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  • Writer's pictureTom Rodenhauser

Consulting's New Era - Rise of the Business Engineer

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KRR-Blog-New Era-Jan 2024
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What Are We Seeing?

  • Chaos typically fueled consulting growth as clients seek help facing new challenges. Since the 1990s, the consulting industry has been on a steady upswing with consultants deploying a predictable playbook that optimized and grew client businesses facing external disruptions.

  • Consulting growth started to take off in 2013, partly because emerging markets – and China – began embracing professional services. Firms’ early investments in local footprints earned dividends. But the greater driver pointed to consultancies’ investments in digital capabilities. Post-2008 financial crisis, digital gained traction amidst the upswell of cloud computing and software-as-a-service businesses and the investment momentum generated by the influx of private capital. 

What's Behind It?

  • Over the last 30 years, the drivers of strategic change have been relatively stable. Digital technologies and the global trading system that emerged in the mid-2000s reinforced the demand and technical feasibility trends that had been set in motion a decade earlier. Meanwhile, access to rock-bottom interest rates and the massive growth of private capital were strong tailwinds for new investment. But notwithstanding the hype this era of "Great Moderation" largely drove incremental growth and optimization continuous improvement not transformative strategic change.

  • Covid yielded a short-term bonanza for many consultants as talent-strapped clients grappled with supply chain and business-model disruptions. But the Great Moderation era is now dead. 

Why Does It Matter?

  • Many consultants now find themselves lacking the cutting-edge, industry-level technical and engineering expertise clients seek to help drive their innovation and resilience priorities. To remain relevant, global consultancies will likely need new capabilities and new business models to compete with non-traditional competitors (i.e. engineers and vendors that bypass consultants as facilitators, and highly specialized data-driven advisors focused on functions and industries).

  • Investment activity this year shifted towards GenAI, data engineering, and other engineering and scientific domains. But integrating the intangible experience and know-how in these non-traditional consulting domains will be a challenge. Addressing the consulting business model itself may prove even tougher than acquiring new capabilities. Firms must flatten their talent pyramids, centralize management, and gear capital structures to fund higher investment budgets. This will force tough tradeoffs and strain partner-based ownership and governance. 

Our next installment will discuss the mega-trends driving consulting services.

(c) 2024 Kennedy Research Reports LLC

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