(This article was based on an article I wrote years ago before generative AI swept the globe. It has been updated to reflect the current times in 2023 onward.)
What we assumed only had the ramifications of the common flu actually brought world economies into a recession. Clientele delayed projects, reduced the scope, or cancelled them full stop. Budgets were now reserved for “recovery” and “recalibration in the new normal.” The world suddenly receded into virtual meetings. Soon, "Zoom Fatigue" had set in, driving everyone close to insanity.
Then, generative AI swept the world, further endangering those consultants who assumed that "the riches were in the niches" was the ticket to abundance.
If you only focused on one narrow part of the consulting "value chain," you were most likely doomed.
AI could rapidly produce cookie cutter solutions in record time and our clients couldn't discern the difference. Specialists were doomed, especially if you focused on one niche.
If you were a copywriter, AI could produce an essay in record time.
If you were a digital artist specializing in character design, AI could create myriad outputs in under 5 minutes.
If you were a strategist in design thinking and innovation, you could feed your client's "design brief" to AI and it would pump out a pretty good "solution," plus a workshop structure to boot.
As consultants, we solve problems for our clients. But if "spurting advice" is your main skill set, it's easy to prompt AI by feeding it a specific scenario and let AI do the consulting.
It's a paradox and an irony: AI produces answers based on "what is currently known," so most of the solutions pilfered by consultants won't be entirely original.
If you are narrowly specialized like a mason, the most simplest "creative" task can still be outsourced by AI. A product or service offering that's easily copied by the masses means consultants who lacked serious differentiation before would find an early demise. Generative AI simply delivered the killing blow to prove that point.
But even before the pandemic and generative AI, I had already noticed certain trends in the consulting industry that went unnoticed by many. It appears my observations were spot on.
Now the real question: What is your true competitive advantage in a world whose services are easily replicated and copied?
Let me explain what I was seeing in the last decade, one which was full of fads, social media, and mainstream business media theatrics.
Global Management Consulting is a $200 billion industry. That number fluctuates depending on who you read. Despite the projected 18% revenue drop because of COVID-19, or minus $28 billion in revenue collectively, the industry will still prevail. A slightly new report shows the industryis expected to grow "from $891.88 billion in 2021 to $973.67 billion in 2022 at a compound annual growth rate (CAGR) of 9.2%"
The consulting industry has become one of the largest segments under the umbrella of “professional services.” No matter if it’s a pandemic or nuclear bomb going off, economies will hire consultants, large and small, for help.
There are endless amounts of client organizations and C-Levels that need some kind of service: strategy, operations, taxes, even more complex stuff like mergers, acquisitions, and finding entry into new markets or segments.
And in my line of work — strategy and innovation consulting — 99% of it isn't new. Despite the saying that creativity is necessary, how much of that work is truly original?
But clients are willing to pay commensurate fees because we have an agility and repertoire that they themselves don't possess. There's a gap, we help them fill it. If they're in pain, we soothe it. If pain needs to be deployed, we deliver it. Whether team, or lone operator, our mission as professionals is to use that very particular set of skills (acquired over a very long career) to get it done. This means being more than a hired gun or a contractor to whom a Task Order or break-fix ticket is assigned. We're trusted peers sought for our services.
If the client wants to do something faster, cheaper, or better, we have the smarts and experience to help them do it. Clients want cutting-edge solutions with the best return on investment.
Remember the days of design thinking and the fancy creative methodologies?
The consulting business is a blend of chess and hand-to-hand combat with people in the same line of work who also think that they have exceedingly rare insights, tools, and methods from their bag of black magic.
Many experts claimed that management consulting was bound to be — wait for it — disrupted. This disruption was set to be an explosive event, but I see it more like the natural ebb and flow on the beach: the market before us is like an overlapping collision of patterns and microevents.
However, not everyone knows how to interpret history or the patterns in the market, and not every practitioner is shrewd enough to pause and pick the right moment to surf.
In 2013, Clayton Christensen said that the amount of classic strategy work being done had "sharply declined over the past 30 years, from 60% or 70% to only about 20%." The industry was dominated by your typical incumbents because it was hard to replicate the specialized knowledge and flexibility that these management consulting firms possessed.
However, client needs also evolved (as they always do). That led to a "decoupling" where it was no longer necessary to pay top dollar for full integrated solutions; more smaller and agile shops could provide better speed and responsiveness in the consulting value chain.
Technology advancements were enabling market research companies and database providers to democratize the availability of data. What big firms could accomplish with marketing analyses by their own staff could be rapidly accomplished by Forrester or Gartner.
And what used to be the domain of Forrester, Gartner, and IDC, can readily and rapidly be accomplished by more agile firms like Domo, Looker, Qlik, Radius, and CBInsights. That made the space even more highly contested.
Consultancy turnover also led to opportunistic veteran strategists who could rapidly start their own shop and further congest the battlefield. Since they now had real world experience and a high quality network of contacts, they could bring new value in ways that couldn't be achieved by slower, massive firms. Plus, the low barrier to entry for "entrepreneurship" and social media allows anyone to brand themselves really well.
There are five flaws that made the traditional model vulnerable to decoupling:
Knowledge commoditization is probably the force of nature you should learn to work with. Now that AI has an infinite wellspring of innovation knowledge to draw from, it no longer pays to be the most knowledgeable or smartest consultant.
Clients used to pay top dollar to access the repertoire of incumbents because they had knowledge and methods that were inaccessible anywhere else. There was intrinsic value in that.
