What if “the crowd” replaced consultants as the go-to resource for answering CEO’s most pressing questions? Tim Brown, CEO and President of the global design firm IDEO, recognizes that this is not a hypothetical, but rather an imminent reality. Digitalization has created new platforms and labor sources that are disrupting consulting’s traditional high-margin, billable time-based business model. But rather than seeing this disruption as a challenge, IDEO is using it as an opportunity to re-think how it will deliver value to clients today and long into the future.
The challenge posed by digitalization
Management consulting is a $250 billion dollar industry in flux. Traditionally, the supply chain has been based around a solution shop model, in which a number of pedigreed consultants work to diagnose and solve a problem with an undefined scope. Value is delivered primarily through the consultant’s own judgement, and customers pay high fees at hourly rates for proprietary offerings, methodologies, and tools.
Digitalization threatens this model in several ways. Firstly, the democratization of information created through digitalization results in the spread of “best practices” that had previously been held as proprietary or localized to a specific firm or region. In addition, new platforms for engaging consulting labor, such as the HBS consulting startup Hourly Nerd, dramatically increase access to consulting expertise at a lower price. Lastly, the emphasis on data analytics is providing customers with new methodologies for tracking and measuring the impact consulting firms are providing, and also encouraging them to reimagine new solutions they might provide that transcend labor services.
While the opacity and agility of consulting firms has long left them more immune to the disruption that their clients have experienced, failure of traditional consulting firms to pay heed to the challenges of digitalization would be a fatal mistake; particularly as big-name technology firms such as Google begin to expand their consulting offerings.
The IDEO solution
From its inception, IDEO has differentiated itself from traditional strategy consulting firms by bridging industrial design with innovation consulting. This unique mix initially made the company hard to imitate and provided a unique market position. However, IDEO’s leadership recognized that the company was not immune to the threats facing other consulting firms and in recent years has developed a number of ventures to test alternative offerings that could change the way consulting firms think about the services they provide.
These offerings, which can be described as a “facilitated network”, are structured to enable IDEO to provide a new range of products and services. These network investments create an opportunity for IDEO to disrupt itself before the outside market does and provide a range of investments that will help the firm grow in the short and long term.
- OpenIDEO: OpenIDEO is IDEO’s attempt to disrupt itself by creating an open source version of the company that harnesses the power of the crowd to solve social enterprise challenges. It disrupts the typical consulting supply chain through a digital platform that engages individuals of diverse backgrounds from all over the world to solve a shared challenge (e.g., improving sanitation in urban areas). While OpenIDEO and IDEO remain separate solutions, the OpenIDEO platform has been used by IDEO consultants as a solution for clients wishing to conduct their own private prize competitions and to source ideas for particular consulting questions.
- IDEO U: Ideo U is an online school that provides training on the IDEO methodology for design thinking and collaboration. This solution commoditizes the proprietary knowledge held by IDEO U and ensures that the firm is adding value in new ways to customers. The digital platform also enables IDEO to engage with potential customers in a new way an enables analytics that can track the value that the service is providing to support optimization.
- IDEO Futures: IDEO has created IDEO Futures to incubate, launch, and scale the new ventures, products, and services that will be essential to helping IDEO stay relevant in the future. It also offers IDEO Futures as an incubators for world-class design entrepreneurs – providing IDEO with emerging talent and unique insights on where industries are heading.
Considerations and Questions for the Future
As IDEO anticipates the future challenges and opportunities presented by digitalization, it should continue to build out its ecosystem of partners. This will benefit the firm by helping it produce new insights into where the world is moving, while also providing clients with relevant connections to industry leaders. Improved analytics capabilities also offer an opportunity to implement value-based billing to the client and new labor structures that are less reliant on full-time labor.
However, long-term questions about the impact of digitalization and a “facilitated network” consulting model remain. Should IDEO new solutions, such as OpenIDEO and IDEO U remain on the edge of the organization or be integrated into the traditional consulting firm? And should the traditional IDEO design process, which was emulated by companies all over the world, be adapted as a result of digitalization?
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 Lakhani, Karim R., and Anne Laure Fayard. “Open IDEO.” President and Fellows at Harvard College, Harvard Business School Publishing, 29 Oct. 2013.
 Kaplan, Soren. “The Business Consulting Industry Is Booming, and It’s About to Be Disrupted.”Inc., 11 Sept. 2017.
 Christensen, Clayton M., and Dina Wang. “Consulting is on the Cusp of Disruption.” Harvard Business Review, Harvard Business School Publishing, Oct. 2013.