Since the time that former BCG advisor Clayton Christensen first used the term "disruptive innovation" in 1995 agile startups have pushed back established companies in every industry from manufacturing to music. Today, a tectonic shift is affecting management consulting, similar to how it has affected various other industries.

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Management consulting isn't often mentioned in discussions of industries that are susceptible for disruption (unless you have a conversation with Christensen) in spite of its fact that it fulfills all the criteria above.

In the past 60 years, the major management consulting firms have grown and have maintained their status by establishing the prestige of their brand, as well as lasting clients. Consulting is a business worth more than $200 billion according to CB Insights industry analyst Consensus. However, the three major consulting firms -which include McKinsey, Boston Consulting Group (BCG) as well as Bain and Bainin the end, are no more protected from the effects of disruption as any other sector.

"[W]e're still early in the story of consulting's disruption... More likely than not, alarms won't sound until it's already too late in the game." --- Clayton Christensen

The management consulting industry is mostly a human-driven. Per-diem or hourly billing, as opposed to outcomes-based or value-based pricing is the norm (even when industries such as law shift away from billable hours). The rapid pace of technological advancement means that increasingly the recommendations of consultants are outdated almost when they're first made.

Consulting, or in other words is inefficient, rigid and slow to adjust. Each of these flaws could signal a possible disruptionhaving all of them suggests a significant battle ahead.

McKinsey, Bain, and BCG have been through existence-threatening crises prior to. These firms provide a popular, brand-driven and difficult-to-quantify service for Fortune 100 companies with plenty of money to spend.

If you delve deeper into the kind of services these firms offer to their clients it's evident that the tectonic disruption is taking place in the field of the field of management consulting the same way it has affected other industries prior to. It might be a slow , gradual change, and the major companies could continue to exist regardless of how the size of their clientele however, a shift is in the works.

The creation of strategies

Prior to the time that Bruce Doolin Henderson opened the doors of the Boston Consulting Group on July 1st 1963, the notion of competition was not a common feature in American business culture or even the concept of strategy.

There were successful, great businesses. Companies made plans. They were not but thinking critically and consistently at a high-level about the three classic Cs of strategic thinking: their clients cost, their customers and competitors.

"What companies didn't have before the strategy revolution was a way of systematically putting together all the elements that determined their corporate fate... the pre-strategy worldview lacked a rigorous sense of the dynamics of competition." Walter Kiechel

Prior to BCG, McKinsey, and Bain the people who owned and operated companies in America generally ignored "strategy" as something for generals and political campaigns.

First management consultancies altered the way they worked. Since business was becoming more complex and global during the 60s and 70s consulting firms introduced modern methods in market research as well as data analysesand also access to experts from industry and academia to address the most pressing issues facing business. They helped businesses build better supply chain systems, boost their positioning of their products, identify which markets to leave and which ones to join and much more.

They pioneered several of the most important frameworks and tools that companies utilize to create corporate strategies, including the 2x2 matrix as well as the Experience Curve and SWOT (Strengths and Weaknesses) Opportunities and Threats) diagrams and Porter's Five Forces and many others.

When they saw the right path to success, BCG, McKinsey, and Bain started hiring the most talented and most skilled MBA students that they could. The MBA was for only the second time in history, an incredibly viable career option. Between 1970 between 1970 and 1995, the amount of MBAs awarded per year increased from 25,000-90,000.

Today, more than 200k students earn MBAs each one year throughout the US. The importance of strategic planning is evident for every business.

McKinsey reported a profit of about $10 billion in 2018. BCG around $7.5B and Bain approximately $4.5B. Both are still growing.

From one point of view it appears that the status of management consulting as a business has never been more safe. However, like their clients, who are constantly under threat by the emergence of new technologies and new players consultants are also not invincible to disruptive forces.

Four functions of consulting

"The underlying principles of strategy are enduring, regardless of technology or the pace of change." -Michael Porter. Michael Porter

Since the beginning of the management consultancy industry, companies have tried to distinguish themselves by providing more value to their clients. In some instances they've even incorporated themselves as part of a team.

