What Is the Impact of Technology on Consulting Business Models?

Of course, there's not a single way technology affects business models. We could easily come up with a giant list of tasks and responsibilities that might change. How client preferences and expectations are impacted. What can and probably will be automated or replaced.

So to answer this question I'll focus on the fundamentals, and let you the reader think through what are the second and third-order consequences of those technological changes for your consulting practice. The Boutique Consulting Canvas can be used as a support tool for the analysis - if you'd like to learn more, feel free to check our consulting business model handbook.

Pragmatically speaking, technology impacts the three universal functions of every business: Value proposition, value creation, and value capture:

• Value proposition: How you express what value you bring to clients and how you differ from competitors.
• Value creation: How you deliver value to clients, requiring both resources and processes.
• Value capture: How you transform value into profit.

Your value proposition is about the benefits you promise to deliver to your target market.

Consulting clients want better, easier, cheaper, faster, and/or safer solutions to their problems. This is true today, and will likely always be true in the future - no matter what or how much technology is involved in the business.

What does change, however, are your clients' preferences. If technology helps consultancies deliver certain outcomes 10x faster, clients will slowly expect every firm to generate those results faster. If someone in the market uses technology to deliver more specialized and tailored solutions, that will become the norm. In this sense, technology raises the bar of what a strong value proposition looks like.

In terms of value creation, technology impacts both the resources a typical consultancy will leverage and the key processes required for the business to work.

The main resources of a consultancy are its people, intellectual property, market assets, and relationships. How the importance of those resources will shift depends on your specific context. But for most practices, I expect that:

• The importance of attracting, hiring, and retaining people should be reduced, as technology reduces the need for manual labor. The obvious exception is for IT talent - you still need people to instruct, operate, and/or oversee the new technology.
• The impact of intellectual property is more difficult to predict, as it is more linked to the type of firm you lead. "Procedure" firms will likely see IP value go to zero, since new technology such as generative AI allows you to create, document, and improve SOPs and methodologies with the click of a button. A strong voice and distinct point of view might become even more important in a world full of generic noise.
• Finally, assets and relationships should go up in value for the typical consultancy. In a tech-heavy world, the more proprietary market data you have, the better. The more channels you own to distribute your message and offerings to people, the better. The stronger your brand and relationship in your space, the better.

The key processes of a typical consultancy will also be impacted in different ways by technology. They are business development, offering delivery, IP management, and team alignment. Here are my high-level thinking:

• How consultancies market, sell, and price their services will change for two reasons. First, the way clients buy consulting will likely change - and firms will need to adapt to it in order to succeed. Second, companies always look for new technologies to try to sell more while investing less - reducing the cost of client acquisition and upsell. Whether this means an even higher emphasis on digital marketing or a return to physical and in-person initiatives, only time will tell.
• The way consultancies deliver their offerings will also be impacted. In the last years, we saw a growth of remote and online engagement, the transformation of many services into digital products, and consultants taking multiple roles during engagements (coaching, facilitation, training). As new technologies come to market, firms will continually look for better ways to deliver stronger value propositions.
• IP management, or the way your consultancy codifies, stores, and shares knowledge, will likely be the most obvious process to benefit from new tech. Consultancies are already using SaaS solutions and generative AI to do it more efficiently, as the processes are mostly internal and don't directly impact your clients and internal culture.
• Technology can also be used to improve team alignment. The impact of new tech will be proportional to how much it will impact team size, although history shows we need to be skeptical of how quickly new tech impacts human interaction and how we behave in groups.

The last part of consulting business models that are impacted by technology changes is how firms capture value. And this means both your revenue model and cost structure.

Over time, we can see a clear trend of boutique consultancies developing multiple revenue streams. Many started to sell coaching, training, books and market research, and so on to their mix. What new technology did was accelerate that trend - adding software, digital products and subscriptions, licensing of their IP. Just like tech creates new possibilities to deliver value, it also allows firms to capture that value in different ways.

As for the cost structure of the typical consultancy, it's uncertain what the impact of new technology will be. Software and automation solutions are, at least for now, sold on a subscription model - which has helped many practices keep a lean structure. But it's not difficult to imagine that some firms might be forced to increase fixed costs in the form of equipment or long-term IT development which would have the opposite effect.

In summary: Technology forces consultancies to continually strengthen their value propositions, increase the importance of assets and relationships, and change the way you market, sell, price, and deliver your services.