Consulting firms are losing ground to Silicon Valley. Data start-ups are disrupting the old guard
I should know. I’m a dyed-in-the-wool strategy consultant, having spent many late nights and weekends cobbling together data in spreadsheets for our strategy cases — fueled by a curious mix of coffee, Red Bull, and whichever caffeine-loaded edible was around.
Every first year Associate, or Analyst knows this. When you’re green, you’re going to be out collecting data, whether it be through field interviews, or rummaging through overpriced market reports, governmental statistics, or ancient dusty files in old ministries in the hope of gleaning that one final datapoint to complete your spreadsheet model.
But in recent times, strategy consulting is increasingly losing its relevance— most consulting firms are old-guard, preferring to focus on large and stately old companies in industries like airlines, mining or power production. You almost never hear of a major tech company using them.
Google never hires consulting firms. There’s a reason why.
In recent times, corporations are no longer interested in strategy or market reports — the vast bulk of consulting cases focus on just one deliverable: a 200-odd slide PowerPoint presentation that tells the CEO what he probably already knows.
It’s very very hard to surprise the CEO, and there’s a major reason why:
In most consulting cases, the vast bulk of data is collected by consulting juniors. People who are young, hungry, and willing to work long hours to get the data needed to put together a strategy deck.
These long hours are billed out to client-corporations for hefty sums. However, corporations are no longer happy shelling out money for something that can be automated easily.
Why would a company like Nestle or Coca-Cola shell out huge wads of cash to get data that is already available in a market report (and prettified by a junior analyst) when they could buy a subscription to a data API, and get that data piped to their internal models for cheap?
Why would an appliances manufacturer pay tonnes of money to a consulting firm to build out a pricing algorithm (based on outdated data, from an outdated report) for their next range of washing machines, when they could purchase access to a Products API and get RealTime pricing on any product sold online — effectively building their own dynamic pricing engine?
The pool of old-school clients who still prefer to hire traditional consulting firms is increasingly shrinking, leaving a smaller piece of the pie to be fought over.
A vast majority of tech-savvy corporations are building out their own data science teams to collect and process insights — the ones who aren’t are already thinking about it.
Consulting firms are probably very familiar with this term:
The truth of the matter is this: corporations are cottoning on to the notion that good 2–3 person data science team armed with a plethora of data APIs and crawlers can put together a better strategy than a million-dollar consulting team could ever hope for.The reason is that more data beats fancy algorithms.
And beats beautifully worded Powerpoint decks even harder.
The more data you have, the easier it becomes to extract real insights without resorting to extrapolation and conjecture.
And getting your data from a market report is a sure fire way to lose out.
Data from market reports are1) limited
3) subject to data bias and,
4) often secondary data
Consulting firms like McKinsey are already aware of this — McKinsey Solutions provides subscription-type solutions to clients based on their IP and knowledge.
An example would be Periscope which helps companies create better pricing strategies
However, a consulting firm will always have trouble matching the breadth and scope that a highly specialized data company has in this field.
A data science team that is attached to a consulting firm is like having a Ferrari tow a trailer.
But consulting firms do have an ace in this game — years of industry experience. Consulting firms best understand how to navigate the corridors of corporate leadership and to whisper ideas in the ears of CEOs, in the language they best understand.
By partnering with data companies like Semantics3 to procure, process and enrich crucial data instead of relying on junior analysts juggling spreadsheets, consulting firms can leverage their most important assets (partners, consultants and managers) and offer an extremely efficient and affordable solution to clients, at a low cost base.
Consulting firms can add enormous value to data by providing it with context gleaned from the collective experience of the firm, and not waste everyone’s time getting crappy data from market reports.
And more importantly, it allows everyone in the consulting industry to focus on the most important part of strategy: actually implementing it in companies.
Also known colloquially as Strategy Activation
Which is a much more lucrative prospect than selling ineffective market reports.