The traditional consulting business model is based on two principle ideas: (1) hiring people (top talent if possible) and (2) charging clients a fee per hour or day for gaining access to this talent, its expertise and/or manpower. Depending on the type of consulting or the brand, the pendulum swings more towards focusing on providing, and buying on the customer side, the more sophisticated expertise or the simpler manpower.
While the bulk of the consulting industry functions according to these basic principles, new business models have been successfully launched in recent years, just like the rise of freelance consulting which pro-vogue individuals to learn top Tips to Start a Successful Freelance Consulting Business, often creating superior value for customers, the firms themselves and the ecosystem they are embedded in (for more on these 3 types of value propositions, see Take your Business Model to the Next Level).
The traditional consulting model is based on utilizing existing assets, i.e. the consultants, as much as possible. There is a strong motivation to sell as many consultants and days as possible. Hence, consulting teams tend to be staffed with a variety of people and the incentive is high to put as many consultants on the team as possible. As a client you seldom have a choice as to which consultants you will get.
EdenMcCallum, a European based management consultancy, changed this fundamental principle. EdenMcCallum does not hire any consultants, but instead has built an extensive network of senior, highly experienced, independent consultants it can draw upon to staff projects. Clients have a say in which consultants they would like to work with and EdenMcCallum goes to great length trying to find the best match between client and consultant. As clients became more sophisticated in buying consulting services (many managers have been consultants) they know best what they need and can make better buying decisions. Partners are EdenMcCallum do not manage the client projects, but instead leave this to the consultants. Consultants are not pressured to sell new projects, as this is the job of the partners, and hence can focus on delivering successful projects. The lower overhead cost translates into lower fees for the customers, while consultants can still earn a considerable salary from their freelance work, plus they enjoy the flexibility to decide how much they would like to work. Nobody pressures them into accepting the next consulting project.
How can your business take advantage of key trends, while at the same time combining the best of existing models in your industry?
Eden McCallum has succeeded in creating a new business model while taking advantage of a trend towards freelancing as well as the desire of many professionals to work independently and to have more control of their careers, e.g. by defining their own terms of engagement.
Another major trend observed was the maturing of the consulting market in which clients desired to have more control and value in the consulting process.
How can you leverage your platform and commercialize your knowledge in new ways?
Instead of selling expertise through consultants, PSFK, a New York based trend research consultancy, sells expertise and advice in the form of reports. PSFK began as a blog chronicling everyday design and innovation. Meanwhile it has evolved into a research, publishing and consulting company focusing on innovative trends and innovation consulting. Besides its off the shelf reports on trends in various industries and areas, it offers customized research services, and turns the findings of this research into strategic advice for its customers.
PSFK operates a global network of experts it can draw upon for putting together its reports. Expertise is made available not through personal consultation but through special reports. As such, expertise can be leveraged beyond the single consultant and project and new revenue streams are possible.
How can you leverage your core assets in new ways and create steady revenue streams?
The traditional McKinsey business model is based on individuals applying their expertise to customers’ problems. McKinsey Solutions offers a range of software and technology based tools for data analytics and data driven decision-making in various functions and industries. McKinsey Solutions offers a very structured, repeatable and standardized process, which is independent of the individual consultants. Customers pay for an end-result, which is delivered as a product, usually in in a shorter timeframe then the typical consulting engagement. Through licensing agreements, the solutions business model provides a steady revenue stream, enabling McKinsey to engage in longer customer relationships outside of its traditional project business. McKinsey’s business model innovation leverages its expertise in these fields and codifies the expertise in standardized solutions.
How can you create value for your customers by reducing their risk and aligning your success with the success of your customers?
Instead of charging clients for hours spent, Fahrenheit 212, a New York based innovation consultancy, charges clients for objectives achieved, aligning 2/3 of its fee with the successful achievement of pre-defined goals throughout the innovation process and the success of their innovations in the market. Hence, the risk for clients is considerably reduced, as they only pay if the output of Fahrenheit 212’s work is successful.
