Two factors — opacity and agility — have long made consulting immune to disruption.
Like most other professional services, consulting is highly opaque compared with manufacturing-based companies. The most prestigious firms have evolved into “solution shops” whose recommendations are created in the black box of the team room. It’s incredibly difficult for clients to judge a consultancy’s performance in advance, because they are usually hiring the firm for specialized knowledge and capability that they themselves lack. It’s even hard to judge after a project has been completed, because so many external factors, including quality of execution, management transition, and the passage of time, influence the outcome of the consultants’ recommendations. As a result, a critical mechanism of disruption is disabled.
Therefore, as Andrew von Nordenflycht, of Simon Fraser University, and other scholars have shown, clients rely on brand, reputation, and “social proof” — that is, the professionals’ educational pedigrees, eloquence, and demeanor — as substitutes for measurable results, giving incumbents an advantage. Price is often seen as a proxy for quality, buoying the premiums charged by name-brand firms. In industries where opacity is high, we’ve observed, new competitors typically enter the market by emulating incumbents’ business models rather than disrupting them.
The agility of top consulting firms — their practiced ability to move smoothly from big idea to big idea — allows them to respond flexibly to threats of disruption. Their primary assets are human capital and their fixed investments are minimal; they aren’t hamstrung by substantial resource allocation decisions. These big firms are the antithesis of the U.S. Steel of disruption lore. Consider how capably McKinsey and others were able to respond when BCG started to gain fame for its strategy frameworks.