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Consultancies should stop prioritising fees in a post-COVID-19 world

In all the talk of cybercrime, terrorism, and geopolitics, who knew that the ultimate adversary of 2020 would be an infectious disease? Save for a handful of epidemiologists; the likely answer is nobody.

Our failure to anticipate is forgivable, but it raises a pertinent question: if an impending pandemic could fly under the radar, what makes us think we can predict the other surprises life holds in store? For the business world, the reality is this: the days of predicting the future are over – or at least they should be.

Even before ‘coronavirus’ made it into the lexicon, fundamental changes driven by digital technology were already disrupting sectors. In fact, whether it be healthcare, energy, telecoms, real estate or transportation, more has changed in the last five years than in the two or three decades that came before.

Hyper specialise

For organizations of all shapes and sizes, the call to action is two-fold: First, it is imperative to shift focus from strategy development to identifying and building the capabilities/competencies suitable to the industry. Strategizing relies on hypothesis, speculation, and prediction.

By contrast, building the right capabilities – in-house and through partnerships - makes organizations agile, robust, and ready to react to any probable future.

Second, companies must rethink how they make decisions. Hierarchy has long dictated decision-making with bosses calling the shots, but in a context of constant change, that model is no longer fit for purpose. Organizations that have survived – even thrived – during COVID-19 are those that have flattened their decision-making capacity.

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Delegate decisions

The logic is simple: lower-level employees are closest to the market, so empowering them to make decisions means the company can react faster.

For this new approach to work, companies must populate their payroll from top to bottom with higher calibre personnel who are capable of making decisions, and rely on digital solutions to handle the repetitive activities typically done by human hands. Entrusting technology with such tasks is just one part of the unstoppable shift towards digitalization.

Of course, these needs existed pre-pandemic, but the onset of COVID-19 has made them all the more pressing. For those who choose to adapt and ramp up their digital capabilities, the results can be genuinely transformational.

Raise those percentages

Digitalization is creating the potential for companies across sectors to create 30-40 per cent additional business from the same investment. Whether it’s ride sharing apps, online takeaway deliveries or digital health services, the way we live has changed, with clear implications for the full spectrum of industries.

Maximizing this potential, however, is no mean feat. It is here, as companies contend with the challenges of digitization and post-pandemic change, that management consultants can prove their worth. But there is a problem.

For too long, management consulting has proven far more beneficial to consultant than client. On average, clients only manage to fully implement and benefit from around 50 per cent of consultant recommendations. In contrast, consultants are paid almost in full and are rarely touched by the fallout resulting from bad advice.

Reset client relations

So, just as COVID-19 compels companies to transform, the client-consultant dynamic must also change, and central to this process is a rethink of fees. Simply put, fees should not be based on time and resources but on outcome and benefits.

This is not to say that consultants should be paid less. Instead, those who truly deliver results should be rewarded accordingly. The consultants should share the risk and reward, with mutual benefits for both parties.

Naturally, it is the best in the business who deliver the best outcomes, and this is where the second shake up should occur. In their search for external support, organizations typically gravitate towards large multinational consulting firms.

Yet, the larger the firm, the more internal the expertise. Consulting heavyweights rely almost exclusively on their internal capabilities, while smaller, more agile firms take an ‘open consulting’ approach, complementing internal expertise with best-in-class external expertise to deliver the best possible results.

With the proper support, there has never been a better time for companies to ramp up their capabilities and transform their businesses. The past year has been tough, but if there is a silver lining, it’s this: only 10-20 per cent of the potential we see today existed before COVID-19. All that’s left is to realize it.