In our latest survey of buyers of consulting, we asked clients to consider who had more expertise about the industry they work in—was it them or was it their advisors? They were asked to consider the situation today and to look back ten years, too. The results are stark. Remembering a short decade ago—the year Alibaba listed, Facebook acquired WhatsApp, and Russia annexed Ukraine—69% of clients said that they think consultants then knew more about their industry than they, themselves, did. Fast forward to today, and this has fallen to just 40%.  

So, what’s behind this shift in perception? Well, there appear to be some trends across sectors, regions, and the confidence levels of clients. 

The sector lens 

Taking an industry view, some clients are more positive than others. Clients within TMT, pharmaceuticals, and retail are more positive than the average, with all of these particular respondents judging that firms and the organisations they serve have approximately equal levels of sector knowledge in 2024. There is still a fall in the perception of expertise compared with their recollection of the situation 10 years ago, but it is not as marked as the average.  

Financial services, however, is particularly problematic: Seventy percent of clients in this sector say they know more about their industry than firms, compared with just 28% of them 10 years ago. The reasons are likely complex, but the nature of the people who work in this area could be a contributing factor. The qualifications needed to work in areas like banking mean that the barriers to entry are high, and technical knowledge is a prerequisite. Financial services is also a heavy user of consulting, and regular buyers may feel they have seen the same consulting solutions used on repeat. Additionally, there is a necessary focus on risk and regulation work in financial services today, and while firms may have leading subject matter experts in this space, perhaps the focus on spend on these services means that there has been less opportunity for firms to demonstrate new ideas and innovation within this sector. 

What about regional patterns? 

There are some clear regional patterns we can pull out too. Clients in France and Germany are comparatively positive about firms’ sector expertise today. In France—the most positive region that we surveyed—73% of clients believe consultants know more about their sector than they do (this is even up marginally from 70% a decade ago). And in Germany 47% are impressed by firms’ sector knowledge versus the global average of just 40%.  

Other markets are less positive. With those in Australia, Saudi Arabia, and, to a lesser degree, the US requiring more convincing. In Australia, only 17% of clients think that firms have the most sector knowledge today, versus a massive 90% when they think back a decade. The picture here may reflect a jaded view of professional services firms as a whole, in the wake of recent scandals.  

The situation in Saudi may be more complex (although we need to be cautious given the size of the sample). Possibly, sector knowledge there requires local knowledge too, with those working in financial services needing insight into Islamic finance, and those offering energy & resources services needing expertise in the crucial oil markets. Also, the demand for consulting support in the GCC is one of today’s only booming markets, and with local experts a limited resource, perhaps the volume of overseas experts being flown in just aren’t hitting the mark in terms of Saudi-specific insight. 

Is the macroeconomic situation playing a part? 

How confident business leaders are feeling in the face of continuing economic uncertainty also appears to impact clients’ views of consultants. Confident clients are most positive about firms’ industry knowledge (49% of them think firms know more) while clients who say they are lacking confidence are the least positive (only 29% of these concur). This could reflect cynicism in the face of multiple challenges, but more likely these businesses are having to rein in spend and double down on costs in today’s challenging market—they will need more convincing about a firm’s expertise before they will be willing to invest in services.  

What can firms do? 

So, should firms be worried? Before we answer this, it is worth addressing the nature of the data. Ten years ago, Source wasn’t asking clients about who they believed had the most sector expertise, and so, this year, we have had to ask them to look back and remember how they felt. This can be problematic: As in all aspects of life and business we often see the past through rose-tinted spectacles—summers were always longer and consultants possibly better. So, while this proxy data isn’t perfect, it is still important. Because what really matters is what clients perceive to be the case: They perceive that they now know more about their industry than their advisors today; that firms are no longer the sector experts.  

It also matters because of the importance that clients place on industry expertise when they are choosing which firms to buy from. In our annual Client Perceptions survey, we ask respondents which of a firm’s attributes are most important when they are deciding who to work with. And their top answer in 2024 was sector knowledge & expertise.  

Which attributes are most important when choosing a firm to work with? (Top five answers)

Source: Client Perceptions survey 2024  [global data]. Sample size 3871

And so, while our latest quarterly data indicates that 89% of clients expect to increase their use of consulting and professional services over the next two years, this drop in confidence about firms’ sector expertise could be seen as a warning shot across the bow. If this data is acting as a leading indicator of future buying behaviour, then firms need to act now.  

Consultants should think about how to demonstrate their sector expertise across all points in the buyer journey, with thought leadership looking like a good place to start. Building strong sector knowledge throughout firms will also be important. Consulting leaders should focus on instilling sector expertise in junior consultants at an early stage in their careers, and it may be a good time to increase the number of senior consultants recruited directly from industry. 

Sector expertise is an area where clients continue to look to firms for guidance and leadership. With clients perceiving that this differentiating factor may be in decline, it is time to bolster industry knowledge and work hard to demonstrate it.  

Emma Carroll, Head of Content, Source 

 

If you would like to delve further into this topic, then look out for our upcoming Emerging Trends report, which will take a more in-depth look at expertise and what clients today are looking for from firms. This is due out in November 2024. Contact us if this topic is of interest and we will let you know when the report is launched. Also, if you would like to talk about any of the data used in this leadership market update then we would be delighted to discuss it with you.