But now? Information is open source, ChatGPT can spit it out in a split second, and the knowledge's uniqueness has a short shelf life.
I've seen this flaw take its toll on starting operators and practitioners who are skilled at their craft, but are really tied down by the presumed novelty of their methodologies. Or, they're tied down to just one mode of help in the value chain — down to a fault — like facilitation, strategic planning, design thinking, and design sprints. You could continue "doing what you love," but you have to fight harder for attention.
Everything has a hype cycle. Any new "innovation philosophy" that appears will get spun by opportunistic consultancies to increase their shop's value and novelty.
What's worse is the questionable efficacy and true value to the receiving client. Is that workshop, training, or whatever, really going to help the core problem of the client? Is any progress being measured against KPIs, metrics? Or is it just making people feel good?
Let’s be real: A lot of practitioners don’t map progress towards business impact metrics.
Secondly, there's a rapid diminishing returns to be an expert on "X."
What are you an expert on? Remember: The "democratization" of knowledge will persist so that anyone can access and deploy "best practices" and "next practices" on their own. The novelty diminishes over time. Just ask Bing, Bard, HuggingFace, or ChatGPT. If generative AI can regurgitate an answer in a split second, where exactly is your value?
Every time a new way of thinking gains popularity, the opportunists will catch on. It gets democratized and commoditized as other practitioners remix intellectual property. It's happened before with Re-engineering.
And Agile? Oh no, not this time buddy. “Finally, this is the true way.”
While IDEO was the trailblazer that bridged industrial design and management consulting together, Design Thinking became such a mature service offering that it wasn't long before incumbents like McKinsey, Microsoft, and IBM replicated their own Design Thinking operation.
And as the last decade came to a close, Lean Startup had already reached mainstream acceptance. In 2018, Steve Blank hinted that we needed to broaden our perspective and think more in innovation systems. Lean Startup was an answer to a specific question, he insisted. Well put, and just in time, as Eric Ries was tied to the GE fallout with FastWorks. Someone needed to step in and set some records straight.
There was a product design company in the mid 2000s that needed to protect its creative difference within an increasingly globalized market. As the west was becoming more vulnerable to entrepreneurial engineers from the east, it could no longer charge their usual rates. That company in question was IDEO.
Chinese manufacturers found it advantageous to offer their own design services for things they were going to make anyway, so it wasn’t hard for them to infiltrate IDEO’s shops and pilfer the sacred design process for themselves.
Like the game of chess, sometimes the only way to adapt is to make sacrifices. IDEO shifted priorities by shrinking its shop staff. More of its product designers became "consultants,” deriving some of that inspiration from firms like McKinsey.
You could say that this was a clever reinvention, but even IDEO faced heavy pressure on their business model. IDEO’s shift was mainly a response to the increase of Chinese industrial designers being trained as entrepreneurs. This shift from “Mechanical to Mystical” is what was described as the shift from mere Product Design to Corporate Strategy, which has led to their fuzzy service offering called “Phase 0.”
Phase 0 soon evolved into the conveniently esoteric “Design Thinking."
I poke fun at the cargo cult surrounding DT before, but for IDEO, all I have is respect. During the early inception of DT, they really brought new value to the corporate world and creative world alike.
Globalization, market pressures, socio-economic political factors, and a wave of new and emerging technologies and now the impact of generative AI — all of these things colliding and shaping the challenges of this decade and beyond — has led me to ask the ultimate kaleidoscopic riddle:
How do aspiring innovation consultants protect their creative difference?
Don't look to generative AI for an original answer. The novelty of knowledge has a short shelf life; generative AI can give you answers in a few seconds, but with zero originality.
Just like IDEO rising up to the threat of Chinese entrepreneurs, today we see a new phase of firms and practitioners cross-pollinating things around Agile, Scrum, Lean, and Design Sprints into a more attractive buffet. Practitioners seeking to be cutting edge are now fighting to protect their creative difference in 2023. This always happens and it’s a never-ending cycle of marketing, mysticism, and constant pivoting.
Some day you will gas out.
There's new white space in the consulting value chain, but riding the next new thing from mainstream business media is not the answer. Novelties always seem like the right solution at the right time, as if they’re the perfect answer to the zeitgeist. But is it really?
Peter Thiel, billionaire entrepreneur, venture capitalist, and author of Zero to One, hit against the "first mover advantage." It's a tactic, not a goal, he insists. Even if the context was more for tech companies, it’s still applicable to the broader context of consulting.
Instead, he insists on being a “last mover.”
“The last will be the first,” he says. What he means is to dominate a niche by making the "last great development in a market” and then scaling up to its ultimate conclusion; it doesn’t mean be a last mover on the latest fad.
Even if IDEO became a first mover in design thinking, it wasn't long for incumbents like McKinsey to follow along with similar services to level it all out.
If I were to impart some final words, I would say: Truly understand the white space in the consulting value chain because it has changed. If you continue to market yourself around one type of operation, method, or expertise like product design/service design — or even just a "facilitation guy"/Strategic Planning guy — then that's all you're going to get billed as.
Ask how your clientele's needs are changing, especially from leaders and investors. Sometimes “staring into the unknown” where both you and the client don’t know the answers to, can yield some fascinating questions about where your market/industry is heading.
This is more than a rebranding operation. It may force you to rethink your operations after providing one type of service for so long. You may have to broaden your repertoire to sync up with a new type of demand, and thus pivot your business model so that you can continue to thrive in the future.
Happy hunting. And as you can imagine, I can’t tell you the answer to your individual riddle.
I wouldn’t know.