Schrodinger's cat and the consulting industry

The art of “and” is the title of an article by the Boston Consulting Group on how organisations, post-recession, need to grow revenue while simultaneously cutting costs. It’s not a question of one or the other, the article suggests: you have to do both.

Our most recent quarterly survey of buying trends among clients reinforces this. Up to the last couple of months, the recession – and I’m focusing here on the private sector – was following a predictable, if severe, course. The early stages of the recession saw a switch away from revenue-generating consulting services (marketing, selling and strategy) to cost-reduction ones (operational improvement and outsourcing). Late last year, as confidence started to return, those trends were reversed. But now we find ourselves in a situation where both trends exist at once: clients are prioritising operational improvement “and” sales/marketing consulting. Similarly, rates which appeared to be recovering slightly now look set to fall again.

All of this points to a double-dip in performance, at least where the consulting industry is concerned, and that takes us into unchartered territory. The information we have from past recessions simply doesn’t guide us here. Clients, having almost exhausted their ability to cut costs already in this recession are looking at ways to grow themselves out of economic difficulties.

One of the challenges that emerges as a result of this is uncertainty. Demand for consulting is often volatile from month to month, and client to client, but the trajectory for a year as a whole is usually clear. This year, a first quarter in which it felt that the consulting industry was back to business-as-normal has given way to a more tentative second quarter. Cutbacks in public sector spending may dampen the overall prospects for recovery, but perhaps the financial services sector will regain sufficient momentum to compensate.

Talking all this through with Oakleigh Consulting earlier in the week, we were struck by a parallel in particle physics. Schrodinger's cat is a paradoxical thought experiment devised by Erwin Schrodinger that attempts to illustrate the incompleteness of the theory of quantum mechanics. In it, a (hypothetical) cat is placed inside a closed box with a mechanism which may, or may not, kill the cat. Until the point where the box is opened, no one knows whether the cat is alive or dead. It’s the act of observing it that determines its state, just as atoms are disorganised until observed. Put it another way: the cat is both dead and alive at the same time.

Imagine now that the consulting industry is the cat inside the box: at the moment we just don’t know whether it’s dead or alive.

24th June 2010