When considering career options, most MBAs will try their hand at management consulting. Consulting is an industry that has been around for over a century,  but is it truly immune to the disruption of technology?
Consulting companies thrive on providing high value-add solutions to clients by using talented employees and intellectual property. The consulting firms give the client access to experts that the client would not traditionally have access to and institutional knowledge that the firm has built up from multiple years of operation. Access to experts and highly talented individuals often allows the clients to transform their business.
The current operating model involves a client contacting a consulting firm for an engagement and presenting a major business problem to the consultants. The consultant adds value to client by aggregating knowledge from various stakeholders and providing more dedicated resources for the problem . After research, a consultant will use internal firm experts, trusted external firm experts, and internal knowledge database to develop the best solution. As a result, the consultant will develop a solution that incorporates information from various sources.
Chart 1: Management Consulting Operating Model
The current business and operating models provide great value to the clients, but what about the clients that have already identified the problem and are searching for technical experts to develop solutions?
This segment of the market that usually do not require the same level of guidance for problem research and have a lower willingness to pay for consulting services, and thereby are priced out of the market. Moreover, research has shown that, “at traditional strategy-consulting firms, the share of work that is classic strategy is now about 20% – down from 60% to 70% some 30 years ago” . Hence, clients are requiring more analytical solutions from consultant firms and requiring that consulting firms lower their prices. In recent years, the improvement in technology has allowed new startups to fulfill the business need for the companies with lower willingness to pay but with a need for industry level expertise. The innovation in technology has allowed for the development of companies such as HourlyNerd. HourlyNerd’s business model is to provide valuable insights to price conscious clients.
So how is HourlyNerd able to provide clients with a cheaper alternative to management consulting firms?
Chart 2: HourlyNerd’s Operating Model
HourlyNerd’s technology enabled marketplace has created a new market that allows clients to connect directly with experts. The following factors are how HourlyNerd is able to use technology to create a two-sided market :
- Connection to Experts
- The clients are able to communicate with experts that they might not have access to .
- Lower Billing Rates
- The platform connects experienced professionals, so HourlyNerd does not spend money on recruiting and training for consultants.
- The consultants are not employees of HourlyNerd, so HourlyNerd does not have to pay the consultants a salary when they are not working on a project .
- HourlyNerd does not have to pay for real estate for employees because consultants work remotely, therefore lowering operating cost .
- Quality Assurance
- The digital rating system allows for clients to find high quality consultants on the platform.
- Better work/life balance
- The consultants are able to choose theirs hours and free to accept/decline job requests .
- Less required travel
- The consultant has the option to travel to the client location or work remotely .
- More pay
- Since the platform requires less overhead compared to the typical management consulting firm, a higher percentage of the bill rate is going towards the consultant .
- Job security
- From the large user base, the consultant will have more project opportunities.
Through the use of technology, HourlyNerd is able to create a new business model that serves the need of companies with lower willingness to pay. Is it possible for HourlyNerd to take more market share from the traditional consulting firms?
The biggest area of improvement for HourlyNerd is to capture the knowledge and expertise of their primary human capital assets – the consultants. Knowledge capture prevents future consultants from having to reinvent solutions that others have already created. Additionally, the company might consider changing the business to reseller model  in which HourlyNerd performs the screening of consultants. Research shows that the platforms lose customers because of lack of trust of the platform . The third area of improvement is around pricing. Currently the clients do not have to pay for the consultant’s service if they are satisfied with the service. Although this incentive works great to attract customers, I question the value of subsidizing customer’s experience for one time users. The company should perform more research on the lifetime value of the free clients .
Word Count: 791
- Arthur D. Little Corporation, “Who says it can’t be done?” http://www.adlittle.com/, accessed November 2016.
- Raj Ramanan, “What value do consulting firms like McKinsey, Bain, Et Al. Really Add To An Operation?” Quora Corporation, July 9, 2012, http://www.forbes.com/sites/quora/2012/07/09/what-value-do-consulting-firms-like-mckinsey-bain-et-al-really-add-to-an-operation/#13f7d8c97225, accessed November 2016.
- Clayton M. Christensen, Dina Wang, and Derek van Bever, “Consulting on the Cusp of Disruption”, Harvard Business Review, October 2013, https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption, accessed November 2016.
- Thomas R. Eisenmann, Geoffrey G. Parker, and Marshall W. Van Alstyne, “Strategies for Two-Sided Markets,” Harvard Business Review, October 2006, https://hbr.org/2006/10/strategies-for-two-sided-markets, accessed November 2016.
- Benjamin Edelman, “How to Launch Your Digital Platform,” Harvard Business Review, April 2015, https://hbr.org/2015/04/how-to-launch-your-digital-platform/, accessed November 2016.
- Dina Wang, “Revenge of the HourlyNerds,” Harvard Business Review, September 18, 2013, https://hbr.org/2013/09/revenge-of-the-hourlynerds, accessed November 2016.
- Mark Garrison, “A startup is disrupting the consulting industry,” Marketplace Organization, December 9, 2015, https://www.marketplace.org/2015/12/09/business/startup-disrupting-consulting-industry, accessed November 2016.
- Andrei Hagiu and Julian Wright, “Do You Really Want to Be an eBay?” Harvard Business Review, March 2013, https://hbr.org/2013/03/do-you-really-want-to-be-an-ebay, accessed November 2016.
- Andrei Hagiu and Simon Rothman, “Network Effects Aren’t Enough,” Harvard Business Review, April 2016, https://hbr.org/2016/04/network-effects-arent-enough, accessed November 2016.
- Sunil Gupta and Carl F. Mela, “What Is a Free Customer Worth?” Harvard Business Review, November 2008, https://hbr.org/2008/11/what-is-a-free-customer-worth, accessed November 2016.