The rise of the mega-firm

By Fiona Czerniawska

All of our research so far this year points to the same conclusion: the big firms will get bigger.  It’s true in western Europe, where globalisation is driving clients to tap into the international networks of the big firms; it’s true in the US where – as the report we launched last week makes clear – digitisation is creating new opportunities to combine the front and back office; data with more efficient processes and analytics with management.  It’s true in emerging consulting markets where speed and the need to compete effectively in the world economy means that clients are looking to match, if not leap-frog, the best practice of established players.

But we shouldn’t assume that all big firms will grow equally, that what we’re seeing is simply the continuation of a process in which the space between the big firms and the rest expands.  Some of the big firms, we suspect, will pull away from the other big firms.  We’ve discussed the reasons behind this elsewhere in this blog and in our reports, but perhaps the most telling factor is the growth in the number of transformation projects; projects so large that they have the capacity to transform, not just the client who commissions them, but the consulting firm which helps deliver them.  While the number of such projects is growing, they will never be numerous, so the competition to win the work will be ferocious.  Moreover, if Firm A wins a project and Firm B loses, Firm A will be in a stronger position when it comes to bidding for the next project – and so on.

It follows from this that the next few years will see the emergence of a new class of mega firm, a ‘segment’ in which all other distinctions will disappear: technology firms, strategy firms, the Big Four become obsolete labels.

You won’t get to be a mega firm through organic growth alone.  Transformation projects will test firms’ ability to deliver different services at scale, so the process of absorbing smaller specialist firms (something that's already happening) will continue.  But just being big won’t be enough to secure your position in this emerging class either.  Mega firms will do four things:  they’ll combine truly effective global delivery with large-scale but flexible resources.  They’ll also marry breadth of service with a multi-specialist approach so that clients get the depth of expertise they want at the scale they need.  Thirdly, they’ll occupy the space between existing business models, bridging the gaps between outsourcing and consulting, and business and technology, providing services to clients which combine advice with implementation, tapping into clients’ reluctance to hire new staff in the face of economic uncertainty.  Finally – and this is perhaps the greatest challenge – they’ll do all this without sacrificing the client service ethos which is one of the main reasons clients often prefer to work with niche firms.

The mega firm won’t just change the shape of the consulting industry: to be successful it will have to reinvent the whole way we think about business services.