The dinosaur’s eloquent lesson is that if some bigness is good, an overabundance of bigness is not necessarily better. – Eric Johnston
Thanks to Professor Clayton Christensen of Harvard University and his 1997 landmark book, The Innovator’s Dilemma, we have a new way of understanding the life cycle of companies and why some market leaders maintain their dominant position and other one-time market leaders disappear.
Here’s how it works:
Because companies tend to innovate faster than their customers’ lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers. By only pursuing “sustaining innovations” that perpetuate what has historically helped them succeed, companies unwittingly open the door to “disruptive innovations”.
What is a disruptive innovation? Mini steel mills that only produced specialty steels for special applications rose in dominance because the large steel companies chased market share through focusing on high volume production where they could gain efficiencies of scale. Slowly the mini mills kept moving into empty niches abandoned by the big companies as “unprofitable”. Before long the mini mills were gaining market share at the expense of the established market leaders. Consider the positions of mini mill makers Steel Dynamics and Nucor versus US Steel, which once owned the market.
Earlier examples of disruptive innovations:
- telephone (disrupted the telegraph)
- semiconductors (disrupted vacuum tubes)
- steamships (disrupted sailing ships)
And more recently:
- the Walkman disrupting cassette players
- the iPod disrupting the Walkman
- digital music disrupting the large music publishing companies
- ebooks disrupting the giant book publishing houses
- the iPad disrupting PCs.
All this got me thinking about another industry and disruptive innovation: Consulting.
At one time there were a few large and highly professional consulting firms who provided services for most companies. But over time, after hiring the best and the brightest and with the invention of a new “technology” – PowerPoint, consulting firms began to innovate faster than client business problems changed. As a result the big consulting firms ended up producing “solutions” and new approaches that were too complex, too expensive, and too inconvenient for many clients. As a result, businesses started looking around for other options and an opening was created for disruptive innovation.
Enter the “mini-firms” and single practitioner consultants who provided solutions to clients that were less expensive, maybe not as sophisticated but still worked, and certainly with fewer staff (they don’t have an army of junior consultants to throw at client problems). A great number of these mini-firms are comprised of partners and near-partners who grew tired of large firm business models and politics. These mini-firms provide highly professional services at less cost and are often more focused on the specific need of the client.
As a result we now have the long-tail effect in the consulting industry where there are a few large firms and a very, very long tail of small sized practitioners. And over time several of the mini-firms have grown and merged into fairly large global competitors, taking market share away from the traditional incumbents. As a result the incumbents began looking for additional markets to penetrate where they could deploy their “army of consultants” and command high margins. And so the world of “technology consulting” began to emerge with the split up of Andersen Consulting and its transformation into Accenture.
And I suspect the world of consulting will continue to evolve in this manner of disruptive innovation.
My question is:
when will the big consulting firms realise that many of their “products” and solutions are too complex and costly for the client? When will they innovate themselves?
Tight Lines . . .
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