Home STRATEGY & MANAGEMENT Change Management Time for change: Why the consulting sector needs a new commercial ethos

Time for change: Why the consulting sector needs a new commercial ethos

February 19, 2021

Leon Gauhman, chief strategy officer at Elsewhen, explores how big consulting can revive its damaged reputation in the wake of bungled Covid-19 contracts and inflammatory sales advice. From asking clients difficult questions to upgrading legacy tech, he provides the blueprint for a more responsible and effective consultancy model.

Hiring a big-name advisor in this era of global pandemic and tech disruption is no longer the silver bullet it once was.

Amid the chaos caused by Covid-19, public and private sector reliance on external advice drove the value of the UK consultancy market up by 7% to £11.3bn^[1]. And 78% of this consulting work^[2] goes to preferred suppliers, dominated by the industry’s big four.

Yet for all their prowess, the world’s leading consultants continue to be embroiled in a series of high-profile fiascos, ranging from the humiliating collapse of Wirecard and accusations of fuelling America’s opioid crisis ^[3] to the ineptitude displayed during the government’s Track & Trace strategy.

So what’s going wrong? One clear problem is that consultants are overreaching in pursuit of growth – and in doing so are placing their reputations, and those of their clients and of consultancies in general, on the line.

If the sector’s champions want to avoid becoming next week’s ‘most-read’ story in the FT, they need to embrace a new ethos – a code of conduct to dodge disaster and regain balance in the services that they provide. Here’s how:

1. Prepare to challenge and be challenged

Over the last decade, the ‘land and expand’ imperative has seen leading consultancies use their influence with clients to secure evermore lucrative contracts and responsibilities ^[4] that lie outside their core remit. However the pandemic has thrown up plenty of examples ^[5] that demonstrate the dangers of this consultancy mission creep. Probably the most noteworthy examples are the failure of the UK government’s Test & Trace programme ^[6] (currently splashing out £2.75 million a day on private consultants ^[7]) and the controversy around its handling of PPE contracts ^[8].

There are two major problems here. Firstly, the client’s assumption that consultants are “a safe pair of hands” that can handle any challenge. Even a powerhouse consultancy with decades of experience cannot be all things to all people: indeed, the pandemic has exposed the weaknesses of several established players.

Secondly, the issue lies with consultancy’s reluctance to come clean about the limits of their capabilities, in case they lose the business. The reality is that consultants need to exert real energy into getting under the skin of the client problem – and at the same time, interrogate their own capabilities. Working with the client, they need to devise a strategy that accurately identifies the core issue and explains how it will be solved. Consultancies pitching for business should not be afraid of really challenging the brief, asking difficult questions, and offering game-changing solutions. Where they suspect that they may not have the capabilities to meet the brief, they should say so, leaving clients free to find the partner best suited to solve the challenge at hand. Consultants which adopt this approach are more likely to be interested in solving the problem, not just securing the contract. In doing so, they will also encourage a more open procurement culture where the real challenges, costs, resources and time required to fulfil the client brief are aired and debated early on.

2. Place company values above delivering shareholder value

All of the four big consultancies have big, bold purpose and value statements usually around making a difference and empowering positive change.

In a pandemic, 21st century world, consumers, stakeholders and opinion formers really expect companies to be purpose-driven ^[9] beyond nice words on a website. In practice this means consultancies benchmarking day-to-day decisions and behaviour against the company’s core values and purpose. For example, asking “Does helping a pharma company ‘turbocharge’ sales of a highly addictive opioid drug chime with our core values or shall we pass?” “Do we think this government procurement process creates a level playing field or shall we pass?”

Consultancies’ sheer size, and the drive to deliver shareholder value definitely mean consistently living the company’s core values and purpose can be hard to do in practice. Ultimately however, the big global consultancies have both the clout and the cashflow to reject RFPs that aren’t a good fit and to set high ethical standards in the process. Boards and shareholders themselves have an important role to play in holding senior leaders accountable on ensuring company values are upheld, not just on delivering shareholder value.

There are signs that consultancies are beginning to understand the need to mind the gap between what they say they stand for and how they behave. McKinsey has introduced a more rigorous framework around selecting new clients. The resignation of KPMG UK chair Bill Michael after telling staff to “stop moaning” about the pandemic is another step in the right direction. Improved governance and accountability are vital to the trust and integrity which for so long has been taken for granted within kingpin consultancies, and which now hangs in the balance.

