After a pandemic-driven decline in 2020, the management consulting industry rebounded strongly in 2021 and is expected to continue its strong growth in 2023. While the business slowdown was just temporary, it seems that the pandemic had accelerated – and even created –several trends that will significantly change the industry landscape in the long run. This article will explore these trends and more.
Traditional strategy consulting has become increasingly commodified in recent years as ex-consultants fill the ranks of their former clients. Many major companies like MasterCard and Pfizer have set up their own internal consulting practices. More often than not, these practices have a far greater understanding of their own businesses, thus helping reduce their businesses’ reliance on external consultants.
At the same time, clients have also long struggled to implement the strategies developed by their management consultants. Many consultant-proposed initiatives fail to generate their initially expected results. This is due to several reasons, such as a lack of talent and/or impetus to drive the implementation, as well as the recommendations being too difficult to implement.
Finally, also due to COVID, digital projects have become more and more common and requested. Consulting companies have seen an increasing demand for projects that only a few years ago were not part of the usual requests of F500 companies.
These factors have forced strategy consulting firms to reinvent themselves, adopting digital as a core part of their offerings – as opposed to just bread and butter strategy – and expanding their offerings to include strategy execution. With ‘digital transformation’ in vogue, consulting firms must possess capabilities in the trinity of strategy, technology, and implementation to thrive. The MBB (McKinsey, BCG, and Bain) firms, in particular, have recognized this, and have been aggressively building up their non-strategy practices (most notably McKinsey Implementation, McKinsey Digital, and BCG Platinion) over the past several years.
As client needs evolve, so has the way the management consulting industry fulfills those needs. While management consulting has traditionally been a labor-intensive industry, firms are increasingly adopting AI technologies to execute core tasks such as research and analysis. For example, global consulting firm Accenture has begun adopting a proprietary tool called myNav that simulates how potential Cloud solutions will function at scale and then helps map out how clients can best migrate their IT infrastructure to the Cloud. This has helped cut down the time clients spent on Cloud migration planning from weeks to a few days, effectively giving Accenture a competitive advantage in the domain.
A major implication of the move away from short-term strategy projects to longer-term digital strategy and execution projects is the increased demand for individuals with deep and specific technical skills over generalists. Project management, change management, and digital transformation skills are especially in demand nowadays. This change has made experienced hires with years of industry experience particularly attractive for top consulting firms.
The rapid growth of the technology sector in recent years means that there is now another faction in the war for talent. Big technology companies like Alphabet (Google), Amazon, Apple, Meta (formerly Facebook), and Microsoft offer amazing pay, comparatively reasonable hours, challenging work, and an assortment of other perks. Even smaller technology companies and start-ups (with the help of VC funding) can offer remuneration that rivals, or sometimes exceeds, those of consulting firms. Their working hours are, in most cases, better as well.
The type of talent that technology companies attract is very close to those who have traditionally been interested in management consulting. The result of this: consulting firms rolling out a series of work-life balance initiatives. For example, BCG offices in the Middle East have rolled out initiatives such as ‘blocking’ an hour a day for personal matters during the pandemic. These initiatives are definitely a welcomed sight in an industry where people regularly work 70+ hours per week, but it remains to be seen how effective they will be in terms of attracting and retaining talent.
In recent years, top consulting firms have begun looking beyond target schools for talent. This trend is expected to accelerate as competition for talent from technology companies intensifies and recruitment is focused on the skill sets that one possesses. In fact, some firms like PwC have even begun recruiting candidates without a Bachelor’s degree for risk management consulting roles, provided they can exhibit the skills needed by the firm.
That being said, being from a target school still gives candidates a slight edge in the recruitment process in terms of improving their profile and providing abundant networking opportunities. If you are a non-target school candidate, be sure to check out our article on how you can overcome this edge.