It's not always a great thing. The notion to be "part of the team" has put both McKinsey as well as Bain on the wrong side of history over insider trading , as well as other scandals in the past.

In the majority of cases this is what makes these companies are so effective. Consulting is more than just trading advice to earn money. Consulting encompasses various types of functions and services bundled together in an opulent expensive bundle. Firms that work with companies such as McKinsey, BCG, and Bain anticipate to getlots of value from the relationships they have with them.

If the relationship between client and consultant is at its highest when the relationship is functioning at its best, the consultant offers the client the following:

• Information: The information and analysis that look at the industry, the customer's world and market position to help to understand it.
• Expertise: Experienced operator's view of a particular issue and the many ways they can solve it.
• Insight: The meticulous analysis and application of knowledge to provide insight that will assist the business in its success.
• Execution: The process of making the necessary modifications to be implemented.

In some instances it is true that consultants from management are employed to justify controversial decisions or to convey an unwelcome message to employees. The book "The Firm," Duff McDonald asserts that McKinsey specifically "might be the single greatest legitimizer of mass layoffs in history."

"If you were a CEO and felt you needed to cut 10% of costs but didn't feel you were getting buy-in from your employees," the author notes, "the hiring of McKinsey generally got the point across quite clearly."

When a client and consultant work together in the way they initially intended but, these 4 values -- knowledge, experience knowledge, insight, and execution comprise part of the "package" that consultants offer and each is questioned by a variety of factors, both large and small in the past few years.

Information about competitors and customers is available more than ever before. Expertise has been separated. Information has been made into a product (and in some instances it has been commercialized). The execution, too, is, in many instances taken place into the company or outsourced to freelancers.

As Soren Kaplan pointed out in Inc, there's much to be said about the nature of management consulting that could lead to it becoming vulnerable to disruptors

• It's a lot dependent upon human labor. (computational) human laborwhich computers are becoming more and more of.
• It typically has extremely high margins (and doesn't charge according to outcomes but on the duration).
• The value is mostly dependent on time, meaning that the advice tends to become old-fashioned rapidly.
• The value is due to information asymmetry (knowing what other consultants or firms do not) and is more difficult to maintain in the online age.

In spite of all this, BCG, Bain, and McKinsey continue to grow. While the major management consulting firms are on the verge of falling but it's not necessarily like it.

On the other hand, if we examine each component of the value chain consulting by a critical lens, we are able to spot weaknesses.

As the prophet of disruption said, "we're still early in the story of consulting's disruption."

A number of the challenges to consulting have resulted from criticism of business practices used by consultants. In recent decades, McKinsey has been accused of conflicts of interests, ties to corruption, as well as working for oppressive governments across the globe.

In the wake of a scathing report from the Department of Justice about McKinsey's "lack of candor" and "insufficient disclosures" in dealing with clients, the company was forced to pay $15 million settlement.

In the year 2019, these complaints led the company to address these concerns to employees in a public manner, promising that it will increase transparency and be more mindful about the kind of clients they work with.

To comprehend what this all came out as well as which post-disruption outlook is for the large management consulting companies We examine all four tasks. The goal is to know the exact value consulting firms provide as well as where other disruptive firms are, or aren't, dislodging the consulting firms.

1. Information

In the golden age of management consulting the young consultants would collect crucial data about the businesses of their clients through activities such as taking a walk in the parking lot and recording the number of customers leaving the store carrying shopping bags.

The growth of market research firms as well as databases have made it possible for firms to collect useful, actionable information themselves. The development of tools for business analytics have made it possible for them to gather data about the operations and performance of their firms and also independently. Tycoonstory gives the opportunity to share the challenges of being an entrepreneur and offers a regularly updated resource on entrepreneurship.

