Post-pandemic era offers opportunities for boutique consulting firms

31 May 2022 5 min. read
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According to Linus Benjamin Bauer, the managing director of Bauer Aviation Advisory, the reshaping of the consulting industry as a result of pandemic-induced change is opening up new, and more competitive avenues for boutique consulting firms in the Middle East and beyond.

The rise of the large consulting firms and the management consulting industry is a textbook tale of business evolution. Over the last 60 years, large consulting firms have grown and maintained their status through prestige, branding, and long-time client relationship.

In particular, the world’s largest consultancies have relied on three crucial growth drivers: managing complexity, deepening their engagement model and expanding internationally.

Post-pandemic era offers opportunities for boutique consulting firms

The current Covid-19 crisis has resulted in one of the deepest recessions; the largest consulting firms are ultimately no more immune to the forces of disruption than any other industry. The consulting industry is primarily human-driven, and the golden rule of this industry is to charge the clients with hourly fees rather than outcome or value-based pricing.

Consulting is much more than trading advice for money. It is more like a bundle of different types of services and functions bound up in a prestigious, expensive package.

As a client-driven industry, with clients’ needs changing constantly, the consulting industry is forced to adapt quickly to services, structure, and operations. This has arguably never been more apparent than during the current unprecedented global crisis, where Covid-19 has coincided with a worldwide recession. This time, the combined situation has subjected many businesses to a unique set of challenging pressures. They are turning to consultants to receive support.

However, over the past few years, the consulting industry, in other words, has become inefficient, inflexible, and slow to adapt – even if large consulting firms have weathered existential crises before. Additionally, the increasing pace of technological change means that recommendations from consultants are out of date nearly as soon as they are made.

Digging deeper into the portfolio of services offered by large consulting firms to clients today, it becomes evident that disruption is hitting the consulting industry just as it has hit (and still is hitting) many other sectors.

The consultant is a specialist

One of the conventional criticisms I have heard from several executives and managers is that most consulting firms send generalists into companies to do an expert’s job. Expertise doesn’t run most of the largest consulting firms – at least, not at first.

Over the past few decades, large consulting firms have always practised the situational, “it depends” style of consulting. Clayton Christensen, a former professor at Harvard, described today's most prestigious consulting firms operating as a black box. Companies bring them a problem, and they produce a solution. However, the visibility into what happens during that process could be described as minimal.

As a result, assessing the impact and value of a consultant’s recommendations and work can be challenging for clients.

Typically, about 75 per cent of the clients think that the quality of work done by the largest consulting firms can be rated either “very good” or “good”. However, the perceived difference between the quality of work done by the top-rated and bottom-rated firms is seven percentage points.

The group of laggards (underperformers) have a notorious image for bringing ‘off-the-shelve solutions’ which have been tried and tested before but are not specific to a client’s needs. These offerings increasingly fail to meet the requirements of the client. The so-called “one-size-fits-all model” is a diminishing business model.

Until recently, the large consulting firms were the only places aggregating expertise from all different avenues. Nowadays, accessing subject-matter experts with industry know-how is accessible through smaller and medium-sized consulting firms, or consulting/expert networks. Flying in an expert with in-depth knowledge of aviation, for example, no longer is the exclusive terrain of large consulting firms.

Mastering the complexity

As industries become more complex, so do the needs of the businesses tapping consultants. Consultants nowadays are expected to know the operational reality of customers and offer adapted services that meet industry, functional and client contexts. This, in turn, enables consulting firms to add more value to clients.

The client-consultant relationship functions at its best if the consultants as subject-matter experts provide information, expertise, insight, execution, and implementation support to the client. Additionally, clients nowadays are often more interested in sharing the risk of change programmes by partnering with consulting firms – instead of hiring consultants on an hourly and ‘performance free’ basis.

In times of shifting client demands and expectations for tailored services, having a vast network of subject-matter experts helps boutique consulting firms to develop better value-added and tailormade solutions for their clients and partners (such as other consultancies).

The firm I have founded, Bauer Aviation Advisory, is one of the examples. We work with internationally recognised experts in the aviation industry, which enables us to be a trusted and sparring partner for leaders in the industry. Meanwhile, our in-depth specialisation means that we team up with larger consulting firms, bringing subject matter expertise to their (often) larger workstreams at clients.

While generalists have historically thrived in the consulting landscape, advisory work needs to be more industry-specific and trusted. The current Covid-19 crisis is laying the foundation for boutique consulting firms to possibly emerge with an advantage in terms of expertise and focus, which in turn can help them thrive in the landscape and wider ecosystem.

About the author: Linus Benjamin Bauer is the founder and managing director of Bauer Aviation Advisory, a Dubai-based consultancy specialising in the aviation sector. He is also a Visiting Lecturer at the City University of London.