3. Narrow the gap between pitching, strategy and implementation

Big consultancies’ baseline competency is classic management strategy. Their standard MO follows a traditional trickle down waterfall formula in which a strategy is devised by subject-matter experts often with little hands-on experience, then handed over to open-ended blue sky design thinkers. Only at the actual build stage does the reality of implementation come in. Often when the term ‘build’ is used in these strategies, however, what’s really meant is ‘implementation’. Not only is this a distinctly ‘un-agile’ process, it isn’t how modern companies, big tech pioneers (GAFA) or tech-powered startups operate.

Today’s tech-first companies ensure designers and technologists are involved at the outset. There is an argument for learning from tech-focused smaller consultancies, whose MO is to execute quickly and to develop options and strategy based on experiment-derived insights. This preference for low-cost experimentation can provide the foundation for a rapid implementation programme, where iterative trial and error replaces reactive strategy.

4. Treat technology as a part of your DNA

Covid-19 has accelerated the shift to digital, which means all companies are now tech companies whether they like it or not. The problem is, many consultancies still have a tendency to downgrade tech, viewing it as a straightforward systematic or procedural investment, when actually it is a creative and non-linear design activity.

Failure to understand this complexity is what leads to situations like the UK government’s failed Track and Trace programme, where the use of an outdated version of Excel to manage public data resulted in the under-reporting of 16,000 Covid-19 positive cases ^[10]. Placing tech at the centre of the action has implications for recruitment and promotion. Instead of packing out boardrooms with pitchers and strategists, consultants need to ensure technologists, engineers and designers are present during pitching, planning, decision-making and sign off. Including experts who are immersed in tech can use their early intervention to give a head’s up on which solutions are viable from a design and build perspective – and which should be relegated to pie-in-the-sky thinking.

5. Don’t shoehorn clients into ill-fitting tech solutions

One of the first moves made by traditional consultancies when they secure a contract is to steer clients towards their own technology partner’s platforms, bringing in the same tools to solve any possible customer problem that emerges from the strategy process. This approach persists despite changing market realities, emerging business possibilities and new CX expectations.

While it has a beguiling off-the-shelf simplicity, this way of doing things isn’t really adequate for the endless rounds of digital transformation that companies must go through to stay ahead of the curve.

Consultants that force clients to adopt these legacy solutions are, in effect, shoehorning them into huge horizontal change programmes where the supplier is constantly migrating everything onto new platforms. The problem is, it’s easy to end up in a place where the client’s business model is no longer delivering the best outcome to customers – and it’s not obvious why. Instead, consultancies need to consider the unique needs of their clients and the problem that is being solved to choose the right tool for the job. The sole priority should be successful outcomes, customer experience and not business relations with vendors.

Final thought

A relentless pursuit of scale means big consultancies are at a point of reputational watershed. And inevitably their performance has a knock-on effect on how all consultants are perceived. Robust processes around KPIs that prove objectives are being met are critical. At the same time, McKinsey’s recent problems ^[11] underline the fact that the bigger players need to ensure their approach to compliance is in line with their own corporate growth and shifts in the market.

With a day of reckoning coming soon for the big four’s conflict of interest between accounting and consulting ^[12], the sector as a whole needs to safeguard itself against consultancy over-reach ^[13].

While consultants must avoid stretching too thin, they also need to ensure that they are keeping pace with the tech transformations disrupting every client’s business.

Perhaps most urgently, given the human impact of recent consulting scandals, big consulting needs to return to the question of integrity and what that looks like across all aspects of a consulting company’s actions, decisions, processes and operations. More than ever, we need the industry’s leading lights to be accountable if the consultancy sector is to rebuild its reputation and help drive the kind of innovation growth that the world’s economy so badly needs post pandemic.

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About the Author

Leon Gauhman

Leon Gauhman is co-founder and CPO/CSO of Elsewhen, a digital product consultancy that works with some of the world’s best-known companies – including Google, Mastercard, Spotify and Microsoft – to develop standout B2B design and technology solutions. A firm believer in entrepreneurship, Leon also mentors startups including Seedcamp and Wayra.

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