Digital Matters - Issue 33

To make matters worse, traditional consultancies now find themselves surrounded by new companies that all seem to end in "ent" or "ant." There's Sapient Corp., Scient Corp., Viant Corp., and God knows what "ant" will pop up next. The old-style blue-chip firms can almost feel the "ant" colony gnawing away at their futures.

These new consulting firms are populated by escapees from traditional firms and are almost exclusively devoted to new-economy projects. They are dedicated to helping companies -- old-economy or new-economy -- that are setting sail for the "new world." They offer equity up front to their employees and take equity stakes in their clients' businesses. They don't see themselves as the real-life version of M*A*S*H's "pros from Dover," put here on Earth to rescue the dumbbells from their own stupidity. They position themselves as partners, and they do whatever it takes to meet their clients' needs.

Equally important, the new consulting firms are keenly attentive to the cultural issues that matter a lot to the tyros. Want to bring your dog to work? No problem. Don't want to travel because you've got young children at home? That's fine. Need time off to recharge your batteries? By all means, take the time. As silly as it might seem, these matters are perhaps the new firms' best recruiting tools.

And looming over the traditional problem of talent, compensation, competition, and culture is the most basic issue of all: What business, exactly, are the traditional consultancies in? They used to know. There was the strategy firm, the time-based-competition firm, the reengineering firm, the information-technology firm. There was the firm with the five forces, the firm with the seven S's, the firm with the dogs and the stars -- and on and on.

Fads, like fashions, would come and go, and consultancies would reposition themselves. McKinsey, after its pitches on "strategy" and "analytics" tired, offered itself up as the Tom Hagen of consultants, consigliere to chief executives everywhere. But the Internet changed everything. In a knowledge economy, everyone's a consultant. And the new consultants can do just about anything for just about anyone -- including acting on their own behalf. All of a sudden, all of the old descriptors are meaningless.

So what is a consulting firm today? Is it a venture firm, an executive recruiter, a "perma-temp" agency, an incubator, a strategist, a brander, an Internet-technology specialist, a digital architect, a creative-services provider, or a trusted partner? The "ants" bundle many of those roles together through partnerships and joint ventures. McKinsey, however, traditionally operated under ironclad rules (which it has only recently discarded) that prevented its partners from owning even a single share of a client's stock.

Given the changing shape of the consulting business, who would you bet on to succeed -- traditional firms like McKinsey, or the "ants"? You don't have to be a tyro to see that the traditional consulting model no longer applies. It isn't even close to the new reality of the Web. The traditional model said, "We make a trade: your money in exchange for our smarts." The Web model says, "We collaborate -- and get smarter together as we go along."

One thing's for certain: The Net has no room for anything in the middle. You're either a big company that offers "end-to-end" services, as they have come to be known, or you pick your niche and own it with relentless and determined specialization. Midsize models need not apply on the Web.

There's another certainty: Predators lurk everywhere. In January, IBM swallowed its own consulting-services division. Read between the lines of IBM's press release: This won't be the last consulting operation that the company gobbles up. Across the country, other big firms -- from Interpublic Group to Microsoft to Omniocom to Sun Microsystems -- are looking closely at the benefits of getting into the consulting business. All of which means that we will soon see the consulting business go through what the advertising business went through in the 1980s and 1990s: Holding companies will be created, which in turn will go public to raise fast cash. That cash will then be used to augment the consulting business's offerings.

McKinsey, for example, might buy the executive-recruiting firm Spencer Stuart. Omnicom might purchase both McKinsey and Spencer Stuart. Viant might acquire a highly creative advertising agency. PricewaterhouseCoopers might spin off its high-margin, high-value-added consultancies, and use the proceeds to buy or form a venture firm. Finally, only three or four giant consulting holding companies will remain, just as today there are three giant advertising holding companies: Interpublic, Omnicom, and WPP Group.