What is consulting 4.0? Where is it coming from? How is it different, or is it different at all?
Just recently a new buzzword emerged in the consulting industry. Suddenly everyone talked, wrote, and tweeted about consulting 4.0. However, hardly anyone took the time to explain what consulting 4.0 is all about. Is it the digitalisation of the consulting industry? And if so, what does it mean? What makes consulting 4.0 different from any other form of consulting? Is it really “just” the digitalisation of an industry, but nothing else changes? We did some digging to better understand the evolution of the consulting industry from its early beginning in the 19th century to the new wave of boutique firms that we are part of. Read on if you’re interested in where all those hip consulting firms came from!
Consulting 0.0 – Reorganizing the Shop Floor
Business consulting first emerged in the US during the late 19th century with one of the pioneers being MIT graduate Arthur D. Little. The focus was on raising productivity on the shop floor. Early consulting firms tried to help business owners in assembly line design and shop floor organization. Business consulting evolved along the post-war recovery and expansion of the American economy in the 1950s and 1960s, when two distinct branches emerged within the industry. Firms including McKinsey, AT Kearny, and Bain developed a strong focus on strategy and thus assisted boards and senior management to develop long-term? strategic trajectories to sustain company growth. Other emerging firms continued to focus on the operational side of business, but slowly moved away from the shop floor into the boardrooms and offices. Both movements assist their clients to enhance productivity and sustain. However, the influence and scope of what we call business consulting 0.0 remained rather limited. Nevertheless, the methods and disciplined project management frameworks these early consulting firms developed are still associated with large consulting firms, even nowadays.
Consulting 1.0 – Getting a grip on Information Technology
The oil shocks in the 1970s and the subsequent global economic and political upheaval led to the first renaissance of management consulting. Driven by escalating cost structures across industries and the rising need for assistance during the first wave of globalization the consulting industry flourished. More than ever before, companies from all industries needed new sophisticated tools to deliver on strategic planning and organizational re-design. Catering those needs, consulting firms subsequently developed new competitive strategy methods, early ERP systems, human resource management systems, and change-management methods. During this period consulting 1.0 firms could significantly upscale the importance of the industry, as they established themselves as much needed experts in business strategy and planning.
Consulting 2.0 – Leveraging Information & Communication Technology
With the early internetization of the economy, the management consulting industry entered the first stage of digital transformation. By driving decreases in the cost of communication, the digitalisation of business triggered the decentralisation the economy. Geography and size became less important success factors and competition grew fierce. As they embraced the internet as a disruptive phenomenon consulting firms developed data-based fore sighting strategies, de-centralized control systems, and change management methodologies. Those strategies responded directly to the assumption of businesses leaders who considered the internetization as an environment of constant change, in which any attempt to control change was futile. Therefore, consulting firms 2.0 emerged as captains of change that, while powerless to control it, could still help their clients to better anticipate and react to ever changing market conditions.
Consulting 3.0 – A new Era of Process-, and Specialist Consultants
The early and mid-2000s marked yet another era of transition for the global economy. The experiences of 9/11 and the subsequent attacks across European and global metropoles led business leaders and governments to develop risk and disaster management systems. This tendency was reinforced by the financial crisis that unfolded in 2007. Thus, the early and mid-2000s created a need for strongly specialized consultants that could analyse, understand, and adapt processes to safeguard businesses against risks and uncertainties. By developing sophisticated disaster management tools and trainings, consulting firms 3.0 reinforced their role as experts and saviours that their predecessors in consulting 2.0 firms managed to establish.
Consulting 4.0 – From Suggestions and Remarks to Execution
Because consulting 4.0 is sometimes understood as the mere digitalisation of the consulting industry, some people argue that consulting 4.0 isn’t anything new – that it’s just a new term to describe an old phenomenon. Those critics are right in a way. To some extent at least. The history of consulting indeed shows, that the industry has always been subject to change and that internetization and digitalisation have already long reached consulting. However, consulting 4.0 accounts for much more than the mere digitalisation of consulting. The more interesting shift that characterizes consulting 4.0 as a new era of management consulting is related to the very nature of the service that consulting firms are expected to deliver and the skillset necessary to meet these expectations.
In contrast to previous years, consulting 4.0 firms focus not just on analysing processes? and their optimizations. Consulting 4.0 firms are not hired to merely analyse and suggest, but to analyse, contextualise, and build. This implies that consultants of the digital age can use their awareness related to the disruptive qualities of digitalisation to identify new business areas and develop as well as execute new business models on behalf of their clients. This drastically changes the way consulting works in the 21st century. With the transition to consulting 4.0, consultants become more than just consultants, as they turn into makers by going beyond suggesting changes and adaptations towards executing them.
Written by: Florian Lorisch
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