Accustomed to the idea of mass-media, we assume that material with the broadest appeal will be read by the most people.  But the internet and social media may invert that relationship: because people can pick and choose what they want to see, they’re more likely look at material which focuses on their interests than at more generic content.

This is certainly what we’ve concluded from asking people how they react to the thought leadership consulting firms send to them.  The more senior a person is, the more important thought leadership is: “In my position,” said one senior executive we spoke to, “there are relatively few places I can go to get new ideas about my business – consulting firms’ thought leadership is one of them.”  But – and it’s a very big but, said this executive – “it has to be relevant to me.”

Almost everyone we speak to makes the same point, but it raises some interesting questions about how to do this in practice.  In a perfect world, clients would like to see thought leadership developed with their unique needs in mind – one-to-one marketing, if you like.  But that’s not feasible from a consulting firm’s point of view: thought leadership requires investment and the best return is likely to come from ensuring that a single piece of research can be relevant to as wide an audience as possible.  But therein lies the problem: the wider the intended audience, the less likely it is that any one person will think it relevant to them.  In other words, in looking for the best possible return, most firms end up with the worst.

All of which brings us to mass-customisation, in which one wide-ranging piece of research is done as efficiently as possible, but the results are then cut up in different ways, for different sectors and different group of readers.  And, in our experience, this has an added benefit: the highest-quality thought leadership is always that written with a very clear audience in mind, so the challenge and opportunity here is not simply to slap on an opening paragraph that talks about – say – the situation in financial services or the role of the CIO, but to work out what the messages arising out of the research mean for these organisations and people.  But that’s not enough: what every senior manager would like (and the more senior they are the truer this is) is thought leadership that’s written exclusively for them.

One solution is to ensure that any material sent to them comes with a personal note from someone they know saying why they should read it. Not every piece of thought leadership will be relevant, so an important part of this process will also be to pick and choose who gets what more precisely.  Another approach (and they’re complementary, not mutually exclusive) is to let people choose for themselves by displaying the data in such a way that they can effectively create their own thought leadership, as the latest version of IBM’s CEO study illustrates.  Tools already exist for people to build their own journals, although they’re not particularly sophisticated and it would be interesting to see consulting firms adopting some app which allowed their readers to mix and match material from different firms. After all, the final stage of mass-customisation will be to allow readers to be their own editors.

That’s been confirmed by our recent round of client research, this time focusing exclusively on the views of almost 150 senior executives in the region.  The impression they give is of a market that’s undergoing significant change.

Around a third of all consulting is driven by the need for specialist skills. “The shortage of skilled labour in the GCC is acute, so we have to buy in a lot of the skills we need from external suppliers,” was a typical comment, in this case from the CFO of a financial services company.  That’s something clients would like to spend less on in the future, not because they’re becoming less interested in these skills, but partly because they’re under pressure to develop the skills of their own staff rather than relying on outsiders, and partly because many feel they’ve looked to big consulting firms to provide such skills over the past decade and don’t believe they’ve been getting the depth of expertise they think they need.  There are two consequences to this: first, although the volume of consulting support will shrink, the level of skills required will rise; second, clients will not necessarily turn to the big, well-known consulting firms, but to niche firms which are perceived to be more specialised.

If that sounds like bad new for big firms, it isn’t neccessarily. After all, there simply aren’t many mid-sized specialist firms in the region. Firms may be able to fly their staff in from the West, but unless they have a sufficiently well-recognised local presence GCC buyers won’t necessarily know where to look in the first place.  Big consulting firms can respond by being clearer to clients about where they have particularly deep pockets of expertise (many clients complained that big firms don’t take the trouble to do this but simply trade on their brand) and/or by acting as a channel, bringing in experts from niche firms where appropriate rather than claiming to be good at everything.

Big firms will also benefit from growing demand for consulting work aimed at helping clients validate difficult decisions, something that ranges from the inevitable rubber-stamping to genuine attempts to consider all the options.  As in the West, this accounts for around a sixth of all consulting (some would say more, if clients were being absolutely honest with themselves), but unlike the West, this type of work looks set to grow in the GCC, driven perhaps by the increasing complexity of organisations and their governance structures.

Big firms can’t, however, afford to be complacent.  The clients we questioned were very clear that if a consulting firm didn’t have the depth of expertise to provide specialists skills in the first market or make the grade in terms of brand and reputation in the second, then they’d be viewed as body-shops, able to provide only the most generic of skills at increasingly low prices.  Having been guilty of offering poor service and mediocre quality in the past, some of the very biggest firms now run the risk of being classed as body-shops.  Their brands will no longer save them.

“You’re a bit of a luvvy, aren’t you?” my prospective boss asked, breaking the silence . “You belong in marketing.”

