Global changes brought by the pandemic put a significant pressure on consulting business. Figures show that before the outbreak, the consulting market had a value of 160 billion US dollars which decreased to 132 billion in 2020. This process inevitably resulted in new challenges facing consulting firms.
Consulting market, already overcrowded, is now even more competitive. To survive, firms need to rapidly react to changes and adopt new strategies. Their stability and growth will depend on the ability to analyze the business environment and come to the right conclusions.
The transformations that occurred in the industry will only accelerate, and it will be up to consultants to see them as threats or opportunities.
What are the biggest challenges faced by consulting? Here we’ll discuss some of the most common ones.
During the pandemic, the importance of remote work has increased dramatically, and this trend is still continuing. This means that success in the consulting industry is digitally driven, so digitalization should become priority number one. It is the main trend and challenge in consultinting.
In the near future, consulting work will be automated to a big extent, especially the administrative part. Work processes will involve more use of remote technologies and digital delivery, which will go beyond video conferencing. Being digital also equals being super fast and delivering offerings within a very short period of time, which is another challenge for consulting firms.
We can also narrow the concept of digitalization to digital marketing. What do clients do to find a firm providing truly professional consulting services? Right, they use Google and research the consultant, looking through social media, content platforms, reviews etc. As Luk Smeyers, a top European Predictive HR Analytics expert, says, the new reality is merciless and demands a high level of expertise, authority, and trustworthiness for a consultant to be visible. Your profile will show evidence (or lack of it) of your expertise and deep knowledge. If it is not convincing enough, preference will be given to your competitor. This is why it is so important to be relevant for Google - in other words, to appear on top.
One of the challenges of consulting firms that comes along with digitalization is cybersecurity. According to Andrew Duncan, Partner and UK CEO at Infosys Consulting, ethical considerations must be an inherent part of consulting business, highly impacted by automation technologies. Consulting firms receive and process a huge amount of confidential client information. The failure to comply with cybersecurity rules can cause leakage of personal or commercial information. This in turn can cause a loss of reputation and contracts, and even legal liabilities.
A good way to solve this problem is to use smart artificial intelligence that would be a good tool of self-regulation for automated systems. Artificial intelligence can help reduce risks while achieving efficiency and speed. Lowering risks of human error, decreasing operational costs, and predictable quality – there are only some of the benefits provided by intelligent automation. However, encouraging partners, customers, and employees to use artificial intelligence, consultants need to remember about meeting regulatory requirements and preventing algorithmic bias. This is another consulting challenge.
One of the greatest challenges in consulting is a high level of competition that exists in the post-pandemic world. Clients have an opportunity to pick a consultant among numerous experts in just one click. To win in this struggle, firms have to adopt a new competitive mindset and show unique competence.
First of all, to stay out in consulting market firms need to shift from generalization to specialization, focusing on subject matter expertise. It goes without saying that consultants must take a broad view, being able to grasp organizational context. However, the key to success in consulting business is narrow focus combined with that broad view. Specializing in a particular field, consultant firms will be able to stay wanted among potential clients, as opposed to highly disorganized generalist competitors.
The reason why consultant firms prefer a generalist approach is simple: they are scared to say NO and lose clients. For example, they may take many tasks, reschedule them on clients’ request, and even re-work the same project many times, making clients take the consultants’ efforts for granted. As we can see, trying to protect your income can often lead to increasing the volume of your work, which is another challenge of working in consulting. It is much more reasonable to focus on getting visible by a specific audience who would appreciate your expertise.
Crisis is not a synonym to degradation. On the contrary, very often crises help see new opportunities and apply innovative approaches, building a foundation for growth. New ideas can lead to new projects that can attract potential customers. But to be open to new opportunities, consulting firms will need to adopt a new mind set.
Innovation is crucially important. It means finding or creating new ways to provide values for clients. Research showed that around 75% of companies call innovation one of their main priorities, and 35% actually put it above others. However, only 30% of companies state that they are good at it. So what can consultant firms do to promote innovation? Make your client think out of the box and recommend alternatives. Find out what is your client’s vision and how easy it is to put it in action. Determine a strategy. Support your client’s team providing guidance on innovation. Make sure their product (or service) is ready to be released into the market.
However, implementing new creative strategies can be a hard task. This makes innovation one of the serious consulting industry challenges.
