Hello there, this is Dan. 17 consultancy partners wanted me to write about innovation in consulting. So that's today's "Adding Value" topic.

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One Idea

Do you think of yourself and your consulting business as a driver of innovation?

Helping clients innovate will strengthen your positioning, offerings, and relationships. But there's much confusion on what being innovative means in the consulting industry, especially among boutique consultancies. Let's try to clarify this here.

There are a few well-known reasons why companies hire consultants:

  • To solve problems: You're often hired to help clients solve a problem, for which your capabilities are needed (and the client doesn't have). You probably solve it better, faster, safer, and/or cheaper than their internal team or other consultants would.
  • For insights: You can bring insights and expertise that very few other people possess. This insight comes from repeated application, which comes from your positioning and specialization decisions.
  • For objectivity: You as an independent consultant can provide clients with an external perspective on the challenges their organization struggles with. By looking from the outside, you can see what clients can't.

In most cases, clients will choose to hire you for more than one of the above. Some clients, however, will naturally get more value from the two last points: engaging with consultants as a source of ideas and outside perspective.

This becomes clear when we look at how mid-size companies, and, in particular, startups with 50-200 employees use consultants. What many are doing now is insourcing their team and outsourcing innovation.

Consultants are not being hired to solve specific problems, but to find new strategies, initiatives, and benchmarks that work. A while ago I heard a great analogy that illustrates this, from Chris Walker.

Where Does Information Come From?

Imagine a cannon, with the ability to shoot all kinds of things from a long distance.

This cannon shoots information, that lands inside of your company. There are many of those, shooting from all different directions. Someone in your company receives information, it spreads, and eventually it becomes part of your strategy.

That's what happens inside companies, and dictates a large part of their innovation initiatives. And it makes you wonder: where is the information coming from?

  • It could come from the leadership's closer contacts.
  • It could come from a software vendor, telling you how you should do marketing.
  • It could come from someone on LinkedIn with no real experience or proof of expertise to back up their advice.
  • It could come from a friend.
  • It could come from a blogger.

Somehow the information is coming in and becoming a strategy for the company.

Your Role As Consultant

When you think of all those different cannons, it becomes clear that there's a huge amount of misinformation that's coming in, directing strategy, and being adopted by companies. But most of them never think about that.

Until someone opens their eyes. That's what some of my clients and friends in consulting are doing, and what I suggest you consider doing as well.

Use your consultative conversations to shine a light on the idea of outsourcing innovation. Feel free to use the cannon analogy to illustrate it. Ask your prospects:

"Wouldn't it be interesting to identify a source of information that you trust, who you know has worked with a bunch of other companies like yours, know what works and how to make it work, and make use of it to direct strategy?"

Every client would benefit from strategy support. It's expensive and time-consuming to learn by failure. If you can reduce risk and accelerate changes, companies will gladly pay for your advice.

Besides getting problems solved, don't forget to highlight that you can help them identify the right problems to solve in the first place.

One Quote

Gerald Weinberg’s Second Law of Consulting:

“Whatever the client is doing, advise something else.

At the very least, the people problem is either lack of imagination or lack of perspective. People who are close to a problem tend to keep repeating what didn’t work the first time. If it did work, they wouldn't have called in a consultant.”

Source: The Secrets of Consulting, Gerald Weinberg

One Number

"As part of our ongoing research programme, we ask clients to rate the importance of around 15 attributes. Although all are important to some degree, an “innovative approach” is more important than anything else; however, it comes close to the bottom when we ask the same clients to rate individual firms’ strength in this area. Historically, that’s been an easy gap to ignore, if not to excuse, particularly as the global consulting industry has been growing at a relatively healthy 7-9% for almost a decade, defying predictions—including ours—of cyclical adjustments. But the crisis is creating a generation of business leaders who—spurred on by the speed and extent of the changes they’ve made in the last year—are looking for more imaginative solutions."

Source: Innovation in consulting, Source Global Research

Fiona Czerniawska wrote this in 2021, and she was mostly referring to larger or mid-size firms. But recent conversations with boutique consultancy founders convinced me we can also find this client behavior today, among smaller practices, in a few key industries.

One Question For You

How much time and energy are you allocating to innovation?

The word "innovation" gets thrown around a lot these days, but what does it really mean in the context of consulting? A starting point to answer this might be to ask what an innovative approach means to clients.

The way I see it, "innovative approaches" help clients by giving them new perspectives on their situation. These approaches allow consultants to find new solutions to clients' problems and see their situation in a new light. It reduces complexity and provides clarity.

This might sound simple, but we in consulting have yet a bigger challenge to address: How do you communicate that your approach is better if clients don't even know what they don't know?

You need to be able to show dream clients you understand their business and the challenges they face. And one of the best ways to do that is through specialization.

By focusing on a specific field and/or type of problem, consultants can develop a deep understanding of the landscape and the challenges their clients face. This allows us to provide more tailored and relevant solutions that address the root causes. And, when done correctly, specialization will strengthen your value proposition - helping you differentiate, generate demand, and win more engagements.

But there's a caveat here: While specialization might be the biggest source of innovative approaches, it's not by any means a guarantee new insights will appear.

Here's a natural specialization process that many consultants go through:

  1. Focus on a field or specific types of problems;
  2. Research their chosen specialty extensively;
  3. Build a strong network of contacts in their chosen specialty;
  4. Stay up-to-date on trends and developments in their chosen area.

Every specialist goes through #1. Some schedule time to do #2. But very few invest energy and money to do #3 and #4.

This is observational data, I have no numbers to support my conclusion. But it seems to me that consultants who are constantly engaging with peers and investing time to look at new developments are the ones who come up with many more "innovative approaches." Changing your marketing positioning is not enough.

Thanks for reading. You can get more specialized and actionable growth insights for micro consultancies in our newsletter. Every Tuesday, you get one idea from Danilo, one quote from other experts, one number you need to hear, and one question for you to level up your consulting practice.

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