Research Paper: Business Consultancy. Research Paper

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Research Paper: Business Consultancy
Introduction
The business consultancy industry has been the driving force in almost all other industries because consultants offer solutions to companies and help them grow and achieve their objectives through a strategy. According to Vukotic, Anicic and Vukotic (69) consultancy can be in the form of organizational and functional consultancy. Organizational consultancy involves providing top management and the employees with a better understanding of the company’s mission and vision, while functional consultancy addresses specific departments of the organizations. As such, consultants are basically responsible for transferring knowledge to organizations, thus facilitating change and successful outcomes in operations. This is one of the main reasons why consultancy is a special career to pursue given that the influence of a consultant is felt throughout the organization and spreads further to the clients that these organizations serve. While the benefits of business consultancy are apparent, especially in how they provide solutions to other businesses, it is imperative to address the challenges experienced in the consultancy industry and the response to these challenges. Consultants are experts when it comes to providing solutions (Vukotic, Anicic and Vukotic, 71) but this does not mean that they lack problems of their own. This paper will specifically address the issue of disruptive innovation in the consultancy industry, expounding more on the issue and how it is a challenge that requires fixing.
What is Disruptive Innovation and how has it affected Business Consultancy?
Disruptive innovation refers to a technology or process that has a significant influence on the existing market, possibly altering the existing functionality of the market (Christensen, Raynor and McDonald 4). Thus, the incumbent players in the market are caught up by the technology, mostly unaware, and end up being shaken and unstable. According to Christensen, Raynor, and McDonald (5), disruptive innovation comes in two forms. The first one, referred to as new market footholds, involves the creation of a new market by the disrupters who identify a need that the incumbents have never identified. The second, referred to as low-end footholds, involves focusing on a market segment that has been ignored by the incumbent, mostly because the said market cannot afford to pay for the services provided by the incumbent. In either case, the incumbent does not realize that a new player has taken hold of the market until it is too late.
The business consultancy industry has been more affected by the low-end footholds form of disruption. While giving a talk on the future of consultants and the consulting industry, Soegaard, a managing partner at Deloitte Consulting revealed that the rise of freelance consulting has brought in some disruption which is affecting the incumbent consultancy firms. The freelance consultants are as a result of specialist firms who, unlike the incumbent who offers their consultant services at a more general capacity, are offering specialized services based on what the clients want. This has brought fierce competition to incumbent consultants, who stand the risk of being pushed out of the market (Soegaard). With this kind of specialization, large consulting firms such as Deloitte and BCG will be left with limited market shares and consultants will be forced to specialize and modularize their services. Disruptive innovation is thus a challenge to the consulting industry now because firms face the risk of losing their market shares, revenues and their general foothold in the industry. While the disruption is affecting incumbent consultants, new consultants also face a similar risk in the future if better ways of dealing with disruptive innovation are not developed. As Levina, a professor and expert in business consultancy notes, how business consultants handle the disruptive innovation will determine their survival in the industry, especially regarding their value-added model. This will require a shift from traditional practices and processes for consultants.
Why is the Business Consultancy Industry Vulnerable to Disruption?
The consulting industry has been able to thrive in high-profit margins over time, and as a result, disruptors are likely to find ways in which they can venture into the industry to enjoy part of the profits. As Christensen, Wang, and Bever (4) indicate, the consultants do not charge their fee based on the outcome of their services but rather on the quality and time spent on executing the ideas/ solutions. Thus, disruptors, such as the specialized consulting firms, can disrupt by charging their services based on the outcomes which will attract more companies, yet the profit margins will remain high. Further, the consultancy industry is vulnerable to disruption now more than ever because of their reliance on human resources to provide solutions. Human capital is the key asset for a majority of the consultancy firms (Christensen, Wang, and Bever 5), which poses a risk to consultants in this age of internet and technological advancement. Failure to incorporate technology in providing solutions has been one of the reasons why the specialized consultants have emerged and are now taking over the market bit by bit. As noted by Soegaard, freelancers are modularizing their services by combining consultancy with big data and other effective predictive algorithms such that the solutions provided are in line with the changing technology. In this age of the internet, it is also very hard for consultants to maintain the competitive advantage that has, in the past, been derived from human capital who were able to keep information secret. Secrecy has been very paramount in consulting such that code names have been used to ensure information asymmetry within the industry (Srinivasan 260). However, the internet has facilitated the sharing of this information, and as such, consulting firms have lost their edge and have become highly prone to disruption.
The use of human capita...