Management consulting is often seen as one of the interesting lines of business. Some CEOs see it as a necessity, while some can’t stand it. Some young people see it as a glamorous profession, while others abhor it due to its lack of perceived impact. Some consulting firms brag about their longevity and sustained performance, while some regulatory authorities are not convinced.
Wherever you might fall on these various scales, it is interesting to understand the nuances of this $200 billion-plus global industry and where it might be headed over the next decade. In this column, I touch upon the industry's future path, the challenges it is likely to face and its long term prospects.
The immediate past
To foresee where the consulting industry might be headed, it is necessary to understand the history of management consulting over the last few decades. In essence, management consulting has broadly reflected the overall state of the Indian economy. In the 1990s, as the Indian economy opened, most corporates in India and MNCs outside would wonder which of the emerging sectors to enter. Hence, a lot of consulting work in the 1990s was around the market entry assessment.
Over the next decade, during the 2000s, most corporates knew which sectors to enter but were unsure how to scale up their presence. Hence, a lot of consulting work shifted towards the ‘implementation’. Over the last decade, the buzz has been around digital transformation—with consulting work revolving around omnichannel commerce, service transformation and business process re-engineering to name a few.
Over this upcoming decade, the Indian economy is broadly going to reflect an accelerated digital transformation, increased M&A and a rapid scale-up in the B2C consumption space. As a result, the nature of management consulting work is likely to change.
There is a famous saying in most consulting firms: Bulls and bears make money, consultants make money, only the pigs get slaughtered. The management consulting industry has been consistently growing at a CAGR of 15 percent over the past many years. Even the pandemic year, barring the first three months of the lockdown, saw double-digit growth for most consulting firms. As the Indian economy is likely to enter a phase of rapid economic growth over the next few years, the consulting industry is likely to grow at an accelerated pace.
As widespread digital acceleration occurs, a consulting firm will be expected to provide services along with cyber security, design thinking, user-interface design, digital transformation and M&A deal-making. There will be greater expectations from clients that consulting firms own a bit of the transformation and become private equity-oriented partners. A lot of consulting firms, like Bain Capital today, are likely to embrace this route.
With geopolitical complexities coming in, supply chain re-alignment for risk hedging is likely to emerge as a key piece of work. Also, the emerging countries are likely to drive disproportionate growth for the industry.
Another likely big change will be that all consulting firms offer the same services of strategy, design, implementation, cyber and M&A. The concept of Big 3 (McKinsey, BCG, Bain) or Big 4 (PwC, EY, Deloitte, KPMG) will be outdated since every consulting firm will compete on every deal. No case will ever be called a strategic piece of work.
There is also an ongoing conversation about whether spending 4/5 days a week at the client site will be the norm in the post-pandemic world. In my experience of over a decade in management consulting, Indian clients love to see the faces of consultants. In 2 quarters, consultants will start spending 4/5 days every week at the client site.
For consulting firms, managing talent is the most important aspect. Consulting firms are notorious for poor work-life balance and inability to show tangible impact on the ground. As millennial and Gen Z aspirations change towards holistic wellness, work-life balance, and pursuing purpose at work, it will be a big challenge for consulting firms to pivot and offer their employees a value proposition representing the changing times.
Over the last few years, with the rise in product management, technology and entrepreneurial roles, the sheen of consulting as a career has been wearing off. Over the next few years, this decline is likely to continue. The elephant in the room is that decision-makers in a consulting firm are from older generations. They might find it difficult to devise a value proposition that appeals to millennials and Gen Z.
A consulting stint will be an excellent finishing school for young professionals to become the ‘Jack of all trades and master of a few’. However, the lure of the partner track might not be that attractive anymore.
Another big challenge for consulting firms is their soft and hard compliance with regulations. Over the last two decades, consulting firms have blindly followed the money—without worrying about the repercussions of their work on the environment and society. However, the recent case of McKinsey paying a $600 million fine in the US—over its alleged advice to accelerate opioid sales leading to a massive crisis—indicates that stronger internal governance mechanisms are required across the board. Since consulting firms are designed to chase profits, compliance will be a tall order for them.
The overall prospect of the management consulting industry looks extremely bright over the next decade. Their client proposition, along with the nature of work, is going to change significantly. However, they will have to manage their talent pool and carefully consider the impact of their work.
The old saying, ‘bulls and bears make money, consultants make money, only the pigs get slaughtered,' is likely to be correct over the next decade.
We hope their clients are not the pigs!
The author is an MBA from IIM Bangalore and a strategy course holder from INSEAD. He has been a strategy consultant for over a decade. He is the author of ‘Hacks for Life and Career: A Millennial’s Guide to Making it Big’. Views are personal.
The thoughts and opinions shared here are of the author.
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