Today, retailers are able to see images of their parking areas through satellite cameras. They can utilize those images to study the traffic patterns of their stores. Inside, as almost everything related to fulfillment purchase, delivery, and fulfillment is digitally recorded, they are able to gain access to a similar level of information about almost every element of supply chain as well as your customer's experience.

"Organizations are now amalgams of software-enabled systems (at point-of-sales, managing inventory, tracking production) that dutifully log and store data." --"MIT Sloan Management Review" MIT Sloan Management Review

The fact that this information is available doesn't mean that management consulting firms can no any longer have a role to play in the collection of data to help clients solve their problems. There are occasions when it's more practical and more cost-effective for CEOs to employ an BCG or an Bain to do this job. However, it does mean that these situations exist in a narrower situation.

How was consulting used to function?

It was the time when businesses would seek management consultants with all their strategic issues and the firms hired the top and brightest graduates of colleges to work at their desks and gather data needed to address the problems. They would utilize every tool to analyze the market, industries consumer attitudes, as well as their product lines. A senior associate will come in and make sense of the information, put it in a package and then present it to the customer.

At the time, customers had a basic understanding of their business was usually in a very basic state.

For a long time, one of many of the best selling methods in consulting was to ask prospective clients if they were aware of how much business they had in all departments with their biggest client, and what the profitability of this company was. The answer according to Kiechel says typically "no."

Since then the internal data of companies and market research conducted by industry are now more readily available than ever. The answer to a question such as table stakesthe difference lies with the depth of analysis that you can do with the data.

Every major consulting firm have teams that are set up to analyze data to their clientele. McKinsey employs skilled data engineers to collaborate directly with clients and help to develop more advanced data collection and analysis workflows.

BCG has a team named BCG Gamma specifically for data experts and consultants who work together to analyze data in areas ranging from "marketing, risk assessment, and customer service to manufacturing, supply chain management, scenario simulation, and competitive intelligence."

In other words, large consulting firms employ individuals to tackle the major questions that go together with the information.

If you're a healthcare facility looking for a thorough study of the most effective way to reduce the cost of treatment while keeping patient care top-notch, you may choose McKinsey. If you're a logistics company that wants to look at the entire supply chain in order to determine where expenses will rise in the future, you may choose Bain. Whatever the case, chances are that you've found the right people to tackle this issue for your self.

For instance, Bain highlights a case study where it collaborated with a major beverage company keen to take advantage the digital channel. According to the study,

"...the speed of disruption , accelerated by the rapid growth of new technologies can make the digital realm difficult to navigate. When BeverageCo tried to make use of the digital revolution the company had several unrelated projects (such as online ads and an official Facebook page for the company) that were in progress, but did not gain the momentum needed to implement each one of these. They also didn't have an integrated vision that encouraged cooperation between the digital world and more traditional structure of the company."

The company was online and had an online presence that generated data, but it was lacking leadership or a plan for how its online presence could be used or how the data could be used to help its primary business.

In the end, the company's website traffic and sales conversion rates were less than the rates of competitors The company's online presence on social networks was sporadic and its CRM tools did not capture information from the internet that could help the business improve its engagement with customers.

In addition, the major advice from the Bain study appear to be fairly typical such as the identification of KPIs and appointing an executive in charge of digital and implementing an automated CRM system.

Although efficient KPIs could be difficult to achieve at a large the scale of an international CRM may be a difficult task for the procurement team of the company but these aren't ground-breaking suggestions from a technology perspective. Bain's contribution here isn't just in procuring data -- it's in helping companies implement new programs based upon the information.

What is the way that the disruption of the business consulting industry affects

Today, tools such as Looker, Tableau, Microsoft Power BI, Qlik, SAS, and Domo let companies instantly produce reports and dashboards of issues such as:

• Value of customer lifetime across all demographic and behavioral cohorts
• The conversion rates (site-to-item as well as item-to-cart) for the entire line of products
• Effectiveness of marketing expenditure and advertising targeting

Different analytics tools available that are available for issues that are less in the scope of their application, and also to incorporate data into daily decision-making.

