Issues in Consulting Innovation

Whilst the last ten years have evidenced a five-fold increase in consulting revenues, analysts have noticed that both profit margins (Brett Howell 2007) and productivity (Sako 2006) have reduced. Whilst such indicators are meaningless out of context, other studies have noticed a qualitative gap between expectations of the consulting industry and what occurs empirically, especially with regard to innovation. Three studies in the last 24 months suffice to illustrate this gap.

The first indication of this was hinted at in the 2007 Management Consultancy Association’s (MCA) Annual Survey. Here, it was noted that, despite year on year growth in revenues, only 52% of clients were satisfied with their consultancy’s innovation and creativity. This confirmed anecdotal evidence from recent interviews with senior consultants who urged the industry to be more innovative in the products that they were offering clients. The survey, however, had not asked this question before, so no longitudinal trends could be observed.

Issues in Consulting Innovation from Joe O'Mahoney on Vimeo.

In the same year, working on an ESRC programme, Andrew Sturdy led a 30 month empirical study of consultants in action. One of his key findings was the “that the conventional view of consultants as disseminators of new management ideas to clients is, at best, exaggerated” (Sturdy 2006). Such a depiction runs contrary to traditional representations which assume “that because consultants actively promote new management approaches and appear to be widely used, they do indeed perform this role” (Sturdy 2008). Instead, Sturdy’s study showed that consulting work was typically project based and not too dissimilar to their own clients’ activities. One reason for this lack of innovation, he suggests, is that “clients were unlikely to welcome consultants if their knowledge was ‘too new” (2006: 42).

Finally, most recently, the author headed a Business Engagement Project funded by AIM into the challenges facing the consulting industry in the UK (O’Mahoney et al. 2008). The study, based on interviews with sixteen senior stakeholders in the industry, found that both consultants and clients were concerned about levels of innovation in the industry. These interviews suggested not just that innovation levels might be lower than clients and the general public perceive, but that this had got worse over the last decade. This study elicited several ideas from the stakeholders as to why this ostensible decline might be taking place. These included suggestions that innovative practice might be inhibited by:

  • larger and more expensive projects leading to risk adverse clients
  • a greater focus on outsourcing and IT results meaning procedural and operational consulting activities
  • a focus on professionalised services and standardised products
  • the increasing use of procurement processes, especially e-procurement

It is, then, against this backdrop that the research seeks to better understand the processes by which management innovations are developed in consultant / client engagements. It holds that such research will illuminate the challenges to innovative practice in the consulting industry and provide an important contribution to the literature on management innovations.