This, needless to say, was not the point at which a glittering career in sales began. And frankly, while I’d firmly refute accusations of luvvy-ness (in fact if anyone says it again I’ll waltz out of the room in a huff), I remain eternally grateful to my colleague for that. What it was, was the beginning of a debate in my mind about whether marketing is an art or a science.

Being a proponent of the if-you-build-it-they-will-come school of thought (frankly being little short of a wild romantic) I’m predisposed to seeing it as an art. But I’m open-minded enough to accept that many marketing activities far more readily meet the description of a science (they’re the bits I’m not very good at) and can understand why some people see the whole of marketing that way. What’s more, in a world in which analytics are beginning to replace instinct as the drivers of decision, I suspect I’m part of a shrinking minority.

I mention this for two reasons. The first is the curiously catchy idea – espoused by an eminent IT services marketer with whom I shared dinner recently – that marketing departments might cease to exist over the next 5-10 years. He wasn’t suggesting that marketing would cease to exist, more that those who practiced it wouldn’t be part of a formal department for much longer. I’m not convinced he’s right but it really is a catchy idea. Five years into a period of sustained economic uncertainty, many marketing departments will now be a shadow of their former selves. If that’s a matter of financial necessity then it’s compounded,  in places like consulting firms, both by the pens-t-shirts-and-umbrellas view of marketing held by senior management, and by marketing departments which often do little to disarm them of that view.

Set within that context, my let’s-all-get-together-and-come-up-with-a-lovely-big-idea style of marketing starts to look a bit like a chocolate fireguard. After all, what marketing departments need to do – and do very urgently – is to find a way to demonstrate the return they can deliver on the investment made in them.

That’s why I was so interested in a conversation I had recently with Vince Kerr, the former Executive Director of Marketing for Fujitsu and a newly-awarded Fellow of the Marketing Society. In short, Vince is now spending his time talking to companies about how they can apply Lean techniques to marketing, and having quite a bit of success doing so. My initial response, you won’t be surprised to hear, was to recoil from such a scurrilous intrusion into the art of marketing, but much as I’d like it to be leaky, it’s an idea that undeniably holds water. PDM, QFD and RACI might sound like the sort of acronyms that belong in big greasy operations departments but they’re about aligning activity to business objectives, eliminating wasted effort, assessing performance based on delivering what’s important to customers and creating a better-optimised organisation. All of which sound as if they might be exactly what’s needed to save marketing departments, both from themselves and from the people who have such a dim view of them. And certainly from people like me.

This is a good analogy to the predicament the consulting industry finds itself in today.

Most of the consultants we talk to would describe themselves as “cautiously optimistic” about growth.  Particularly in Western Europe, there’s a sense of resignation that we’re facing a period of prolonged low-level growth.  The chance of a euro-zone crisis has receded for the moment and client confidence and expenditure on consultants is picking up after a rather dismal back-end to 2011, but many people are worried that the improvement is fragile and that another economic blow will knock the industry off course again.  Like my son, they’re looking downwards, scanning the path in front of them for problems, worried that it will suddenly drop off a cliff.

As we’ve explained previously, clients’ views are rather different.  While most are broadly comfortably with the amount of consulting they use, around a quarter expect to see a substantial increase as they re-draw the line between what they deliver internally and what they bring in from the outside.  They think the consulting industry of the future could be much bigger than it is today.

By continuing to look at their feet, consulting firms may – if they’re lucky – crash into this opportunity.  If they’re unlucky, they may never see it at all, or see it only after other suppliers have already started to scale its heights.

Consulting firms shouldn’t be looking down, they should be looking up.

But how much does this positive feedback stem from the fact he’s told them what they want to hear?

Most of the clients we interview stress the importance of honesty in consulting.  Surrounded by yes-people, many of those at the very top of their organisation end up losing touch with what’s actually going on.  Some, I suspect, welcome this insulated existence, but the majority are conscious that short-term cosiness easily becomes long-term weakness.  Being at the top doesn’t make you infallible, but it does mean that people are less willing to tell you you’ve made a mistake while you’re still in a position to do something about it.  As outsiders, consultants have a genuinely important role to play.  Able to view things objectively, they separate an issue from the politics that surround it; not dependent on their clients for career progression, they can (though admittedly they don’t always) deliver a difficult message.

