Interview with Prof Joe O'Mahoney: Virtualisation and impact on the Management Consulting Industry
Luca Collina: Dear Joe, thank you for accepting the invitation to this interview. As discussed, this is related to my ongoing research on “The impact of virtualisation on trust in the Management Consulting lifecycle”. There are three questions I would like to ask for your view.
The first one is: what do you think is the state of virtualisation? What has the impact of virtualisation been on UK consultancy so far?
Joe O’Mahoney: I guess there are different ways of cutting this up at the beginning. In terms of now, I think there’s consultant-client interaction. But there’s also internal to consultancies. And with both of those, I guess you could talk about larger consultancies and smaller consultancies. Is that the right way of breaking it up?
With the smaller consultancies, COVID-19 has, firstly, hit many of them very badly. And I’d say a good 40% have been hit quite badly. And that is regardless of how they have adopted virtual in any way, they were in the wrong service at the wrong time or in the wrong market. And there’s another 20% which have done well, because either they’re in the right market and/or the right service.
But there’s another group who have adopted digital quite creatively and have either pivoted to more online services and products or have found ways of doing their consultancy online. And so I guess, in terms of client work, and client interaction, and client sales, what we’re doing – the Zoom call – has become the mainstay. And I don’t expect that to be maintained at the same level, but I think it will significantly shift the industry in terms of delivery. I don’t think it’s going to shift sales, because sales are too important to be left to Zoom. And it’s the interpersonal relationships, building trust and all the rest of it. Thus, I still expect people to be flying out to whatever they are trying to do face-to-face business development. And I guess, within that group, there are also people who have found more intelligent ways of working online.
So there are loads of applications that people are now using to make brainstorming and video conferencing and strategy calls or audit team, which are much more interactive, more interesting. And I’ve also seen a lot more people developing services that don’t require face to face. Whether it’s video courses, or apps or surveys or whatever else. I guess there’s that side of it.
On the internal side of things, so within consultancies themselves, I see a lot less transformation. It seems that the consultancies, especially small ones, for the last year, have mostly been running around saying “Where’s the work? Where’s the work?”. And what they haven’t been doing is looking at internal efficiencies of automation or digital transformation. I guess there are still a lot of opportunities there. I’ve just had a call this morning with someone who said I’m thinking of using LinkedIn for, you know, to reach out to clients. And I said, Well, you know, that’s the only way I reach out to clients anymore. And you can automate that to a great degree. And, going beyond that, in terms of billing, back office and outsourcing tasks and virtual assistants, I would say, there are the 20% of consultancies that have embraced it and there’s 60%, who are kind of playing at it, but they have no strategy about it, they’re just doing digital. And then there’s another 20% who aren’t doing it at all because they’re quite traditional and find digital unnecessary, or are a bit scared of it. So that’s roughly where I’m putting the distinctions.
Luca Collina: Very interesting to hear this, Joe.
Joe O’Mahoney: People do a bit of LinkedIn and a bit of YouTube, and then they’ll play with a blog, and then they might start a podcast, and then they’ll go back to YouTube. And, you know, and they don’t have success. And then they may say, virtualization doesn’t work. And so they just stopped doing it. And they exclusively rely on their contacts. And, you know, same as before. I think the big difference is people who do it strategically.
Luca Collina: From my current research there are eight out of eighteen participants that said that apart from COVID-19, they adopted virtual, because for them is a way to differentiate their business from the competition, and that is the future. Then I thought: “oh, wow, finally we can see something that Christensen, predicted as disruption” but it seems now more an incremental change than disruption.
Now how is Management Consulting market changing in addition to the virtualization?
Joe O’Mahoney: Few forces are working on the consulting market that have been going on for 20-30 years in some cases, and now clients are more sophisticated. There’s more competition. Day rates are relatively static; profit margins are generally down. Costs have gone up; liability has gone, procurement has taken a central role in many contracts. Clients are a lot cleverer; all of these drivers are transforming the industry in different ways. And large consultancies are buying a lot, a lot smaller consultancies, there is more consolidation going on. And this has changed the market in many ways.
In terms of sort of Christensen’s argument about, the disruption of the industry, there is disruption happening. Still, I would argue it’s quite incremental, not transformational. So I see, obviously, all the large consultancies are getting into AI, big data and so on. Because there’s business. And I guess with the smaller consultancies, it’s much trickier. There is high growth of digital consultancies, who are offering anything. They are expensive because their skill set is quite rare. And what I see more and more, is sort of hybrid consultancies. All the changes are happening but they’re slow. And, and it’s a very fragmented market out there. I mean, what I see with smaller consultancies, that they are doing tech, doing digital, or any type of digital service. There is growth there, if they want it, if they manage it properly.
And with everyone else, it’s a bit tougher. So what you’re getting in the market, and this isn’t just about tech versus everything else or digital versus everything else, you’re getting a pulling apart of consultancies. There are those that are high value, doing hard-to-do work that their clients can’t do, their daily rates are going up and up, there’s more and more demand for them. And there are people that are still offering standardised work that clients could do, for example, change management, training, coaching, that type of services. For most of that market, day rates have been standard. They have to go through procurement, they’ve been negotiated down, there’s more competition. You’re getting this market pulling apart.
And with these that are the doing the stuff that clients can’t do themselves, sometimes it’s not just a known unknown in that clients know they can’t do it. Sometimes it’s an unknown unknown. So the client will sometimes say, “Look, you know, what can AI do for our firm?” That’s the type of question that you used to get in the old days where you could go in as a consultant and say to the client, “Look at these amazing things”. And the client goes, “Wow, I’ll buy it”. However, you can’t do that with change management or culture change or leadership training anymore, as in the past. The client knows about it, they understand it, they’ve done the reading, looked at some YouTube videos, they’ve probably done an MBA. And so there isn’t that wow factor anymore. And that is where digital /virtual mostly is, in my view, at least.
It could be a difficult question: what about building and maintaining trust in client-consultants’ relationships, with virtualisation?
Joe O’Mahoney: You know as well as I do, that there’s a lot of research that shows that building trust virtually is much harder than doing it face to face, if you can see to each other. This varies internationally and varies by culture, but the effect is always there. And I guess, there’s a distinction between new clients and old clients. If it’s an old client, you carry on with that relationship, and it’s fine, but not working with new clients. As I said, I think once COVID-19 has gone, I think the sales process and business development will still be very much face to face. Having said that, now we’re all on the same playing field, we’re all having to do remotely.
However, I think you can build trust in different ways. You can have testimonials, you can have videos of you talking, you can have an ad that you’ve published. And so the client sees lots of different sides of you, they see your LinkedIn profile, they visit your website, they see reviews, and so they can get an idea of you. And, of course, there’s lots of different ways of communicating that to the client.
I also found that online suits better to some personalities. For example, I’m an introvert and I find this is great, I like this. I don’t particularly appreciate meeting face to face whereas meeting online is relatively easy and quite nice. So I think this suits certain personality types. Now whether I’ll be able to carry on doing business development like this? I don’t know. I would hope so. I think that, if one can sort out automation and marketing, then, one of the things I always say to consultants is, try and have a virtual coffee with someone rather than a physical coffee, because a physical coffee can take you two hours out of your day to travel alone. So, this suits me down to the ground, and my clients seem to be quite happy with it. That might change. If this carried on, I’d be quite happy in terms of work.
Luca Collina: Thank you, Joe, for your insightful data and points of view.
Joe O’Mahoney: You are welcome.