Disaggregation of the Value Chain: Emergence of New Business Models in Strategy Consulting

About the authors: Both authors worked several years as engagement managers for a leading strategy consulting firm. At the moment they are writing their professor thesis (" Habilitation ") at the European Business School in Oestrich Winkel (Schmidt) and the University of St. Gallen (Vogt). They lecture MBA and executive courses at various business schools (e. Abstract The paper explores the predominant driving-forces shaping the strategy consulting industry. Clients have become more demanding and their skill gaps in relation to strategy consultants are narrowing. The instant availability of global information has precipitated an erosion of the competitive advantage of integrated players running internal research and knowledge building capacities. As a result, the strategy consulting value chain disaggregates, new business models emerge, and focused players enter the field. Based on the discussed changes within the strategy consulting industry the paper identifies and describes four promising business models and their respective strengths, weaknesses, and key assumptions for their sustainability. Two mini cases examplifies how small players can benefit from the disaggregation of the value chain. The consulting industry can look at an impressive growth in the last decade. Between mid of the 1990ies to the year 2000 the size of the global consulting market has more than doubled to more than USD 110 billion in total revenues (Kennedy Information 2001: 35). Solely in Europe the number of management consultants has tripled at the same time (FEACO 2002: 8). However, since the burst of the Internet bubble at the begin of the century everything might have changed. Industry growth has stalled to become outright negative and especially incumbent consulting firms begin feeling it (Niewiem & Richter, 2004). In the context of this paper, we focus on strategy consulting firms such as McKinsey, 3 strategic services arms of large consulting or accounting firms such as Accenture, Bearing Point, Gemini or IBM. These firms were established or grew large during the "second wave" of the development of the consulting industry, or were formed later yet followed essentially the main features of those classical second wave firms (Armbruester The emergence of second wave consulting firms can be dated back to the 1950s when the rise in demand for a broader range of management consulting services beyond efficiency-enhancing concepts occurred characterized by high profitability, high growth rates and rather limited competition But the good old days are numbered. The strategy consulting value chain disaggregates. Overall, four major …