But research tells us that people look for evidence that supports their existing views; that although most of us like to believe we’re open-minded, we are, in fact, quite the opposite.  Thus, the person reading a new piece of thought leadership, or indeed listening to Joe’s presentation, will focus on the parts they agree with.  Two things flow from this, I think.  The first is that any judgement they make about whether a report or presentation is good is essentially based on whether they agree with the points it makes.  Our best work may not be that good, it’s just what most people have most vociferously agreed with.  The second is that it’s very hard to change people’s views: a good presentation will be dismissed as poor if the audience don’t like its message.  But it’s not impossible.  Perhaps our measure of whether we’ve done a good job (whether that’s writing a report, making a presentation, coaching a junior member of staff or even just running a meeting) should be based on whether we’ve got someone to change their mind.  Something can’t be excellent simply because you agree with it – it has to have made you think.

It is advice, we feel, consulting firms would do well to listen to.

In not a few consulting firms, the approach to business planning starts and stops with going over what they already know. This is the equivalent of my 13-year-old son whose recent biology revision consisted of looking down the list of topics and thinking about what he could remember (he was quite puzzled when I suggested that he might read through his text book to see what he’d forgotten).Call me a pedant – my son certainly did – but I can’t quite grasp the value of an exercise in strategic planning which ends up repeating what everyone already knew. Much better, as Bacon suggests, to start off with all the things you don’t know or can’t be certain of, and see where that takes you.

Looking across the industry at the moment, I reckon you could divide firms up into two clear groups.

• Those that start with certainties: Firms in this category can be identified by phrases along the lines of: “We don’t need to survey our clients because we’re talking to them all of the time” (read that carefully – no actual listening is involved); “Most of our competitor intelligence comes from new recruits” (sorry – but most tell you what they think you want to hear); and – a personal favourite – “We work in this industry so we understand it” (professional footballers may play the game brilliantly, but it doesn’t mean they’re the best people to analyse it intelligently).
• Those that start with doubts: You know you’re talking to a firm in this group when you hear things like: “I’m not sure I trust what our client feedback programme is telling us” or “We really have no idea what’s going to happen in the next 12 months”.  These are the firms which will, I suspect, do better in the long-term precisely because they’re willing to challenge long-cherished assumptions and to debate issues based on data rather than the gut-feel accumulated over time.

I know who I’ll be putting my money on.

One of the most important strategic choices a consulting firm has to make is whether to specialise or diversify.  Conventionally, the decision has been driven by size (small firms specialise, big firms diversify): the point at a firm crosses from the first to the second signals its transition from adolescence to maturity; the point when it crosses back again suggests that maturity has given way to senescence.  That thinking is increasing challenged by clients who want to combine deep expertise (usually associated with boutique firms) with international experience (usually associated with larger ones).  But it’s also been complicated by consultants’ own fears of being pigeon-holed by the people they work with, that if they’re known for doing good work on – say – leadership development, clients won’t be interested in their knowledge of technology.

Our recent research with clients suggests that cross-selling is both easier and harder than consultants think.

We were surprised how open-minded the clients we questioned were.  Most would be willing to consider using a firm in a new area, or recommend them to a colleague in a different part of their organisation.  But only if three conditions were met: the consultants have to do have done a good piece of work in the first place and they must be able to demonstrate they have expertise and experience in the new area.  Neither point is unsurprising: both relate to the client’s confidence in the ability of the consulting firm. The third condition is perhaps the most interesting: clients were only comfortable with cross-selling where a consulting firm kept its fee rates constant.  In other words, it’s fine for a high-end strategy firm to do technology work, but only if it charges similar prices for it – which of course determines what kind of technology work that is.  Similarly, a Big Four firm wanting to move into the strategy space will find itself confined to the type of strategy work associated with Big Four firm rates.  Changing price points confuses clients; it makes them concerned that they’ve been over-charged or that they won’t get the quality of input they’re looking for.  You can cross-sell or you can change your price point, but you can’t do both at the same time.

I hope no one will think me immodest if I say that that bald statement has enormous implications for consulting firms.  Yes, you can cross-sell consulting services; in fact it’s probably easier than you think.  But the choices you make about which services and how you position them are far harder.

We’ve still some way to go before “shamrock organisations” – the term Handy coined to describe structures which made up of one third traditional permanent employees, one third freelance contractors and one third suppliers – become the norm, but our recent client research suggests that we’re about to take another leap in that direction.  Pressure to keep costs low while growing and to remain agile while operating on a global basis mean that structural change is the only meaningful option.

What’s less clear from our research is how much consulting firms will benefit from this.  There are two potential sources of competition, from freelance consultants and from non-consulting firms.

Research we did at the back end of 2011 suggested that almost 40% of the work provided by consulting firms is actually contingent labour – filling gaps in the organisational hierarchy – and this was reinforced by our more recent report in which clients said that around 45% of the consulting work they buy could be done by individuals (from expert networks or body-shops) and didn’t need the input of consulting firms.  The issues here are around specialist knowledge (the bigger the firm, the less likely it is that clients will be aware of its specialist skills) and flexibility (freelance consulting doesn’t come with the process baggage and even internal politics many clients associated with consulting firms).  To be able to address this market means changing the business model of consulting.  And that, of course, opens the door to non-consulting firms which can combine specialist expertise and flexibility with the means to deliver an on-going, knowledge-based service.  Consulting firms, by contrast, are accustomed to working on short-term projects.