In the contemporary environment marked by digital innovation, clients have become more demanding. A study “Insight to Action - The Future of the Professional Services Industry”, showed that now they expect immediate results, transparency, accountability, and higher quality of work – preferably at a lower cost. It can also mean new projects will become more complex. The root of this change lies in the financial crisis caused by the pandemic, which led to cutting down consulting expenditures and scrutiny when picking a firm.
Basically, buyers expect consulting firms to be experts, and at the same time to be trustworthy. So gaining and maintaining clients’ trust is definitely a serious challenge in the consulting field. This makes consulting firms deal with two problems: find new clients and retain old ones. New clients can be attracted by a customer portfolio. To retain old clients, consulting firms will need to develop and maintain a good consultant-client relationship which is not always easy. Some clients can have extremely high expectations while not being willing to pay appropriately. All you can do as a consultant is to convince the customer that your professional service will be profitable for him in the long run.
This is why it is very important to try to understand your audience. Who are these people? What are they looking for? Is your content relevant for your ex-clients? For your actual clients? The consulting services industry is going through perpetual changes, and only having answers to these questions – and many others - you will get a chance to see your own prospects. The ability to understand customers is also one of the greatest challenges for IT consulting firms, among others.
Maintaining your reputation as a prime place to work and recruiting top talent is essential to most consulting firms’ strategies. Given the challenging nature of the consulting work environment, consulting firm should always try to recruit new individuals who are highly motivated, stress-resilient, and willing to learn. Firms strongly depend on the quality of their staff. Daniel Nerlich, a founder of the Consultant Career Lounge, recommends several strategies to convince potential talented consultants to join your team. You can motivate them with money or provide a decent overall package of life/work balance and flexibility. Promise them they would improve as specialists and personalities; promise that they will be involved in the decision-making process. But do not forget that once you get such a valuable asset in your team, it is your responsibility to upskill and develop him.
The outbreak of Covid 19 was an unpredictable event whose consequences were hard to foresee. However, this experience helped understand the importance of crisis management. Now it is clear that in order to survive, organizations have to identify potential crises before they actually happen, and develop strategies to effectively deal with it. Crisis management is one of the challenges of management consulting.
To handle crises, companies may need to deviate from traditional methods and rules. Taking the Covid 19 pandemic as an example, we can see that a crisis management response to it was a shift to remote work and travel policy change.
Crisis management consultants support customers ensuring their companies take quick action in unpredictable circumstances. They identify and analyze crisis situations and provide solutions, recommending an appropriate reaction. This helps customers control all activities and remain flexible. Basically, crisis management consultants‘ goal is to minimize or avoid damage, protecting people and the environment. However, as it was with Covid 19, it is incredibly hard to predict all possible crises and damages that could be caused. This is another consulting industry challenge.
Consulting is notorious for its high-demand, high-performance culture. This has been known to contribute to burnout and voluntary staff turnover as stressed-out consultants see a better work-life balance. Research from Consultancy.uk found that - at the top of the market - between 76% and 100% of consultants work beyond their contracted hours to meet the demands of the role. In strategy consulting firms, the average overtime was 20 hours per week, contributing to the sector’s reputation as an extreme work environment.
In the post-pandemic context - characterized by ‘The Great Resignation’, a more global hybrid workforce, and the desire for better work-life balance - consulting firms that want to retain talent are well-advised to address excess working hours.
Whilst high monetary compensation and fringe perks can motivate consultants to some extent, they have their limit. For example, when consultants realize they have no time to actually spend their generous bonuses, they begin to lose their shine. When staff satisfaction drops, voluntary turnover can result.
The cost of employee turnover is estimated to be up to 150% of a staff member’s salary in the case of technical and senior resources. Then there’s the disruption to project delivery to consider - including the risk of clients leaving your firm when their preferred consultant does. Given these negative consequences of work-life conflict, consulting firms should put more priority on tackling work-life issues and long hours, post-pandemic.
As we can see, even though the pandemic has negatively influenced the consulting industry, it has provided consulting firms with many opportunities. Technologies have made it possible to work remotely, which has opened horizons for many specialists around the world. Digitalization has brought consultants closer to their customers. However, each of these processes leads to more and more challenges facing consulting firms. The need to adapt business strategies can appear to be a serious issue. If firms overcome these difficulties, they will substantially increase their chances to thrive in the business world.
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