The scarcity of scarcity

A previous post, about the impact consultant-managers could have on the consulting industry, has had me thinking about what clients lack.

For all the talk about scientific management, innovation and new technology, consulting is an industry that’s founded on scarcity – of skills and of certain types of people. The more consulting firms control access to those limited resources, the more money they’ll make. But, in recent years, profit margins in the industry have fallen because the skills consulting firms have aren’t sufficiently scarce – clients find it hard to distinguish between those of different firms and, indeed, between the know-how they have internally and that consultants would bring. This explains, too, why body-shopping has become so prevalent (see our stats on this): if everyone appears to have the same skills, then the “scarcity” offered by consulting firms is flexibility – they’re providing something clients don’t have, the ability to hire and fire good people at a moment’s notice and without acrimony.

What about scarcity in the future?

There are still some skills which continue to be short supply. Consulting firms themselves complain of the dearth of really good analytical skills (the ability to interpret numbers, not just present them). It’s hard, clients say, to find people who have worked in different geographies and who have a good, practical sense of the opportunities and pitfalls involved. Moreover, the more specialised a skill is, the rarer it’s likely to be: there may be lots of experts in consumer product businesses but few in – say pet food manufacture. Such pockets of expertise will keep some parts of some firms going, but they’re unlikely to generate much volume of work. Flexibility may be scarce at the moment, so clients may choose to work with consultants because they can hire and fire them more easily than their own staff. But even that advantage may disappear over time as clients may change the way they work to match the flexibility of consulting firms (more project-based work; even more short-term contracts).

But if skills and flexibility won’t be scarce (or scarce enough) in the future, what will be? I think the answer lies in proprietary content. Intellectual property, insights – call it what you will – the key will be to have something that no one else has. Create data which only you have access to and you change the rules of the game.