To learn more about the Fahrenheit 212 business model visit: www.businessmodelgallery.com/models/fahrenheit-212/ and www.fahrenheit-212.com.
As these examples show, business model innovation is alive and well in the consulting industry. These new business models take advantage of what we call “business model design themes”, like for example “pay-per-use”, “complimentary offerings”, “turning fixed cost into variable cost”, etc. allowing them become more flexible, while lowering their cost and introducing new revenue streams.
It is well possible to successfully challenge the traditional ways of how an industry works. You just have to be brave enough to do so.
For more inspiration on how to reinvent your business model, visit Business Model Gallery.
By Marc Sniukas
Marc Sniukas partners with leadership teams and their organizations to discover opportunities for new growth, design innovative strategies and business models to seize these opportunities and transform the organization to execute.
He is a partner at Doujak Corporate Development, co-founder of Business Model Gallery - The World’s Largest Business Model Database, and visiting professor at CEDIM, a leading Latin American design school, where he lectures on Business Model Innovation. He’s the author of the forthcoming book “The Art of Opportunity: How to master business growth through strategic innovation and visual thinking” to be published by Wiley in Spring 2016.
Photo: Consulting Concept by Shutterstock.com
This case study explores the results of an innovation research process undertaken by Oxfam, which compared internal feedback vs. general public feedback to identical sets of ideas. In comparing responses between these two audiences, Oxfam discovered an immediate and obvious divide between their staff’s opinions about which fundraising ideas would perform the best, versus what the general public preferred – an important lesson about avoiding the bubble of the echo chamber.
Big data is becoming increasingly vital to business scaling and competition. In this article, we’ll introduce you to the three V’s of big data – volume, velocity, and variety – and discuss the many ways your company can benefit from incorporating big data into decision making, product development, audience analysis, and much more.
An in-house innovation program is becoming a common fixture in the most competitive organizations. However, in a recessed economy, these research & development programs can sometimes get eliminated, because they struggle to prove or articulate value.
Before investing in your company’s innovation development, it’s important to develop a strategy for collecting and evaluating ideas. Having guidelines in place to thoroughly vet ideas, value diverse opinions, prioritize scalable and sustainable results, and other areas of innovation management can set you up for success over the long term.
Embracing an intrapreneurial mindset, which intentionally disrupts things from the inside out and often from the bottom up, is a radical concept for companies that thrive on stability and predictability. However, if an enterprise is committed to developing its innovation capability through intrapreneurship, three groups of people must be mobilized to make it happen: leadership, stakeholders, and innovation support.
Sustainability is one of the key emerging trends in recent years. But much like innovation, it is a maturing discipline with few established business practices and lots of evolving methodologies. Sustainability champions at organizations often face the same challenges that innovation champions do: lack of senior level buy-in, lack of process, lack of resources. The benefits of successful sustainability and successful innovation are similar, as well: a competitive advantage, improved profit margins, and better brand sentiment from employees and customers.
Recent advances in technology put Internet-of-things (IoT)-innovation on top of the management agenda across industries. It is predicted to increase economic value by $11.1 trillion in 2025 (McKinsey 2015). The Service Science Factory and Noventum collaborated on this article to present a state-of-the art view on the Internet of Things and how to implement this vision within organizations.
Why do a large part of the design thinking projects in the corporate world never pass through the prototype phase? In recent years I’ve been involved with many design thinking initiatives. Many of them related to the development of new products inside large companies in industries such as finance, health, education and consumer goods.
Organizational innovation requires discipline. And like any other discipline, it requires monitoring and training to make sure that you’re on the cutting edge of your capabilities. But what skills should you focus on building and how can you track your progress?
Business Intelligence software is an essential tool for analyzing your company’s strengths and weaknesses. From inventory management, to accounting, to customer intelligence and beyond, there are many ways you can use BI software to inform your decision-making, increase operational efficiency, and gain a competitive edge.
A service from InnovationManagement.se