If your business has 100 to 1,000 or 10,000or more people, creating an internal analytics department requires changing the company's organization's culture, creating an entirely new team, and making significant, long-lasting modifications to the way your company operates.

This is a problem which consulting firms can to solve.

What is the most significant difference between Bain's service in this instance (and its management consultancy services offered in general) isn't as in the expertise of the consultant as much as what the client does not have.

"BeverageCo," the "BeverageCo" from the example above won't be able to just begin with Power BI to understand its business from a higher degree, since it doesn't know where to begin.

As technology improves however, it's possible that the bar will drop further and farther. Businesses that are that specialize in analytical and business intelligence understand they're competing for prizes worth a few billions of dollars. And hundreds of them have come up to assist Fortune 500 companies get the types of information they would get from Bain or BCG.

However, even in the event that "big data" doesn't obviate the need for expert advice completely, it may create a market for more specialist consulting firms who specialize in the use of analysis and market research.

Others are using these insights to challenge the power of the old guard in management consulting. Software firm Palantir is one of them. It is a specialist in large-scale data analytics applications is one of these firms.

In 2004, the company was founded and has drawn initial investments from the investment arm of the CIA, Palantir has since grown into one of government's biggest suppliers. Palantir is said to have $1.5B in contracts with a variety of agencies and departments that include those of the Department of Defense and the Department of Homeland Security.

The expertise of Palantir goes beyond its work with big data with the Federal governmentand this expertise is placing the old management consultants in the spotlight.

The company has two distinct platform software: Palantir Gotham, designed specifically for defense and intelligence applications for government agencies in addition to Palantir Foundry, aimed at commercial enterprises. Foundry is an earlier Palantir project called Metropolis which was extensively tested by JPMorgan Chase in 2009, was employed by various companies, including Airbus, Ferrari, and Merck.

What sets Palantir from the other software company that offers data analytics is the fact that it blends its software with custom-designed consulting services to create a single information product it licenses to its customers. Palantir's filings to the Securities and Exchange Commission (SEC) show that the average amount of contracts it issued was $5.6M in 2019, which highlights the huge potential for revenue from the company's hybrid strategy.

For government agencies like that of the Department of Defense, Palantir's business model is a bit unconventional. The federal government usually hires its consultants in isolation from its software suppliers as well, and Palantir is a unique exception to this. Many private firms, however, the hybrid model offered by Palantir may provide a glimpse of the next generation of managerial consulting could appear to be.

Management consulting fights against

A few big consultancies have realized the danger technology poses to the foundations of the company's model of business.

The year 2015 saw McKinsey purchased QuantumBlack the London-based company that offers advanced analytics and has expertise in analyzing data on organizational performance along with Formula 1 teams across Europe and Asia.

QuantumBlack "combines data from disparate sources to produce meaningful data around human endeavor," which suggests that McKinsey is focusing on the need to improve its analytics capabilities to be competitive with the latest self-service options currently available.

Another significant acquisition for McKinsey through the acquisition from Carbon12 in 2016 was part of the company's McKinsey Digital Initiative. The purpose of the new McKinsey department is to attract designers, developers as well as data engineers and many others to the kinds of projects that might be managed solely by analysts who focused on strategy in the in the past.

But, just acquisitions do not suffice for the legacy management consulting firms to stay relevant and competitive in the face of the threat posed Palantir as well as other competitors like Tyler Technologies and Verint Systems.

In this regard, a number of consulting firms have created their own digital platforms that supplement the in-person consultation services which have been their mainstays for many years.

Bain's Vector platform is a prime instance. Vector is not a platform or software but rather an online framework by which Bain offers consultation services to clients. This means it's not a platform for software that clients of Bain's are able to license and deploy.

Although Vector is a fresh method to consult for Bain however, it's just that -- a different way to market conventional consulting. Analysts with different specialties analyze the data from various sources supplied by the client prior to making tactical and strategic suggestions to accomplish the desired goal. The results have been impressive for the clients of Bain, but it doesn't go any further than repackaging and providing the long-running consulting services of Bain in a new, digital way.

