It’s the most common and most predictable question in any social conversation I have at the moment. I usually wait to be asked it, simply because I’m interested to see how quickly the subject comes up. it does, very quickly, very often. And the question is, ‘how is your business being affected by what’s been going on in the financial world?’
Most consulting firms seem to have a pretty consistent answer. The tone of it is different from a couple of months ago, when the question tended to be framed in terms of ‘credit crunch’ as opposed to today’s various euphemisms for total carnage and near-meltdown in the global financial markets. Then, we were saying, ‘it doesn’t really seem to be affecting the market. We’re busy, and so are most consulting firms we know. You can’t take anything for granted but so far it’s been fine.’ And that was the truth. The emphasis was on the positive although it always felt wise to acknowledge that we didn’t know what lay around the corner.
And boy, did we not know. Now, the answer I give, and that I hear pretty consistently across the consulting world, still accentuates the positive - most of us are still busy and we still have current and potential clients who are actively engaging consultants – but it places far greater weight on the unknown future. The truth, I believe, is that we still don’t know what lies around the corner. Like the rest of the world we have seen what has happened in the financial markets, and, as I heard a member of the Shadow Cabinet say at a private dinner last night, we’re now all waiting to see what it is going to mean in the ‘real economy.’
My prediction is that what it won’t mean is that everything will grind to a halt. In fact, one of the most common observations from non-consultant friends and acquaintances when we’ve had the ‘how is your business being affected’ conversation, has been that there are probably more organisations in serious need of external challenge and support than there are in normal times. I’m sure that’s right. Not only are the demands on management piling up, and presenting themselves in hitherto unexperienced ways; more than this, there is a huge temptation to cut to the quick and take knee-jerk decisions that will do damage in the medium term, and maybe even in the short. I heard a story from one of the largest and most highly-regarded corporations on the planet the other day, who have introduced swingeing cuts on travel and training budgets because they had two bad weeks in September. Swift, decisive action at the first sign of the inevitable downturn? Or same old panicked reaction that has been wheeled out for years at the first sign of trouble and what might just have been, well, two bad weeks in September? I don’t know enough about this specific case to comment. But sometimes it isn’t the former. And it is at times like this that the ability to think and act innovatively, and to have the courage to drive innovative ideas through to implementation, is more business-critical than ever.
One of the problems with generalisations about the consulting industry is that we’re a diverse bunch. An article in the Economist a couple of weeks ago assessed the state of the sector worldwide. It reported a good first half to 2008 – as we’ve seen - and a more cautious view about the foreseeable future, again in line with what we’re seeing and saying. But it also acknowledged that there are consultancies who will thrive in a downturn, citing the example of some who advise on litigation and forensic accounting, and that there are geographical areas such as China, India and the Middle East where demand is expected to be buoyant for the foreseeable future. This is all true and there are many other, more local, examples of firms and offerings that will resonate with the needs of the market in these difficult times. Whilst past performance in a recession is no guide to future, it’s interesting also to note that in the last downturn, world consulting revenue only failed to grow for two years – 2002, when it fell by 5%, and 2003, when it was static. That still left a huge consulting market, and it’s even bigger now.
So in my view it makes sense to be quietly optimistic about the future but deeply aware of the potential pitfalls on the road. It will be more difficult to thrive and grow than it has been for the past five years, but it will be possible. Consulting firms that survived the last downturn largely emerged more client-focused, more flexible and more commercial than they had gone into it. The same opportunity exists now; but it won’t be exploited by doing nothing.
And that’s where it all gets interesting on the client side. I believe many buyers of consulting learnt to become more savvy and more discerning in how they bought consultancy as a result of the last downturn. Pre-2000, an awful lot of stuff got done in the name of consultancy that wasn’t. It was project management, interim management, but a lot of it wasn’t consultancy, even if some of the rates being charged would have made you feel it would have been nice if it had been. This trait was largely driven out in the downturn of 2001 – 2003, and you’ll see a lot more emphasis these days, amongst both suppliers and customers, on getting leverage from consultants and ensuring that the client, not the consultant, drives the project and owns the outcome. I won’t claim this is a universal truth – I’ve seen plenty of evidence to the contrary recently in clients where we’ve been alongside some of the big firms - but it is far more prevalent now than when we launched Partners for Change on that message in 1994.
Our view at Ignite is that the inevitable pressures on use of resources in many organisations right now creates a fantastic opportunity for those businesses to take their use of consultants onto another level. It’s absolutely true, there are many, many environments in which intelligent use of consultancy will be highly productive. It’s also true that hiring a sizeable team of consultants in parallel with, maybe, headcount reductions and other cutbacks, won’t be the easiest sell of a difficult year. Ironically, what would probably have been the right answer in less turbulent times will be an easier ‘sell’ now – a packaged solution that combines on-site consultant time with remote coaching, use of online materials including insight, approaches and tools, membership of forums and interest groups, training and development material and much more. We call it the Ignite Innovation Package and we see it as a mechanism by which clients can build their own internal capability around innovation and change, leveraging external expertise as much as they need to – bringing in extra people when it is right to do so, relying on a small core support team when that is the need. It almost inevitably costs the client less than hiring a team of consultants. This helps, but it really isn’t the point. It’s an investment in knowledge and capability, not just in a small team but in the DNA of the organisation. And that is a pretty innovative proposition for difficult economic times: a business case where the return is relatively quick and the investment is actually less than the operational spend it is replacing. It’s got to be worth a look.
