How the Corona Crisis Will Change Consulting Forever
“Consulting is People Business”. That is the foundation an entire industry has been built upon. It shows how clients and their consultants value personal relationships in their collaboration. It is about trust, perceived competence, and reputation. But the global spread of the coronavirus hits the consulting industry hard. Now, it is important to embrace inevitable changes.
The Coronavirus Crisis confronts companies with manifold challenges. One of them is shaping successful collaboration between people and maintaining personal relationships. Many companies have reacted by sending their administrative staff to work from home (WFH). Additionally, clients have stopped less critical consulting engagements and work on continued projects is widely done remotely.
Last week, my co-founder Markus Sinz shared his thoughts on three levels of virtualization of consulting (Link). Today, I’ll provide some guidance on how clients and consultants may adapt
Consultants Must Change
The current changes in project delivery are a reaction to a temporary situation and most consultants hope to go back to normal as soon as possible. But will the old normal be the new normal? And should it? Digitalization of consulting, meaning true changes to the business model by using digital technology, is overdue and this crisis will accelerate the need to transform.
Clients will notice that personal relationships with consultants are relevant but not the only critical factor for success. They will see that flying in consultants from all around the world for one-hour steering committee meetings is inefficient. And they will realize that they can save up to 30% by hiring consultants who are able to successfully carry out projects virtually.
In order to successfully provide (consultants) and receive (clients) consulting services in the medium and long term, it is necessary to rethink the product. Tesla is a powerful example. They did not become successful because they simply installed an electric drive in an existing vehicle. Tesla is successful because they have rethought the car. This is the challenge consultants face now more than ever before. They must develop new business models instead of trying to merely digitize their analog products.
Consultants who do not virtualize their product and adapt their business model will be made dispensable by more agile competitors and upcoming challengers.
Why Virtual Consulting
As Markus has pointed out in his text, virtualization is not an end in itself. It is diverse, agile and sometimes surprisingly easy. The article covered the three dimensions of WHO, WHERE and HOW. Please join me in looking at the WHY.
The short answer: Because companies spend too much money on poor consulting. A study conducted in 2018 shows that in Germany 38% of consulting projects fail (Link). With about 31.5 billion EUR spent on consulting (Link), the damage amounts to 12 billion EUR annually in Germany alone. Virtualizing consulting services helps mitigate the three main reasons for project failure (Link).
People | Virtualization shifts the focus of staffing projects from availability to competence. I am not claiming that management consultants deliberately staff their project teams with unqualified personnel. I am saying that the available talent pool is significantly expanded by limiting on-site presence. By the way, this is also true for the availability of client resources.
Process | Virtualization facilitates far-reaching improvements of the project management and delivery process. For instance, instead of retroactively measuring the degree of milestone achievement, technology enables project teams to continuously collect and assess relevant performance data to identify project risks before they become problems.
Communication | Virtualization and digital collaboration are complementary and mutually reinforcing trends. Communication across company, country and cultural borders is easier today than ever before. This includes web conferences, chat platforms and virtual project rooms. Some solutions combine these three components.
How Clients Can Adapt
Another reason projects fail is because the sourcing process for consulting services is broken and an unsuitable provider had been picked. No wonder. With several thousand consulting firms offering their services globally, clients struggle to find the right consultant, even in the traditional environment. Now that “virtual consulting competence” is added as a criterion to be evaluated, it becomes almost impossible for clients and their souring teams to carry out a quick, easy and compliant vendor selection process. This is particularly painful in times of urgent need for action.
Mitigating this is fairly straightforward. There are three aspects in sourcing consulting services that clients should focus on.
Discovery | Stop fishing in the same pond. There are some innovative technical solutions to identify the right partner for your individual virtual project. A clear understanding of the project’s objectives and deliverables helps to define vendor target profiles.
Selection | Use new firms to challenge your preferred vendors and ensure compliance in the selection process. Make sure to involve the relevant sourcing teams eraly to stay compliant and efficient. If possible, make use of electronic sourcing solutions.
Management | Monitor the quality and performance of services vendors like you do for suppliers of tangible goods. Key performance indicators are typically quality, schedule and budget performance. Make sure to document all ongoing and past projects.
Clients and consultants alike are faced with significant changes due to increasing virtualization. Consultants have to adapt their proven concepts to the virtual world, and clients face the challenge of learning to assess the virtual competence of consultants. Nevertheless, the virtualization of consulting services offers huge opportunities for both sides. Clients can take advantage of the trend and professionalize their service provider management while reducing consulting costs, and consultants can win new clients with innovative digital concepts.
How has the Corona Crisis changed your interaction with consultants?
What do you think about Virtual Consulting in general?
Failed consulting projects in Germany – WGMB 2018
Size of Germany’s consulting market – BDU 2018
Three reasons for project failure – PMI 2007
APADUA | Vendor funded Match to Contract solution for Professional Services sourcing
Miro | Online collaborative whiteboard platform
Slack | Cloud communication platform with messaging and document sharing features
Teams | Platform with video- and audioconferencing, messaging and file storage features
Zoom | Cloud platform for video- and audioconferencing, messaging and content sharing