Consultancies prefer a £60 million failure to a £1 million success - and that’s a problem

Josh Hall's picture
by Josh Hall

Nick Parminter, co-founder and CEO of Class35, says the issue with ‘digital transformation’ projects peddled by management consultancies is that they rarely deliver the value clients so desperately seek.

We might be in a post-digital era, but legacy organisations are still under immense pressure to catch up with digitally-native challengers that have technology and innovation at their core. It is not surprising, therefore, that many companies bought into the hype of Digital Transformation, expecting a digital Valhalla where success was the only thing to be found.

Alas, those dreams have long been shattered. Digital transformation has become synonymous with big-ticket projects that have gone over budget, are not fit for purpose, or are sometimes abandoned altogether. It’s become a black hole for wasted investment and wasted man hours.

Is it any wonder, then, that a recent report found that the financial services industry has lost confidence in digital transformation?

It shouldn’t be this way. We know that ‘going digital’ is increasingly necessary and delivers rewards for an organisation. In fact, the majority of CEOs report an increase in profits as a result of adopting digital initiatives.

So if the problem isn’t with the digital initiatives themselves, could it be that the problem lies with the management consultancies that promote digital transformation?

Keeping the gravy train going

The traditional management consultancy models operate on an opaque payment structure and as a result, they deliver little value to clients.

Leaders who never actually work on the project take a Pollyanna approach to selling prospects and clients the ‘digital dream’. Why? Because they need to cover the fixed cost of a pool of talent and an expensive office. And because it’s really hard for consultancies to say no to work. They are under pressure to meet tight utilisation targets, as well as yearly profit and promotion targets, exacerbated by sales teams who are incentivised by, well, sales. But mostly, because digital transformation projects come with a tidy profit, regardless of the results.

Such are the incentives that consultancies would rather celebrate a large scale failure over a modest success. After all, that is what keeps the gravy train going for bloated.

False consultancy ‘IP’

Our archetypal service provider is getting away with this by hiding behind false consultancy ‘IP, generic frameworks and journey maps. Applying the same formula to every organisation does injustice to the unique challenges faced by each individual organisation. Instead, an organisation needs to embark on its own continuous journey to tackle its unique business challenges.

Those journeys needn’t take two years either. It is much better to go back to digital transformation's original purpose: to find digital solutions to current problems. Why not start with focusing on the solutions that help organisations survive now and thrive later? After all, digitally-native challengers will steal a march on those who choose to wait years for a big-ticket digital transformation to complete before potentially seeing any value, if at all. By that time, it could all be too late.

People are not the real problem

Senior consultants might not agree with how a project is sold, or indeed executed, but they are compelled to go along with the plan. They are safe in the knowledge that the more complex a programme, the more difficult it is to actually apportion blame. It doesn’t matter anyway, as by the time the project is completed or abandoned, they may well have been promoted or have left the company altogether. And there are always other clients to sell the dream to instead.

Having said that, bad actors aren’t the root cause of the current failings of consultancies. Rather, they are victims of the incentives created by the outdated business model itself.

People-driven solutions are the way forward

So what is the solution? One thing is for sure: we cannot continue to do things just because that’s the way we’ve always done them. Just as failing to innovate could be the downfall of client organisations, a resistance to change could mark the end of consultancies as we know it.

Instead, we should get rid of rigid processes and tackle business challenges with people-driven solutions that deliver real impact instead.

That means stopping leading clients down the garden path just because you get paid for the walk. Why not have an open and honest discussion with clients, instead? As equals. Working together trying to find the best way to solve their problem. That might mean showing some vulnerability, especially when things are harder than expected, or if it’s unclear if a proposed solution is going to work.

But isn’t that the whole point of digital transformation? Evaluating the current situation and finding digital solutions to particular business challenges that can be implemented, tweaked, and improved as time goes on? Surely, it’s better to fail fast and have the time to identify and implement alternative solutions, than to waste time and money on a two-year project that fails to deliver any value whatsoever.

Transformation projects should bring about business change through the use of digital solutions. They should also be rooted in reality: customers don’t have time for gimmicks, and certainly don’t want to be sold a pipedream.

The sooner consultancies redress their current business models and payment structures, the sooner they can start delivering real value, by working alongside their clients to start small, start quickly and go from there. It’s the only way to deliver impact in the long run.

Nick Parminter is co-founder and CEO of Class35.

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