The problem with innovation in consulting

Recessions are supposedly great times for innovation. Companies, their backs against the economic wall, are forced to be creative; those that rise to this challenge emerge stronger once the recovery comes.

Is the same true of consulting?

It should be. Long and deep recessions like this one create the need for new ways of managing. Post-recession, buyers of consulting want different services: the recession has changed them and they want it to have changed their suppliers as well.

So why does innovation always seem to be such a challenge for consulting firms?

The answer lies partly in the economic model of consulting. If you’re running even a mid-sized firm, then you want to know what resources you’ll require when. You don’t want to wake up one morning and suddenly find you don’t have enough people of the right skills or – even worse – you have too many with the wrong ones. Forecasting is everything, but it’s very hard to do, especially as clients are increasingly looking for specialist skills. Because innovation makes it harder to predict the resources you’ll need, most firms choose to focus on services which are new, but not radically so. They’re good at applying new ideas, but not at coming up with the ideas in the first place.

But this isn’t the only obstacle. Most experts agree that the roots of innovation lie in collaboration. New management ideas aren’t born in ivory towers but in the cut and thrust of everyday business; they’re not invented, so much as discovered. Consulting firms are increasingly working with business schools, but the latter’s experience often isn’t “real” enough to be useful. They also work with clients, but the ideas they want to develop are rarely core to their clients’ business so they don’t get the input they deserve. So the obvious answer is for consulting firms to work with each other – but this is where the difficulties really set in. Collaboration between firms only works in boom times when there is enough demand to be shared between both firms. During recessions, the firms will fight over what they can get. However, when the economy is strong and demand for consulting is high, the incentive to innovate is much less.

You try and make enough hay while the sun shines to last you through the long winter nights, rather than trying to invent a crop that could grow all year round.