When companies look to innovate, they have a choice of using internal or external resources. One of the chief sources of external assistance is the category of consulting firms (“consultancies”). A study by the Management Consultancies Association (Czerniawska 2006) suggested the top reason consultancies were recruited was because client staff did not possess the relevant skills (66 per cent). While original and creative work took second place (45 per cent), getting access to proprietary methods and tools prompted a response from only 17 per cent of respondents. What does this mean? That  consultancies themselves may need to become more innovative in the way they interact with clients.

Globalization and the ensuing stiff market competition suggests consultancies need to identify and respond to these factors, and then modify their responses to fit their clients’ changing needs and expectations. Improving thought leadership within the consulting industry is critical. Yet, formal innovation processes alone can hinder innovation itself and contribute to loss of market position. One-person shops as well as national firms will benefit from becoming “more innovative and adaptive in their proposals, methods and solutions, while traditional client/consultant boundaries need to be challenged, stretched and even broken. Consultancies may also need to be more open to partnership working with other agencies, such as academia or even competitors, if they are to respond effectively to the pressures of the current high-cost, low-resource business environment.” (Institute of Consulting, 2011)

Clients need to learn how to work with consultants in this new environment. We should be cautious, however, to say that consulting has ceased to be innovative; the creative processes have simply shifted. Rather than looking at the bellwethers of old, BPR or TQM programs, local, client-focused innovations are the new frontier. Such projects are driven by a more discerning client who is often wary of being sold a ‘one-size fits all’ product, and are frequently undertaken as joint initiatives between clients and consultancies. Such arrangements provide clients with more control and consultancies with reduced overheads.

 The Institute of Consulting Report recommends the following to improve innovation inside consulting firms so that the organizations they advise can, in turn, become more competitive: 

For Consultancies:

Think small: clients are more sophisticated and demanding, requiring ideas that are tailored for their local needs.

Share costs and expertise: there is little that can be done about diminishing margins or higher utilization rates, but universities, research institutes, clients and other consultancies will often jump at the chance to share resources on interesting innovative activity if the case is made well enough.

Explore new frontiers: innovation is to be found in bringing fresh ideas in and listening to them. Develop boundary-spanning roles, recruit graduates that are not from business schools, interview new recruits about what could be changed in your company, seek out different sources of research and knowledge and organize cross-silo spaces for discussion.

Enable talent: providing bright, motivated consultants with autonomy and the ear of senior management is more likely to generate useful innovations than trying to formalize the process through bureaucracy. Innovation involves risk so loosening controls is no bad thing.

Be proactive: innovative activity depends greatly upon clients and procurers leading the way in taking risks, having conversations and enabling creativity. This can be supported though communication, education and persuasion.

Develop your people: over half of all respondents reported that training, conference attendance and professional, accredited staff were important enablers of innovation. Continuous professional development, it seems, is crucial for developing innovation as a strategic capacity for consultancies.

For Client Organizations:

Work with consultants: research shows that companies which invest in innovation during a recession are more likely to come out of it faster than their competitors. Co-working with consultancies on management innovation generates a number of benefits: a closer match of solutions with your needs, more motivated and skilled employees, a potential sharing of intellectual property and association with ground-breaking ideas.

Take risks: examine and prioritize the areas of your business where new ideas could put you ahead of the competition. Put aside some of your budget to work with consultancies on new ideas, if possible using a risk-reward form of payment so that risks are shared with the supplier.

Improve procurement: sourcing consultants solely on the basis of cost is risky to both the delivery of the project and the innovation that it might bring. Good procurement practice will acknowledge this and purchasers should have both the expertise and the freedom to select the best consultant for the best price. An over-specified solution may mean you are not getting the best out of your consultants and minimal consultant interaction with the business owner during the tendering process can sometimes mean the project requirements get miscommunicated.

Enable expertise: your consultants will have witnessed the challenges you face dozens, if not hundreds of times, in similar companies. Making the most of this not only involves conversation with the consultancy when defining solutions but also ensuring as much of their skill and knowledge is passed on to your staff before they leave. Clients must enable consultant expertise as much as consultants enable that of clients.