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Physician Heal Thyself: Competitive Strategy Consulting Faces Disruption

Posted by | Fuld & Company

At Fuld & Company, we pride ourselves on giving objective, evidence-based advice on matters of competitive strategy to some of the world’s largest and most innovative companies. But we now potentially find ourselves facing the same sort of competitive disruption that our clients typically call us to help them solve.

HourlyNerd: a new model of business consulting?

HourlyNerd, an online network of professionals willing to take on consulting projects for clients large and small, has attracted more than 22,000 MBAs and start-up funding of more than $9 million. Deemed by some as the “Uber of management consulting,” a recent article in the Boston Globe speculates that HourlyNerd “could evolve into potent competition for some of the best-known management consulting firms, like McKinsey & Co. and Boston Consulting Group.”

I’ll try my best to overlook the fact that our hometown newspaper failed to include Fuld & Company in that list of threatened incumbents, but nevertheless, the Globe may be on to something here. The business model is simple: a company posts on HourlyNerd’s website a project it wants to get done, a start date, and an estimate of what the company is willing to pay. MBAs on the network review the project, can contact the prospective client for more information, and submit a bid. Clients can review their prospective labor by examining their star rating (one to five), just like you can check out your Uber driver’s rating.

By some estimates, the fees paid by clients in this model can be as much as 70 percent less than hiring a traditional consulting firm. And, clients can potentially benefit from the speed and flexibility hiring from an independent network offers. Daniel Callaghan, the founder of London-based MBA & Co., an HourlyNerd competitor, says that a project sourced from his network can “get rolling within days, not weeks,” as is the case with the large consulting firms.

Three things consulting firms must do to meet this challenge

Innovative? Yes. Market-disruptive? Maybe.

Cause for concern here at Fuld & Company and inside other consulting firms? You betcha. But, before we succumb to the same sorts of responses that other disrupted incumbents often pursue – drastic price cuts, mimicry, and ill-conceived plans to find new sources of revenue, to name three – let’s look at the problem a little more closely.

First, does HourlyNerd, MBA & Co., and any other emerging competitor threaten the entire management consulting business model? Probably not. There will still be a need for companies like General Electric and IBM to hire consulting firms that have the relevant project and industry experience to give frank advice to the CEO and other senior leaders. While contract MBAs may be great for the one-off projects, having access to a true strategic adviser is a need that these new entrants can’t satisfy, at least not immediately.

Second, what do established consulting firms bring to the table that is different? For some, it is unique methodologies and frameworks that help get to actionable solutions for their client’s toughest challenges. For others, it’s training and professional development programs that enable their consulting staff to hone their skills and increase their value to clients. For others, it’s collegiality and collaborative approaches to consulting projects that combine many smart people to conjure solutions that freelancers working by themselves would be hard-pressed to invent.

Lastly, what steps should the incumbent consulting firms take to keep ahead of this emerging competitive threat? If I can treat my firm as the client for a moment, Fuld & Company must double down on innovation, to make sure we continue to offer unique solutions and skill sets, never let up on our focus on quality and “super-pleasing” (a term we use all the time) our clients, and continue to attract top-tier consulting talent.

Problems with the business model?

While scoping out our counter-competitive strategy, let’s also not ignore the problems with HourlyNerd’s business model. Just because something is new and disruptive doesn’t mean its perfect, and it’s easy for incumbents to overestimate the size and nature of the threat.

The most obvious problem with this business model for me is the fungibility of the workforce. How hard would it be for any of the MBAs in the network to use HourlyNerd as a place to cut their teeth on specific consulting projects with an eye toward eventually starting their own firm, or going to work for an established consultancy? The potential for HourlyNerd’s own consultant network to emerge as competitors to itself is a real concern.

And, let’s not discount the importance of the legitimacy that comes with years of consulting heritage that the incumbent firms like McKinsey & Co. Bring. While speed and flexibility are one thing, knowing that your working with a firm that, in Fuld & Company’s case, brings 37 years of history to the table has got to be worth something.

We’ll keep our eye on this.

To be sure, we will continue to monitor and assess this new professional services business model – just like we advise many of our clients facing similar disruptive threats – and we won’t take the challenge lightly. While uncomfortable, disruptive innovation is the best impetus for threatened incumbents to step up their game.

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