Normally one would assume that as a company grows, its ability to set itself apart from the rest of the industry would grow proportionally. For the top consulting firms, however, it is a different story. Studies have shown that as a consulting firm grows, differentiation becomes increasingly difficult. In fact, consultants in the top firms cite differentiation as their number one challenge. Smaller niche firms are by definition specialized, so they are far more easily able to attract clients by offering unique value propositions. For reasons that are deeply embedded in the industry, big consulting firms that deal with every sort of business problem have a far more difficult time. Here we examine the reasons why consultant differentiation is so difficult.
Marketing at the Wrong End of the Funnel
Consultants find differentiation difficult because of the manner in which consultant firms market to their clients. According to an industry report, the growing commoditization of the consulting practice has caused consulting firms to market at the wrong end of the funnel. Commoditization, or the growing availability of substitutions to an offering, causes marketing to become detached from the offering itself – in this case, from the actual consulting services. Instead, consultant marketing revolves largely around the client experience. Rather than focusing on how their consulting work is faster or more innovative, gathers deeper insights, or produces better results, consultant firms advertise the personalities or expertise of individual consultants, their excellence in communication, or their thought leadership. The problem is that by focusing on client experience, consulting firms are marketing only to prospective clients who have already determined they need consulting services (the bottom of the funnel) rather than to businesses that are still searching for a solution to a problem (the top of the funnel). Because the top consulting firms’ offerings are largely similar, marketing is therefore limited to the “soft” skills that the firms have to offer. Instead of offering new and exciting solutions, firms pour resources into explaining what they do in new and exciting ways. By limiting themselves to prospective clients who have already decided to employ consultant help, consulting firms are limiting their marketing ability. Were firms to target prospective clients who have not yet chosen a solution to their problems, they would be able to better demonstrate why their services are superior to alternative solutions.
Focusing on the People instead of the Service
Not only do consulting firms recognize that their marketing focuses on client experience, but many actually champion it. The top consulting firms have succeeded in holding an edge over their competitors by other means than differentiation, and they are content to do so. McKinsey, for example, markets itself as a firm that hires only the top talent in the nation. The other top firms are also full of incredibly smart people, and talent doesn’t necessitate better offerings, yet McKinsey has to date seen great success with this strategy. Additionally, top firms maintain their competitive edge by creating strategic client relationships. Many rely on “alumni” employees who have moved on to their own businesses to return to their “alma maters” for consultant services. Smaller firms, such as McKinney Rogers, pride themselves on building trusting relationships with their clients. There is certainly value in these firms’ approaches; hiring top talent and maintaining strong client relationships are crucial elements of a successful consulting business. As we discussed above, however, focusing differentiation strategy on people rather than services increases the burden of commoditization and makes it more difficult for firms to set themselves apart.
Difficulty Proving ROI
The nature of management consulting makes proving ROI tricky. The success of the consulting offering itself, which is for the most part solution advice to deep-set business problems, is simply not an easy thing to track. Some consultants aid their clients in implementing the advice, and some do not. Regardless, it is difficult for consultants to prove the worth of their advice because there are so many factors at play in business. Because ROI is not so easily apparent, prospective clients are far more likely to focus on factors such as prestige and past relationships when choosing a consultant firm simply because they feel reassured in their investment.
The nature of today’s consulting industry makes differentiation, especially among the bigger firms, truly difficult. Because the top firms are still so successful, it seems likely that most will be reluctant to change the way they market to clients and set themselves apart from competitors. Yet in today’s climate of technology disruption, and with the growing commoditization of the consulting practice, it also seems likely that offering differentiation will soon become a much more critical component of a successful consulting practice.