This post is part of a series in which LinkedIn Influencers analyze the state and future of their industry. Read all the posts here.
My background as an industry analyst at Forrester Research and management consultant at the now-defunct Monitor Group gives me a unique point of view into the intersection of two industries, Industry Research firms (dominated by companies like Forrester, Gartner, and IDC) and Management Consulting (with leaders like Bain, BCG, and McKinsey). Both are being hit by the classic Innovator’s Dilemma, where new entrants offer services that are cheaper (or free) to an under-served customer base. I believe that the established players have several facets of their business models that limit their ability to respond.
Let’s take a look first at the state of the research industry:
- The double-edged sword of syndicated content. Research firms derive much of their revenues from great content that sits behind a syndication wall. But analysis from journalists, bloggers and independent analysts is rapidly improving in quality and available at a great price point – free. And technology vendors like IBM conduct cutting edge research that is arguably better than what any research firm can do. While syndicated revenues scales thought leadership wonderfully, research firms can’t cannibalize themselves without seriously jeopardizing profits. The result – free content from these new entrants – is gaining a significant foothold and making syndicated clients take a closer look at their investment in annual seat-based subscriptions.
- Individual versus firm brands. Research firms promote the expertise of top analyst talent – but not too much for fear that these “stars” gain too much visibility and spin off to create their own firms, stealing away clients in the process. Non-compete contracts and restrictions on personal blogs are attempts to try to contain the brand of individuals. But this means that all talent needs to be homegrown as no established thought leader would ever consider subsuming their own brands. This opens the door for companies that know how to attract, grow, and develop individual brands in harmony with an overall umbrella brand.
- Clients demand more custom solutions. Research firms don’t like consulting – it’s messy, time-consuming, and not as scalable as syndicated research. But their clients are dealing with tough, disruptive problems of their own – and parachuting analysts into a client for a day leaves many clients wanting more detailed, customized advice and strategy. While research firms have made decent inroads into creating consulting services, these efforts typically involve dedicated consultants rather than industry experts – because every minute an analyst spends with a client means less time spent on generating syndicated content that pays the bills.
Now let’s turn to management consulting firms that have their own set of challenges:
- Secrecy constrains engagement. Consulting firms operate in the Cone of Silence to respect client confidentiality, which limits their ability to network and share best practices sometimes even within a firm. Contrast that to their clients’ own increasing willingness to share with and support each other through formal networks like Corporate Executive Board and SocialMedia.org. The result: It’s getting harder and harder for consulting firms to provide new insights and value to smarter, networked clients.
- Clients demand more research to justify decisions. Consulting firms rarely invest in industry research that isn’t specific to a client because it’s a cost that can’t be easily recovered across multiple engagements. This business model constraint means that a key client need – research-based evidence needed to justify risky strategic bets – aren’t at the fingertips of these consultants.
- Deep relationships versus deep expertise. In the Internet and social networking age, small boutique firms and even individuals with deep expertise can create visibility, generate press, and get on the radar of potential clients. This challenges the broad expertise and brands of traditional firms who rely on a brand and deep relationships to carry it forward, even in areas when expertise may be lacking. One of the key notes of disruption in consulting is the pairing of these boutique experts with the mainline consulting firms, supplementing knowledge of the firm’s inner workings and relationships with deep expertise. Guess what happens when senior management sees that much of the value is being created by these boutique experts rather than trusted counselors?
If your firm is in either of these two industries, I encourage you to take the following three actions to refine your business model and guard against disruption:
- Develop and grow networks. Research and consulting firms often indulge in hubris, believing that they have THE smartest people in the industry within their walls. But how can that be the case in fast developing, disruptive spaces? Buy yourself an insurance policy against the pace of change by developing a network of the brightest people OUTSIDE of your firm including people at rival firms. At Altimeter, we cultivate and feed that network with our Open Research, where we give it away for free. The result is thousands of people reading the research, commenting on it, and helping us develop the next research. The result is in research that is better, faster, and cheaper to produce. In the future, it’s not the firm with the smartest people that will win, it’s the one with the smartest network.
- Invest in the brands and careers of individuals. The success of research and consulting firms depends on attracting A+ talent – and that talent won’t stick around if they think they can do better elsewhere or even on their own. At Altimeter, we believe that a strong individual brand results in a strong company brand – the two live in harmony so that we can leverage individual thought leadership AND the company brand. But we also create the greenest pasture possible for individuals to stay with us – there are no non-competes, no constraints on personal blogging or book writing, that artificially keep someone around when they don’t want to be here. When one day the fit is no longer there, we agree to bid each other “all the best,” knowing that it was a fair exchange of value for the time that we worked together.
- Create synergies between research and consulting. Rather than look at either research or consulting as a cost center, think about how they can each lower costs and actually result in better outcomes in the other area. Research improves when you can apply it to real client problems. Consulting deepens your understanding of client pain points that results in better, more meaningful research. The key is to find people who can stretch between these two areas. At Altimeter, we have analysts who do primarily research, but stretch frequently into consulting to keep that research grounded. And we have consultants who spend most of their days working with clients – but who then stretch into research, which gives them research-based grit to bring into their engagements.
So because the incumbents in the research and consulting industries have very real business model constraints, I see plenty of opportunity for new entrants to disrupt and gain a foothold.
Additional reading and resources:
- I’ve included a SlideShare of the trends impacting research and consulting firms below, including how we approach it at Altimeter.
- My how you’ve changed! Technology meets Social, Consumerization, and Freemium, by Donald Ham
- Consulting on the Cusp of Disruption by Clayton Christensen, Dina Wong, and Derek van Bever
Photo: Pressmaster / shutterstock
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Enjoyed this post? Read what other Influencers had to say:
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• Rita J King on State of Innovation: Thriving in the Imagination Age