What data and analytics tell us about business models

By Fiona Czerniawska.

How the world changes. 

Only a couple of years ago, if we asked clients about the importance of data and analytics in their business, we either got blank looks or a fairly uninterested shrug of the shoulders. But data isn’t boring anymore; analysis is sexy. Combining the two, and being able to derive actionable insights and then implement them, is the Holy Grail. “We need analytics, but we also need implementation,” commented a client in a major bank. 

Perceptions of consulting firms have changed as a result. “It is the biggest names that are leading the way in digital and analytics,” one executive in the Middle East told us. That’s unsurprising: data and analytics are no longer the poor cousins of higher margin consulting but the drivers of it. “I think it's normal to pay different rates and to be charged differently depending on the service I'm receiving,” one typical senior executive told us. “If a firm has data analytics capabilities, I don't mind if they charge a different rate for that type of service.”

The challenge though, is that not all data and analysis work is created equal. While some may command premium prices, other work decidedly does not. That’s because, as our new report on the subject argues, one market is actually two. Data assurance, software assets, data trading/broking and managed services fall into the low-cost space, while algorithm design, technology consulting, and evidence-based insights are high-value offerings. 

The services you offer have a direct bearing on your business model, so the evolution of the data and analytics consulting industry isn’t just important in its own right, but because it tells us something about the way the consulting industry as a whole is likely to evolve. People working in a low-cost firm have historically got paid less, but, today, more and more of the work they do is being automated by clever computing, so the people who remain in the future may be paid more, but the type of work they do will be different, and the ratio of people to systems will be much smaller. 

While it’s tempting to think of this business model like a factory (and, for many existing suppliers, this is indeed the case), the better analogy for the future will be like flying an airplane. Consultants here will be like pilots, flying a very well-understood machine along prescribed routes; they’ll be overseeing multiple systems and making judgements based on the data presented to them. By contrast, people working in high-value firms need the ability to think on their feet, often creating their own data as they go. Giving them the skills to fly a plane won’t help in situations where there’s no flight plan, and perhaps even no plane: they’re explorers, rather than pilots. 

Neither is wrong, but they are different. And knowing which your business is, will be crucial.