Storm Clouds Ahead
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Transcript of Storm Clouds Ahead
© Fiona Czerniawska, 2004
Fiona Czerniawska
Storm clouds ahead?The future of management and IT consulting
Storm clouds ahead?The future of management and IT consulting
www.arkimeda.com
© Fiona Czerniawska, 2004
Storm clouds behind
1.702.00
2.723.08
3.72
4.354.53
5.1135%
18%
36%
13%
4%
17%21%
13%
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1.00
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3.00
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5.00
6.00
1996 1997 1998 1999 2000 2001 2002 2003
£bn
0%
5%
10%
15%
20%
25%
30%
35%
40%
Like-for-like fee income (£bn) Like-for-like growth (%)
Fee income 1996-2003 (£m) and percentage growth rates
© Fiona Czerniawska, 2004
The growth in public sector consulting
-4%
13%
9%
86%
8%
46%
-20% 0% 20% 40% 60% 80% 100%
2001
2002
2003
Private Public
Percentage changes in fee income 2002-2003
© Fiona Czerniawska, 2004
The growth in outsourcing
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Management consulting I T-related consulting Outsourcing-related consulting
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Management consulting I T-related consulting Outsourcing-related consulting
© Fiona Czerniawska, 2004
The problem with (almost) everything else
-56%
-49%
-49%
-37%
-22%
-20%
-14%
-14%
6%
17%
70%
150%
-100% -50% 0% 50% 100% 150%
Econ/environ.
Operations
Financial
Marketing/corp. comms
Strategy
E-business
P rogramme/project mgt
IT-related consulting
Human resources
Change mgt
Outsourcing-related consulting
Business process re-engineering
© Fiona Czerniawska, 2004
Storm clouds ahead?
Agenda
Three challenges:
Enron and the tarnished reputation of consultants
An increasingly volatile market for management ideas
Offshoring and the organisational structure of consulting firms
© Fiona Czerniawska, 2004
Storm clouds ahead?
Agenda
Three challenges:
Enron and the tarnished reputation of consultants
An increasingly volatile market for management ideas
Offshoring and the organisational structure of consulting firms
© Fiona Czerniawska, 2004
(1) Enron and the reputation of the consulting industry The client context
Enron has not materially changed clients’ attitudes towards the consulting industry, but has reinforced some of their fundamental concerns that: Consulting projects are most likely to go
wrong when they involve end-to-end or bundled services
There is insufficient objective information available to clients
Aggressive selling is compromising the ability of some firms to offer the best possible advice and assistance
© Fiona Czerniawska, 2004
(1) Enron and the reputation of the consulting industry The 12 factors that “tip” small scandals into large ones
Context
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
Context
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
Stickiness
Scale
Systemic problem
Reputation of an entire industry is compromised
Perpetrators embody the industry
Stickiness
Scale
Systemic problem
Reputation of an entire industry is compromised
Perpetrators embody the industry
The law of the few
Coherent agenda for change
Evangelists
Political mileage to be gained
Opposition in disarray
The law of the few
Coherent agenda for change
Evangelists
Political mileage to be gained
Opposition in disarray
© Fiona Czerniawska, 2004
(1) Enron and the reputation of the consulting industry Feedback from clients
Context Consultants
add value if projects very large or very focused
Minor criticisms crystallizing around recession and the generation gap
Context Consultants
add value if projects very large or very focused
Minor criticisms crystallizing around recession and the generation gap
Stickiness Most clients see
themselves as responsible unless they have been deceived
Difficult to see as systemic because of lack of information
Branding has been counterproductive
Stickiness Most clients see
themselves as responsible unless they have been deceived
Difficult to see as systemic because of lack of information
Branding has been counterproductive
The law of the few
Better information
Codes of practice
Accountability
Scarcity of evangelists
The law of the few
Better information
Codes of practice
Accountability
Scarcity of evangelists
© Fiona Czerniawska, 2004
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
1 2 3 4 5 6 7 8 9 10
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
1 2 3 4 5 6 7 8 9 10
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
Economic turmoil
Perceived over corporate greed
Public concern
Evidence ignored
1 2 3 4 5 6 7 8 9 10
(1) Enron and the reputation of the consulting industry How close to tipping?
