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New challenges for consulting firms in the digital age

04 March 2020
Article written by Lucille Ladurelle, Grande Ecole Programme Student

Digitalization can be defined, according to the Oxford dictionary, as the “conversion of text, pictures, or sound into a digital form that can be processed by a computer.” This revolution has impacted the business world in many ways: day-to-day operations are changing and business models are rethought. All these changes have been unavoidable for companies that wanted to stay in the race. Technological tools represent a wave that traditional companies have to surf in order to avoid sinking. The GAFAs (Google, Amazon, Facebook, Apple), for their part, have taken advantage of digitalization to build a real digital empire, spearheaded by data. But what is the fate of consulting firms in the era of digitalization? Tim Morris, senior consultant at Capgemini Invent, clarifies this question.

According to him, all consulting firms now need to offer digital solutions. “Digital is no longer a niche market. All firms must integrate digital solutions in order to avoid seeing their business model collapse.” It illustrates a relevant statement from Gartner: in the minds of CEOs the growth and increase in revenue of their companies do not depend on investment anymore but on digital information and technology. In other words, digital transformation has become the backbone of business. “Even BCG and McKinsey, which have only been specialized in strategic consulting over the years are currently adapting themselves to digitalization.”  Buying out firms specializing in digital technology or massively hiring digital profiles: all means are good for integrating digital competence into consulting firms.

Thus, the strategy of consulting firms is evolving which logically leads them to adapt their organizational structure. First, “the pyramidal organization observed in consulting firms can be a barrier to change because it does not allow much flexibility,” argues Tim. On top of that, young digital natives, who often are at the bottom of the hierarchy in consulting, are more likely to completely understand the challenges posed by digitalization. Therefore, Tim clearly highlights an issue: “It will be necessary to involve digital natives in decision-making, whereas the pyramidal model of consulting firms does not foresee it and does not allow it.”
In that way, a flatter organization could be more likely to fit the requirements of digitalization. Nevertheless, a flat organization is known to make the decision-making process more confusing and would delay the speed of execution. It could thus prolong the time spent on a project.
 
Therefore, the consulting firms will lose efficiency. Hence, what could be the more adequate organization for consulting firms in the digital age? The debate is still pending…

Furthermore, consulting firms traditionally have a matrix organization (sector/function). Digital is then only one independent function. For Tim, digital is becoming so important today that it is necessary to create a transversal organization that integrates digital at all levels. “We need to move away from the traditional model and make digital a transversal element in all business units.” This way, consulting firms will be more agile in developing digital solutions whatever the sectors of the client or the technical skills required for the mission.

These many changes cannot occur without impacting culture, values and way of working within consulting firms. “Innovation and collaboration are the main values that consulting firms have to develop to fit with the complex context of digitalization.” However, it does not seem to be a problem for them as most consulting firms have integrated a real culture of change which makes them inclined to adapt quickly. By the way, we can observe the rise of collaboration platforms such as Trello or Sharepoint which clearly highlights the fact that promoting collaboration is already part of the daily life of consultants. Nevertheless, Tim shed light on a contradiction posed by this increase in collaboration led by digitalization: “The fact that more information is exchanged in a shorter amount of time jeopardizes the confidentiality of customer data which raises concerns about security. For example, many clients do not want to work with Google because they are afraid that the information exchanged will be used for purposes that are contrary to their strategic interest.” Thus, consulting firms must strike a balance between increased collaboration and data protection to meet new customer needs while maintaining data security. The collaboration and the increased data flow on the internet also represent a challenge for consulting firms to control their reputation. As reputation is one of the major assets for consulting firms to do business, they have to pay close attention to their e-reputation. In order to do so Tim advises them “to adopt a digital marketing strategy, to implement training on how to use social networks and to raise awareness on cybersecurity and GDPR.”

According to Tim, another challenge raised by digitalization for consulting firms is “to make consultants with digital technical profiles and consultants from more traditional backgrounds (engineering school or business school) collaborate more.” That way, consulting firms could propose end-to-end solutions to provide all strategy development, management and operational application to their clients. In this area, not every consulting firm is equal: “For instance, Capgemini and Soprasteria are used to doing this, but it is more complicated for strategic firms like BCG and McKinsey, which have always tended not to mix profiles by abandoning technical profiles.”

To conclude, on one hand digitalization raises many challenges for consulting firms and leads them to make significant changes. On the other hand, clients need more and more help for digitalization projects, which represents a very complex value-added service. That explains why digitalization can be seen as an opportunity or a threat. Nevertheless, Tim reassures us on an issue that is much talked about when we speak about digitalization: “Artificial Intelligence will not replace consultants because their job is to take a step back in order to provide a high value-added service in creating and developing strategies, which is not achievable by Artificial Intelligence. Some redundant tasks can be replaced by Artificial Intelligence such as data analysis to validate hypotheses, but not the core business of consulting.”

Thus, consulting is not an activity that will disappear because of artificial intelligence, i. e. with digitalization, if consulting firms make the necessary efforts to adapt to the new challenges of this real wave...


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