Exploiting the opportunities of the shamrock organisation will require a different type of consulting firm this time around: one that has both distinct and demonstrable centres of excellence in specific fields and the ability to deliver its services in a range of different ways, individuals or teams, short-term or long-term, juniors or seniors.  Consulting firms can either lead the way or be left behind.

“I make you very good price” the shopkeeper told me. “Very special price”.

Good price? Special price? This was making me nervous already.

“Can’t you just tell me THE price?” I asked, with magnificent naivety.

“Yes, sir, very good price”, came the reply.

“No, no…what I want is THE price. Your cost, plus your usual mark up.”

“Yes, sir, my cost plus usual mark up, sir. Very special price. How much you want pay?”

How much did I want to pay? What on earth did that have to do with anything? Why couldn’t he just put a ticket on it and leave me to decide if it sounded reasonable? Now I had work to do, and I was surpringly unnerved by it.

The absence of a ticket is, of course, no more unusual to clients of consulting firms than it is to about three-quarters of the world’s population, but it’s no less a problem than it was to me on that afternoon in India. What I did was simply to work out what I’d expect to pay in England, turn that into rupees and halve it. And then halve it again. And round that down a bit. And chance my arm. What clients tend to do is something a bit more sophisticated.

Few have formalised their method either on paper or even in their minds, but what became obvious as we spoke to them is just what a consistent method there is.

Broadly speaking, of course, this is about a relationship between price on the one hand, and perceived value on the other. Price, in the minds of clients, seems to have two compoents to it: expertise (and specifically the scarcity of that expertise) and brand. If both are high, prices are expected to be high. If one is low, the price may be held up to some extent by the other, but if both are low then prices are expected to be low.

Perceived value may be a more slippery concept, but its component parts appear to be equally simple: firstly it’s determined by the extent to which outcomes, from a consulting project, are tangible. The greater the tangibility, the higher the perceived value. Second, value is determined by leverage, or the extent to which the effect of consulting work is considered greater than the input. If both tangibility of outcomes and leverage are considered high, then value is perceived to be high.

Having got a feel for both of those, what clients are interested in is the gap between the two. Where prices are seen to be higher than value, clients will try to bring them down; where they’re seen to be lower than value they’ll allow them to rise. We wouldn’t want to spoil the fun for those of you who want to rush out and buy our new report but what’s fascinating is to see how that gap changes from one sector to the next, one country to the next, one function to the next and even one firm to the next (we’ve looked at the price value gap for 11 of the world’s biggest consulting firms). It helps consulting firms to understand how much room for manouvre they’re likely to have in negotiations with clients at a time when most are seeing prices coming under sustained pressure.

Indeed it’s the sort of information that is leading people to understand the value our report may have for them (you can see where I’m going with this, can’t you?) and us to put a price on it. A very special price? I’m saying nothing.

As I mentioned earlier in the week, we’ve spent the last few months talking to more than 400 senior executives who use consulting services on a regular basis.  Almost all work in big organisations most of which have preferred supplier lists which should – in theory – govern their choice of consultants.  In practice we found that preferred supplier lists matter when one or more of the following conditions apply:

• The project involves either a huge amount of work across multiple countries or using consultants to substitute for full-time employees.
• It relates either to technology, process improvement and/or regulation or to the use of consultants as “contingent labour”.
• It’s being bought by a middle-ranking executives (these, it seems take procurement rules seriously than their more senior counterparts).

The more senior the person, the more specialised their need, the less likely they are to use – or even expect to have to use – a “preferred supplier”.  Most people at this level think that the role of procurement is to negotiate the contract and bring the price down as much as possible, but not to interfere with the choice of firm.  As one person summed up the situation, “If I have a standard set of requirements then it makes sense to use a firm from our preferred supplier list, but, if I’m looking for a specialist, then I’m the best judge of who to use.”

It’s not a surprising attitude: procurement procedures designed to standardise the buying process inevitably work best with standardised services; procurement people often move too quickly between categories so it’s hard for them to build up anything like the market knowledge their internal clients have.  But does it matter?  It certainly re-iterates a point we made recently about there being a glass ceiling in consulting procurement.  At the same time, it also confirms and legitimises the role procurement teams play in several important and financially significant areas.  The contribution of procurement managers may be narrower than they would like, but it’s also more accepted than most feared.