Another lesson from Monitor?

If you haven’t already seen it, you might want to read Steve Denning’s article in Forbes about the rise and fall of Monitor.  How, the author asks, could a firm renowned for helping its clients exploit their competitive advantage fail so dramatically to exploit its own?  He lays the blame for Monitor’s demise firmly at the door of Michael Porter’s Five Forces strategy, probably one of the most famous conceptual models and certainly one of the most taught in business schools:  “By defining strategy as a matter of defeating the competition, Porter envisaged business as a zero-sum game… The ultimate profit potential of an industry is finite fixed amount: the only question is who is going to get which share of it. [But] the purpose of business is to add value for customers and ultimately society.”

I’m not convinced that you can, as Denning does, attribute Monitor’s problems to this, not least because – ironically – consulting firms are notoriously bad at swallowing their own medicine.  But I do think he raises an interesting point.

A few years ago we carried out research aimed at understanding where demand for consulting services comes from.  Our assumption was that consulting projects don’t spring fully-formed, like Athena from the head of Zeus, but are the result of some process of gestation.  The findings supported this: broadly speaking, we found that clients mull over many possible problems and ideas but are only likely to focus on those which they see other people (colleagues, competitors, customers, etc) paying attention to.  Once they’ve filtered out those issues which seem unimportant (roughly half), they invest more time in trying to understand the remaining ones in greater depth, trying to gauge what they should do and whether they can do it themselves or will require help.  Around 10% of these issues (5% of the total) evolve into fully-fledged consulting projects – the visible part of the market consulting we can see and measure.  Providing clients with more information at the early stages of this process would, we concluded, increase the size of the overall consulting market.  As Denning points out, “a better analogy than war or sports [with business] is the performing arts. There can be many good singers or actors—each outstanding and successful in a distinctive way. Each finds and creates an audience. The more good performers there are, the more audiences grow and the arts flourish.”

With many consulting firms thinking ahead to the coming year, much attention is rightly focused on market share.  Consulting is not, at least within most of Western Europe, a fast-growing market, but it is highly fragmented – and consolidation is inevitable.  But, in defining strategy in terms of competitors, there’s a danger that we miss opportunities to grow the market.  Yes, clients are interested in new services, but what they’re really asking for – what we’re really hearing through our research – is that they want consulting firms to develop a more flexible delivery model.  Responding to this might create a bigger market, not just a bigger share of the same market.