (28%) </li></ul><ul><li>New people & skills  new ideas (21%) </li></ul>
    19. 19. But….. there’s less money available Profit margins have decreased by 25% since 1994 39 12 44 34 39 Uncertain demand for innovative goods or services 21 14 22 21 19 Need to meet EU regulations 24 24 27 23 22 Need to meet UK Government regulations 34 5 38 28 36 Market dominated by established enterprises 32 16 36 30 31 Lack of info on markets 30 20 34 28 28 Lack of info on technology 39 21 43 38 35 Lack of qualified personnel 37 28 45 31 35 Availability of finance 38 33 47 32 35 Cost of finance 43 9 46 40 42 Direct innovation costs too high 44 18 52 35 44 Excessive perceived economic risks Total % increase 2009 2007 2005
    20. 20. and less time….. Time % Utilisation Training
    21. 21. So How is This Possible?
    22. 22. How were these services developed? 166 22 22 8 Jointly with other institutions -66 9 28 25 By your enterprise group % Inc 2009 2007 2005
    23. 23. The Growth of Co-innovation
    24. 24. Insights
    25. 25. The Innovation Battle CONSULTANTS <ul><li>Greater Competition </li></ul><ul><li>Increased Experience </li></ul><ul><li>Fewer Partnerships </li></ul>Consultants Clients <ul><li>High utilisation rates </li></ul><ul><li>Low profit margins </li></ul><ul><li>Less ‘definition’ work </li></ul><ul><li>Risk adverse clients </li></ul><ul><li>Cost constraints </li></ul><ul><li>Procurement </li></ul>Clients <ul><li>Recession Aversion </li></ul><ul><li>Joint Innovation </li></ul>
    26. 26. What innovation means…..
    27. 27. … .to larger firms….
    28. 29. … .to smaller firms….
    29. 31. What Clients Think “ Coming out of a recession, we need new ideas” “ I feel like I’m being sold a standardised one-size-fits-all solution” “ Innovation isn’t always needed. But when it is, it’s hard to find” “… consultants blame procurers, procurers blame consultants, the business owner blames both” “ I now tend to use smaller consultancies because they focus on the problem more”
    30. 32. Key Lessons <ul><li>Less formal procedures (e.g. development processes, innovation teams) </li></ul><ul><li>More cultural techniques (e.g. investment in people, autonomy, communication, boundary spanners) </li></ul><ul><li>External knowledge crucial (e.g. cross-departments, conferences, collaborations with universities, professional associations) </li></ul><ul><li>Collaboration shares costs and creates ties. </li></ul><ul><li>Clients need to examine procurement processes to promote risk and innovation. </li></ul><ul><li>Big is no longer beautiful? </li></ul>
    31. 33. Innovation in Practice
    32. 34. www.aimpractice.com
    33. 36. 40 Page Benchmarking Report www.aimpractice.com
    34. 38. Questions [email_address] www.consulting-ideas.com

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