The growth in growth

We weren’t convinced about this last year.

We heard a lot from consulting firms about their ability to address the growth ‘agenda’, helping clients respond to the challenges of growing their business in complex and uncertain economic conditions.  But the numbers, when we came to unpick them, painted a different story; of a very small market which was struggling to establish itself.  Consultants, we suggested then, had become too closely associated in clients’ minds with back-office operational improvement. They might have been addressing the agenda, but their message wasn't getting through.

Things have clearly moved on.  Again, many of the conversations we’ve had with consulting firms over the last few months (for our new report on consulting in Europe, the Middle East and India) focused on this, but this time the figures justify the attention.  We estimate that demand for growth-related consulting among big companies (those with a turnover of more than €500m) grew by almost 50% in 2011, compared to an average growth rate across all services of just under 4%.  The rate of increase was greatest in some of the smallest markets: consulting firms in India saw an increase in the order of 80%, and those in the Gulf Co-Operation Council of around 65%, but the total market in these regions, we calculate, was just €17 million and €36 million respectively.  However, the bigger, more established markets also saw substantial growth: Germany, EMEI’s biggest market for this type of consulting and worth around €250 million, grew by 35%; the UK, the second biggest market, grew even faster, by almost 60% to €180 million.

In terms of industries, the most substantial increases were in energy and natural resources, financial services, and retail and services sectors.

But who has benefited from this change?  Which segments of the consulting industry have been most successful at winning the right to work in this space?  Our research suggests that the Big Four saw the fastest growth, but this is misleading as these firms come from a particularly small base in this field – just 5%.  By contrast, strategy firms have more than half the market; indeed, one of the major reasons why strategy firms had a strong 2011 is because they were especially well-positioned to exploit this opportunity.

But even growth has its casualties.  Niche firms which had more than a third of the market in 2010, before it really took off, now have just a fifth.  And that isn’t just because bigger firms are growing more quickly: we estimate that revenue from growth-related consulting in the niche firm segment actually fell last year by just over 15%.  Some of these firms have disappeared, absorbed through acquisition into larger ones; local firms have been left behind by clients who want cross-border support.  But perhaps the main cause of their decline lies in the fact that organisations don’t just want any growth: they want scalable growth.  So the growth agenda isn’t really too far from the back-office efficiency agenda.  The consulting industry, like a leopard, doesn’t really change its spots.