As a lifelong consultant, I have been frequently asked why companies can’t sort their own problems. The answer is very simple. We operate in a global economy within which the speed of change in the marketplace is faster than the ability of the incumbent organisations to adapt or get ahead of the new breed of competitors. This response often gets challenged by statements like “so, except the fancy words what makes consultants so special!”. This is always tough to answer as I have to explain what I do without using consulting lingo, which is not easy for most of us consultants!
As management consultants, we are experts in some aspects of business. The need for business and management experts is more evident when the business environment is changing, which has been consistent for decades. However, in the past number of years, there has been a significant change in the way consumers purchase products and services.
Based on research carried out by PayPal, the percentage of retail online sales has been increasing steadily every year, reaching 8.8% in 2018. Cross-border shopping is becoming the norm among online shoppers. USA and China are the most popular cross-border destinations, capturing 21% and 26% of online transactions.
Ireland, relative to its population, has the highest number of cross-border transactions. 80% of Irish online shoppers purchase goods from international merchants annually. This resulted in €2.7 billion of cross-border purchases in 2018.
As money is no more than a few digits on a computer, retail banks are going to seriously feel the change. According to Eurostat, the usage of internet banking in Ireland has steadily increased from 30% of the population in 2009 to 58% in 2018. While the rate of change of moving to online banking has been significant in Ireland, by the end of 2018, 73% of UK and 89% of Denmark, Belgium and Finland populations were banking online.
According to the consumer group Which?, 3,033 UK bank branches have closed in the past four years. In Ireland, Financial Services Union has stated that 129 bank branches were closed between 2012 and 2018. While, these changes have been necessary for retail banks to survive, closing branches will not be enough.
The new banking legislation, PSD2, will end the banks sole ownership of customer’s account information and payment services. This means while our money will continue to reside in our current banks (accounts) all the customer facing activities can be offered by third parties more cheaply and effectively. In addition, the emerging digital banks, such as Revolut, are providing new and enhanced services to their customers at a significantly lower cost.
For the incumbents to compete with the newly established digital-age companies have many challenges. These newcomers do not have the burden of unruly and fragmented technical infrastructures that have evolved over decades. Above all, their business structures and mindsets encourage customer centricity as well as innovation and flexibility, enabling them to significantly change consumers’ expectations.
There is nothing new in what you have read so far. It’s all common knowledge. In fact, if we examine the number of the British motor companies of the 60s, independent disk drive companies of 70s, computer companies of 80s, music and video related companies of 90s that are still in business we will notice that even disruption of the market through technology is not a new phenomenon. The question is what caused these failures.
When we examined the history of some of the companies that have disappeared (e.g. Digital Equipment Corporation employing 1,200 at its peak in Galway) it became clear that the most consistent pattern of failure of those companies has been the lack of ability to lead when technologies and/or markets changed.
Now let’s get back to the original question i.e. what is the value of hiring consultants?
Since its inception in the 1960s Management Consultancy industry has significantly grown to a multibillion-dollar industry, expected to reach €198 billion globally. This growth is largely due to expansion of consultancy services from initially focusing on solving critical business issues to include implementing change and provision of skilled personnel for implementing business & IT change initiatives.
Today’s critical business issue for our customers is the transformation their businesses such that they can retain their customers and to grow their market shares. We, as consultants, understand the impact of change on the future of our clients’ industries as well as their capacity to change. We use these together with many years of experience in leading change initiatives to support our clients to develop roadmaps and to transform their businesses.