The BCG's Digital Ventures (DV) is a company that takes digital-first consulting one step further than Bain by providing large companies the opportunity to are able to launch businesses rapidly. DV is a wholly-owned subsidiary of BCG which functions in the same way as startups accelerators. Analysts from DV assist clients look at concepts for new ventures and then analyze the market's current conditions and future opportunities. DV creates businesses that are just beginning to emerge and uses its in-house experts in order to develop these companies until the companies "graduate" from the program.

This strategy is beneficial for DV as well as its customers. DV can benefit from BCG's consultancy expertise to demonstrate the advantages it has to offer big corporations looking to establish smaller companies that are more agile and flexible. Additionally, its clients are able to explore new market segments and profit from emerging opportunities without taking on all the burdenand risk -- them.

Palantir however offers its consulting expertise along with custom-made software that is tailored to the specific needs of the customer. The clients of Palantir are able to not just benefit from Palantir's expertise in consulting however, they can also use Gotham or Foundry their own software.

The fact that a majority of companies in the field of management consulting are hiring experts in fields like machine learning and data analytics is a good indicator that they are responding directly towards Palantir and other rivals in addition to capitalizing on the strategic significance of these technologies for their customers.

In the end, traditional consultants could have no choice to make a decision to invest in development of their own private technology platforms that be competitive with the hybrid model developed by Palantir and other business intelligence firms like Verint Systems.

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2. Expertise

One of the most common criticisms about consultants is they put generalists into businesses to complete the work of an expert. Complex problems, as the theory is, can only be solved by an expert with relevant knowledge.

That's why consulting companies have long-established a network of experts with specific kinds of expertise outside their own walls. From industry experts and academics to the top business leaders and government, these professionals are able to offer advice from an operator's viewpoint for a variety of client-related issues.

The vast group of experts help consultants find superior solutions for clients and increase their reputation. Utilizing the top experts in specific areas like CPG logistics management for instance -they can also provide them with a legitimate advantage in these areas.

For a long time consultants were the only source of knowledge from various ways. Today, it's much simpler to connect with "experts." You don't have to engage with the likes of Bain or BCG to speak to someone who has a thorough understanding of the management of supply chains.

But the particularization of consulting firms knowledge bases the trend began in the 1980s, implies that, even now most of the operating expertise in the pillar areas of the management of supply chains is tied to firms such as McKinsey. Although experts aren't as easy to locate but management consultancies have gained an advantage in the fight to solve specific types of issues.

How did consulting work

Expertise was not the mainstay of the large consultanciesat least, at first. At McKinsey the majority of partner's senior executives were proud generalists. The junior partners who had less power, were specialized. For more details to visit Share your startup story

Fred Gluck, who left his job as the electrical engineer in order to be a part of McKinsey as an analyst in technology, was an important influence in the opposite direction. While Gluck was rising to the status in the position of senior partnership in McKinsey, BCG was winning clients by its strategic, rigorous strategy for consulting. Its BCG "strategy buffs" (as Gluck called them) were highly analytical, always seeking to improve their skills and were highly scientific.

McKinsey has always employed the"situational, "it depends" style of consulting in management. Gluck was determined to change this and create an environment of expertise within the company.

To accomplish this to do that, he conducted internal training sessions on strategic strategies and tools, as well as creating relationships across the think tank, academia as well as successful businesses and other organizations. The objective was to utilize all resources available to transform McKinsey into the top company for strategy. In the year in 1980 Gluck is the person responsible for "virtually all McKinsey's endeavors to systematically build expertise in particular subjects and industries."

The top three management consulting firms. McKinsey's strategy adoption coincided with its rise as the top firm for revenue generation.

After McKinsey's successes in building its knowledge base, getting expertise in crucial areas of research was the main concern of other major management consulting firms.