© Fiona Czerniawska, 2004
(1) Enron and the reputation of the consulting industry The optionsThe consulting equivalent of the prisoners’ dilemma
Firm B
Firm A’s position
Firm B’s position
Does not act Acts
Acts
Does not act
Freeloads on the action of others
Freeloads on the actions of others
Damages own reputation
Damages own reputation
Everyone wins
Everyone wins
Everyone loses
Everyone loses
Firm A
© Fiona Czerniawska, 2004
Storm clouds ahead?
Agenda
Three challenges:
Enron and the tarnished reputation of consultants
An increasingly volatile market for management ideas
Offshoring and the organisational structure of consulting firms
© Fiona Czerniawska, 2004
(2) The volatile market for management ideas
Management ideas have life-cyclesFashion Decade during
which fashion emerged
Average number of years between fashion introduction and peak
Average number of articles on fashion during peak year
PERT 1950s-1970s 14.8 44
Quality circles
1980s 7.5 121
Re-engineering
1990s 2.6 130
Management fashions introduced in recent years: have shorter life spans are broader-based require greater implementation effort are abandoned more quickly (because they’re more
difficult?)
© Fiona Czerniawska, 2004
(2) The volatile market for management ideas
The life-cycle of management ideas
Level of benefits
and costs
CostsCosts
BenefitsBenefits
Time
© Fiona Czerniawska, 2004
(2) The volatile market for management ideas
Innovation
Never has been the core competence of most consulting firms
Need to avoid monolithic ideas – but there’s no economic incentive for individual firms to do so
Need to reinvent the wheel more often – has implications for resources and cost structures
© Fiona Czerniawska, 2004
Storm clouds ahead?
Agenda
Three challenges:
Enron and the tarnished reputation of consultants
An increasingly volatile market for management ideas
Offshoring and the organisational structure of consulting firms
© Fiona Czerniawska, 2004
(2) Offshoring and the organisational structure of
consultancies The pyramid firm
Junior consultants
Senior consultants
Partners
© Fiona Czerniawska, 2004
(3) Offshoring and the organisational structure of
consultancies Ripe for disintermediation?“Once I’ve found the people I want to work with, what value is the firm?”
Brand?
Knowledge sharing?
Training and quality assurance?
Network?
© Fiona Czerniawska, 2004
(3) Offshoring and the organisational structure of
consultancies Factors determining supplier impact
Direct access to clients
Private sector client basePressure on margins
Offshore (low cost)
Onshore (high cost)
Public sector client base
Changing definition of offshore-ablePerceived level of risk
© Fiona Czerniawska, 2004
Scenario #1
Scenario #4
HighLowLow
High
Level of interaction between client and service provider
Perc
eiv
ed
level of
risk
Scenario #3
Scenario #2
Constant confrontatio
n
Constant confrontatio
n
Profitable distrust
Profitable distrust
Offshorerules
Offshorerules
Onshore returns
Onshore returns
(3) Offshoring and the organisational structure of
consultancies Four scenarios
© Fiona Czerniawska, 2004
(3) Offshoring and the organisational structure of
consultancies The diamond firm
Junior consultants
Senior consultants
Partners
© Fiona Czerniawska, 2004
Film studioFilm studio
DirectorDirector
Script writerScript writer
Cameras, make-up, catering, lights, set designers
and builders,
costumiers, location scouts, finance
managers ….
Cameras, make-up, catering, lights, set designers
and builders,
costumiers, location scouts, finance
managers ….Film starsFilm stars
ProducerProducer
ClientClient
Creative agency
Creative agency
Proposition development
specialists
Proposition development
specialists
Enabling specialists
Enabling specialists
Programme manager
Programme manager
(3) Offshoring and the organisational structure of
consultancies The future of consulting?