While recruiting the right talent is a key success factor for firms, they have not forgotten to continuously nurture these talents once they are a part of the firm. It is no longer enough to just train employees in Excel and PowerPoint or to simply sponsor their MBAs. Many top firms are now encouraging and even mandating employees to acquire knowledge on emerging topics such as cloud computing, data analytics, and blockchain technology. All major firms have their own internal learning platforms, and many make external learning easily available to their employees. For instance, EY is subscribed to Udemy for Business, giving its employees access to the more than 14,000 courses available on the platform. As technology and the business landscape change, so too must the skills consultants possess; accordingly, a continuing education mindset is key.
A multi-sourcing model has become more and more attractive as the problems businesses face grow increasingly complex. Companies are now breaking their large projects into smaller ones and then hiring multiple parties with unique capabilities to handle these smaller sub-projects. Large consulting firms can now expect to partner with freelancers, academics, technology companies, and each other to deliver the ultimate project goal for their shared client. An example of this was the Singapore Economic Development Board (EDB)’s Smart Industry Readiness Index (SIRI), a series of frameworks and tools to help manufacturers of varying sizes and industries transform their operations for Industry 4.0. SIRI was created via collaboration with major tech companies, consulting firms (including McKinsey, BCG, and Accenture), as well as experts from the industry and academia.
Another key driver of the multi-sourcing model is the proliferation of boutique consulting firms and niche freelancers (now easily locatable via freelance platforms). These firms and individuals usually have deep expertise in a particular niche. Thus, companies can leverage them to fulfill a specific need within their project and effectively get more bang for their buck, compared to hiring one large firm which comes with added frills and costs.
Management consulting work has traditionally been done on-site, with the industry standard being Mondays to Thursdays in the client’s office and Fridays at the home office. This was done to work more easily with clients and facilitate relationship building. However, the pandemic has proven that consulting work can be done effectively from a remote location.
While consultants are now returning to client offices, firms have begun to establish policies allowing staff to work remotely if they so choose. After all, there is a business case for this: the commute time could instead be used for more productive work, and the ability to work from the comfort of their homes may help firms retain experienced consultants who now have more personal commitments.
With communication tools becoming more advanced and recent developments like the metaverse, this trend will only accelerate in the future. Who knows? Maybe one day, SteerCo meetings may even be hosted in a virtual boardroom attended by avatars of C-suite executives and senior consultants.
Now that remote work has proven to be an effective alternative to on-site work, project staffing pools are expected to be expanded significantly. Global firms can now easily leverage specialized resources from faraway regions to meet the unique requirements of a project. Some local consultants will most likely still be needed for client relationship purposes, but firms that are able to fully leverage their diverse workforces will gain a competitive advantage going forward.
In an effort to serve clients better, consulting firms have begun adopting new pricing models. Traditionally, consulting services were billed based on the consultant hours devoted to a project. Nowadays, it is also possible to see value-based pricing where a percentage of the fees are locked behind the achievement of certain performance milestones. This has allowed clients to share risks and rewards with their consultants, effectively aligning their incentives. Another pricing model to look out for is a subscription-based service, which incentivizes firms to work leaner and deliver quality service more efficiently.
At the same time though, these new models also increase expectations on consultants to both work harder and smarter. The increased stress may very well push some aspiring and current consultants away from the industry — not a good thing as the war for talent heats up.
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Francesco is an interview coach, former BCG consultant, and tech entrepreneur. He is the #1 coach on PrepLounge.com for meetings done, where he completed more than 4.000 expert sessions. As a coach for consulting interviews, Francesco helped hundreds of candidates to land offers from McKinsey, BCG, and Bain. Since 2016, he organizes consulting boot camps in some of the leading universities in Europe. As a consultant, Francesco joined BCG in the Milan office, where he worked on projects in the energy, industrial goods, and consumer goods sectors. After BCG, he worked in venture capital in Germany as an angel fund associate. As an entrepreneur, Francesco founded two companies in Europe and Asia in the entertainment and EdTech sectors. He is currently leading a Singapore-based company and supporting startups as a strategic advisor.