Each naturally had a distinct area of focus, based on the customers they served and the way they wanted to distinguish themselves from other.

Bain who was founded by two of the co-founders, who were later to create Bain Capital, was a specialist in finance right from the start. In the course of time, it's been able to take on a greater percentage of PE clients and has also worked on leveraged buyouts as well as M&As.

BCG was the first management consulting firm to focus on strategy. firm, has today an image of being one of the more "academic" of the big firms, with a strong focus on innovation and development for companies -- which is aiding companies to adapt to the changing world of technology expand, develop, and transform.

The first partners of McKinsey's and client relationships were focused on operations, management and logistics. In time, McKinsey developed a particular knowledge of topics such as governance (both as political and corporate) as well as development and healthcare.

Today is the time to consult

In the decade following Gluck assumed the responsibility of creating McKinsey to be a "knowledge-centered" company, the McKinsey Global Institute (MGI) was established. MGI was founded in the Soviet Union had just collapsed, China was beginning to open up, and US firms required international knowledge -which is what McKinsey offered through MGI that combines macroeconomics and on-the-ground analysis by experts.

These types of experts that consultancies have been hiring for decades are now able to be independently consulted without the need to pay for the remainder part of the consulting package due to what's known as "learning networks."

Companies offering this service that do this in Europe comprise Third Bridge and AlphaSights In the US the top contender company is Gerson Lehrman Group (GLG). GLG as well as other companies like it employ experts in a similar way to consultants like McKinsey could do, and then hires experts to respond to clients' questions on a demand basis.

If you're an investor looking to be aware of how the industry will evolve in US coal mining or an executive from the technology industry searching for an expert on AI or AI, you can collaborate with companies such as GLG to locate the best source. You can then pay per hour for a private, informal discussion (or series of conversations) on any topic you want to discuss.

How disruptions in the industry of management consulting works

Although GLG defines itself in the present as "a learning membership connecting business people trying to solve problems to experts that can solve them," GLG was founded as an publishing company.

The goal was to recruit experts to write guidebooks which could assist investors from hedge funds and other companies to understand the decisions they made in specific industries. 

As time passed, GLG found that its investors were more interested in engaging in informal, one-off conversations with their experts than studying its reports. Managers of the fund GLG spoke to as reported by The New York Times, said "many of their best insights came through casual conversations, not from formal reports."

GLG revamped its business model to put its focus on connecting experts to people who require their services. In the process, and with this new model of business, GLG discovered that management consulting companies -that are often in search of particular, specific expertisewas among its most loyal clients.

GLG network experts can be paid up to $1000 an hour for a telephone call, or even more. GLG's experts are today the former ambassador for China Jon Huntsman Jr. and the former Obama campaign director David Plouffe, and former under secretary of Defense for Intelligence Michael G. Vickers and many other famous people in finance, government and business. GLG clients can utilize GLG to talk with celebrities like Pamela Thomas Graham who was a former director for Credit Suisse and associate at McKinsey.

"You could call what we do consulting, but it isn't, really," GLG President as well as CEO Alexander Saint-Amand told Recode. "We've executed hundreds of projects. Our members have responded to more than 100 million questions via our many websites. The most memorable experience is a one-to-one telephone chat or meeting."

GLG faced challenges in cutting costs throughout the financial sector following the 2008 financial crisis. However, in the years since, prominence network of experts has grown dramatically.

In 2008, businesses had budgeted less than $100 million on professional learning networks. In 2017, the figure was $800 million. By the time of early 2020 this figure stood at greater than $1.3B -an amount that is proof that Integrity Research's estimations that expert network expenditures will surpass $1 billion by 2021 were correct.

GLG is, obviously but it is far from being the sole expert network company profiting from the growing demand in this area.

The London-based AlphaSights is named as one of the fastest-growing businesses within Europe in 2017 by Financial Times in 2017. Third Bridge was also listed as one of the 100 businesses that have the highest growth in profits in Britain in 2019.