Baseball, Pizza and Consulting Innovation…
July 25th, 2019
I recently watched the film “Moneyball” which, although very entertaining, had me spending most of the time thinking about innovation, especially in the Consulting Services sector. Avoiding a spoiler for those who haven’t watched the film, the plot centres on the real-life story of the baseball team Oakland Athletics in the 2002 season where, unable to compete with bigger teams with better budgets, the manager introduced a novel way of finding undervalued players to replace those who had left for bigger pay cheques elsewhere. At one point in the film, the owner of the Boston Red Sox tries to tempt the manager away from Oakland highlighting that the cost per win of the Oakland Athletics was $260,000 compared with £1,400,000 for the New York Yankees. Despite failing to recruit the Athletics’ manager, the Red Sox introduced the new techniques and went on to find success themselves within a couple of seasons.
Had the product of “baseball” been changed? Had new rules been introduced which allowed the manager to gain an advantage? No, he had introduced innovation in sourcing talent which had everything to do with the structure of delivering the service and nothing to do with the service or product itself.
The innovation Imperative
The need for innovation is taken as a self-evident truth but it is easy to derive from logic. Any company innovating is – at worst – still competing based its old competitive position and – at best – has improved its competitive position. All other things being equal, those companies which innovate will eventually out-compete those who do not, unless – and this is important – they over invest in failed innovation. This latter aspect will be revisited in this article.
Examples of successful innovation are easy to find and often quoted:
- The introduction of the SABRE reservation system by American Airlines
- The online book seller Amazon in the 1990s growing to today’s behemoth and which could probably buy a small European country. Or large chunks of Mars.
- The ordering and delivery of takeaway food. From walking to the local Fish and Chip shop in the 1970s, to ordering by telephone and having food delivered in the 1980s and 1990s to today’s internet ordering which connects you, the hungry customer, with a much larger group of suppliers of takeaway food.
Consider the examples above. At the time of introduction, had the actual American Airlines flight from one destination to another changed? Were Amazon’s books different from those sold by bookshops? Is the pizza you eat whilst watching a film substantially different from that which you could have ordered by phone or collected yourself or even consumed at a table in a restaurant?
Types of innovation
So, when a Consulting firm offers innovation, what is being proposed? During research for this article I came across a paper published by Dr Joe O’Mahoney for the Institute of Consulting (“Innovation in Consulting”, 2011). I have worked in the Consulting Services sector for over 30 years and the findings, conclusions and recommendations of the paper still resonate. In this paper the main areas of innovation from the perspective of consulting firms are:
- New solutions
- Adapting solutions
- Thought Leadership
- Creative Problem Solving
Again, this is exactly the experience of myself and others in K2 Consulting Partners when at our former employers. However, consulting innovation is something which is developed to generate sales at customers and is then performed for (or on) customers. Examples of innovation within the process of delivering consulting services to customers – that is innovations within the consulting companies themselves – are harder to find. The globalisation, by means of partner firm combination, of some of the Big 5 consulting companies in the 1980s and 1990s is perhaps one.
Innovation in Consulting companies
It is hard to see any innovation within Consulting companies themselves which goes beyond the introduction of new processes and new technology or entry into new markets. Indeed, a lot of consulting innovation mainly seems directed towards internal cost cutting which, although a critical thing to undertake, isn’t exactly a fundamental change. The experience of many of us at our former employers is that the increase in real costs (loss of productivity, reduction in flexibility, etc.) tends to outweigh the lower cash costs which show up in our P&Ls. For example, routing a consultant flying from London to Chicago, via Frankfurt, to save a few dollars in ticket price; banning flight bookings without 7 days’ notice (thereby encouraging consultants to book flights they might not need early and then cancel if not required), etc.
One of the things that attracted me to K2 was an article by the CEO, Mike Hunter. In it he proposed that the old model for consulting could be dead or certainly in need of radical transformation. It would be easy to dismiss this article but how many of us were convinced that Amazon was on to a good thing in 1995, especially once the “dot com” boom came to a crashing end after 2000?
In his article, which was written at the start of the founding of K2 Consulting Partners, Mike proposed that the old model of large consulting companies with multiple practices and large administrative functions to support them may not be the model required for the future. Instead, the mechanism for assembling consulting teams could be better served – and at lower cost – by using a wide network of specialist consulting companies and independent consultants. In this model, the process for connecting the customer with the service was completely revamped but without losing the appeal of having a single contract with the main supplier. In K2 Consulting Partners the contract obligations are fulfilled by us and the process of assembling an experienced team with the correct skills and at an economic price becomes the joint responsibility of K2 and the partner firms.
This model is not merely an enhanced version of 3rdparty subcontracting, it is the key part of the model itself.
Benefits of the new model
Who gains from such a model? Surprisingly, everyone does … except possibly the older consulting firms who will soon have to adapt to the model.
- The customer gains because they have a wider choice within the market place (either assemble their own independent consulting teams and manage them; continue with their current Big 5 provider or come to K2).The range of pricing is also improved because the advantages of using a Big 5 firm are available from K2 at approximately half the cost.
- The consultants gain because they take on contracts which are aligned to their interests and skills, plus they receive better rewards than being employed by a consulting company which has utilisation targets of 65%, 70% or even higher in some cases. (This can drive other consulting companies to assign staff with mismatched skills to the customer engagement).
- The partner firms gain because they have a second channel to market and can supply their services in larger scale consulting engagements than would be possible on their own.
- K2 Consulting Partners gain because we can offer a compelling proposition of Scale (access to over 3,000 consultants through our network), Value (same delivery but at lower cost) and Quality to our customers.We don’t have to fund the employment of those consultants unless and until we have secured the work and so our margins are usually very predictable.
Although the metaphor might not be especially flattering, K2 Consulting Partners are the Deliveroo or Just Eat of the consulting world. You place an order and we figure out how to supply it and the only thing that has changed is that you now have more choice and your order is delivered at a lower price. Of course, the comparison will be much more flattering if K2 Consulting Partners becomes the Amazon of the consulting world…
One possible counter argument is that the model doesn’t allow for any R&D or innovation on behalf of the customer. The response to this comes in 4 parts:
- In the examples at the start of the article, innovation in the process of delivery is equally important as innovation in the products or services themselves.
- Much of the innovation bought by customers is delivered at their cost and while working on their premises. This can be delivered just as well by getting the equivalent staff from K2 Consulting Partners at lower cost.
- Over investing in failed innovation can be just as risky as no innovation at all. Note that the key point here is “over investing”. It is accepted that innovation must allow for some failure. Lower cost delivery of consulting services can help mitigate this risk.
- Most companies have more pressing issues to implement a tried and trusted solution before moving on to more innovative projects.
In summary, when seeking innovation – or tried and trusted solutions – who is more credible? Companies which sell you innovation for your products and services … or … companies which have applied innovation to themselves. In Dr O’Mahoney’s article (referencing research by Nesta), consulting companies come 8thin the list of sources of external knowledge for companies and so the view of K2 Consulting Partners is that we should innovate first and then the customer can receive the benefits of our innovation. With this approach everyone gains.
Finally, did I watch “Moneyball” at the cinema or on television – the main distribution mechanisms for films over the last 80 years? No, I watched the film of on one of the monthly fee film distribution channels delivered through a smart TV.
Innovation in delivery – the technology of the smart television connected to the internet and a service provider connecting me to the film – was key to me buying and enjoying the film.
Nigel Minett, K2 Consulting Partners Ltd.
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