Internal consulting: has its time come (yet again)?

By Fiona Czerniawska.

Internal consulting units are cyclical things. Typically, a large corporation suddenly wakes up to the fact that it’s spending millions of dollars with consultants who may bring lots of value, but don’t hang around. Surely, senior executives reason, we’d save ourselves a lot of money and equip our business better for the future if we created our own, in-house consulting firm. But, after an initial flurry of excitement, the idea starts to pall. Over time, consultants, poached from external firms, lose their knowledge of best practice elsewhere; without a big brand behind them, many also find it hard to earn the respect of their internal customers. Objectivity, critical to so much consulting success, is inevitably eroded. Under pressure from its cost-conscious organisational parent, internal consulting groups are asked to look for work outside. Some manage the transition well, becoming highly-respected specialist firms, but others fail to find a market and are ultimately disbanded.

Such has been the fate of many internal consulting units in the past, but technology may be changing all that, at least in the short term.

New, digital technologies are creating different rules for competition—and robotic process automation, cognitive computing, and artificial intelligence promise to take that even further. Supposing you’re a bank. You’ve developed some nifty software for doing something that everyone needs to do, but more efficiently and faster—onboarding new customers, for example. That’s nice, but it’s not a competitive advantage, because the rules that govern onboarding are laid down by regulation. You can’t do it better, only cheaper. To recoup your investment, you might try and sell that software to other banks. Sometimes you’ll succeed: Often, I suspect, you don’t.

In most organisations I’ve talked to, the IT department that builds some clever software, and the internal consulting unit are quite separate. They may both have an external market for their products and services, but they rarely approach that market together. The irony here is that the market for their services would be much greater if they did that: a classic example of the whole being greater than the sum of the parts. Clients are turning to consulting firms to develop applications, which can be as part of the consulting process and which can be left behind for clients themselves to use after the consultants have gone. But they could just as easily turn to the bank in my example. “I’d prefer to go to another bank, than a consulting firm,” is how one senior executive expressed it. “They understand our business as well as we do, and better than a consulting firm could.”

Technology suddenly levels the playing field between internal and external consulting businesses. It may even create a once-in-a-generation opportunity for the former to break out of cyclical existence.