Every January, we take stock of the research we’ve carried out in the consulting and professional services sector over the previous twelve months in order to identify five big trends we think should be occupying the minds of senior partners in the next year.
Trend #1: Bridging the gap
The crisis has changed clients’ sense of what’s possible: Although almost 40% of senior executives we surveyed in late 2021 describe themselves as still focused on the constantly-changing challenges of the pandemic, three-quarters say that their corporate goals are now more ambitious than they were before the crisis; a third that the pandemic created new opportunities for their business; and a quarter that they’ve achieved more in the last two years than they’d believed possible. But some things haven’t improved: a quarter of clients complain about slow decision-making and sluggish adoption of new technology, a fifth blame problems on poor-quality information and analytics, and a sixth are concerned about exhausted and demotivated staff.
With an increased sense of possibility bumping up against the same old pre-pandemic frustrations, it’s clear the gap between what organisations want to do and what they can do in practice is wider than ever. No wonder, then, that transformation—the means to close that gap—is on every client’s lips and is creating significant, new opportunities for consulting firms. Although two-thirds of clients say they’ll be making substantial investments in digital transformation, almost half plan transformational changes in their approach to sustainability, their target operating model, and/or their organisational structure.
But the drive to transformation will create challenges, too: Consulting firms will need new skills and will become more accountable for making change happen.
Trend #2: Expertise and the skills shortage
Even before “the great resignation”, in 2019 clients were complaining about a shortage of staff; now, 38% of clients say they don’t have enough people with the skills they need, and 26% claim to lack the capacity to get things done. More than a quarter of clients say that the main reason they’re increasingly turning to consulting firms is that they have more work to do, and a fifth that it’s because they have to get work done more quickly.
To make matters worse, the pandemic has made clients far more conscious of the value deep expertise can bring. The speed with which clients have had to react over the last two years has left no space for people to learn on the job or to get up to speed. Experts are important because they can diagnose issues quickly and know what needs to happen. Also, Teams and Zoom have ruthlessly separated the experts from the ignorant. We can see evidence of clients’ growing demand for experts in our most recent client perceptions data, where the relative importance of deep expertise has gone from 15th out of 16 attributes at the start of 2021 to 2nd at the start of 2022.
Demand for skilled people presents an enormous opportunity for consulting firms, but they too are short of key skills. A fifth of consulting firms say they’ve had to turn down work because they don’t have enough staff, and although salary inflation is exceptionally high, 17% of firms complain that consultants are leaving to pursue careers elsewhere or simply to do something different. So, while 2021 was the year in which the talent war went nuclear, 2022 will be the year in which the consulting industry has to create a better, more coherent, and more sustainable response.
Trend #3: Innovation and multidisciplinary working
Thirty-nine percent of clients think that a permanent legacy of the pandemic will be the ability to make change happen more quickly; 26% see a legacy of better, more radical solutions to business issues. But both outcomes depend on finding new ways to work.
Alongside expertise, brand, and the ability to implement, innovation remains one of consulting firm attributes that matters most to clients. But clients recognise that innovation, in turn, relies on bringing together people with different perspectives.
Meanwhile, effective multidisciplinary work remains a challenge for consulting firms, however. Although clients are more positive about consulting firms’ ability to innovate now than they were a year ago, they still see innovation as a relative weakness (only their views about fee rates are more negative).
Trend #4: Making technology work
Transformation depends on being able to link business goals to people and technology change. But while organisations are more eager than ever to exploit new technologies, they’re less sure how to extract concrete and enduring business value from them. They’re also significantly more likely to say that they have challenges in their technology function than anywhere else in their organisation, which is partly down to—yes, you’ve guessed it—a shortage of talent. Having expected technology to replace manual work and the shift to the cloud to result in easier, faster, and cheaper adoption, clients are now recognising that technology and people are two sides of the same coin. That’s going to have significant implications for a consulting industry in which very few firms are seen to straddle the divide between the two successfully.
Consulting firms have always struggled to get the equilibrium clients are looking for between business and technology, but our research suggests things are changing. Technology firms continue to be regarded as authorities on technology, but some of the biggest improvements in clients’ perceptions of the quality across all firms this year have been in areas such as robotic process automation and AI. Furthermore the positive perceptions of the digital transformation work done by strategy firms have improved by 10 points, more than twice as much as those of technology firms. No firm, however, appears to have a commanding lead in this space: Just 9 points separate the most highly-regarded firm for digital transformation from the least-regarded.
Trend #5: Social value
Our research has consistently highlighted a gap between positive perceptions of the quality of work consultants do and the value they add to clients in practice. Our most recent data is no exception, with 80% of clients having positive views about quality and 41% about value. At the same time, consulting firms are investing unprecedented time, effort, and money in honing and promoting their social purpose.
2022 will, we think, be the year when these two issues—value and social purpose—converge: consulting firms will need to demonstrate that their purpose has a concrete economic and social impact in practice.