Trends in the Consulting Industry 2023
Despite the pandemic, global management consulting has expanded by an average of 0.7% year on year for the past five years, and had record revenues of $693 billion in 2022. However, that was then, and this is now. As the world economy struggles with high energy costs, inflationary pressures, an unending war in Ukraine, and regional problems such as Brexit, can the Teflon-coated consulting industry maintain its upwards trajectory, or will macro-economic problems bring consulting crashing back to earth? Read on to discover more, as we review the current trends in the consulting industry and their impact on UK trade and businesses in 2023.
What is the Consulting Industry and How Does it Work?
The global consulting industry is a widespread network of skilled professionals who work with businesses to improve their performance by providing expert advice to solve problems and encourage growth.
Management consultants work with businesses across a wide range of sectors, including business strategy, finance, HR, operations, technology, and marketing. Their clients are not only private companies. Public institutions also use management consultants to improve their practices and efficiency. The consultant will typically provide the client with an audit of current procedures, a recommendation for improvement and a plan for implementation. Consultants may advise on a specific project, or more broadly on the structure and practices of the organisation.
Opportunities in the Consulting Industry
The world may stumble in 2023, but projections suggest consulting industry growth of 1.9% and global revenues of $706 billion. So, where are the opportunities in this sunny sector forecast?
Teamwork Will Level the Playing Field
Even as consulting giants such as McKinsey, Bain, Deloitte and PWC race to take a larger share of the global consulting pie, so their bid for dominance is undermined by the sector’s transition to a multi-sourcing model. What does this mean? It means that clients in industries as varied as agriculture, energy, textiles, and shipping, are demanding ever-greater specialisation, making it necessary for consultancies to pool talent to deliver an optimal result. Large generalist firms must collaborate with smaller niche specialists, and other management consulting companies are teaming with consultants from outside the sector, bringing academic institutions, digital agencies, and technology firms into the mix. The outcome is a level playing field where results are all that counts.
The consulting industry is a bellwether for business trends. What first happens there, often happens everywhere. Expect further fragmentation in the division of labour for large projects as clients demand a range of skills that single service providers cannot provide. Additionally, SMEs, who may struggle to meet the costs of consultants, while still needing expert help, may be forced to compete for services in the open market, where capacity issues are high. In many cases, buying support from overseas suppliers will be the only solution – a route that increases business risk and leaves UK companies vulnerable to currency fluctuation.
Digital Footprints Will Make a Bigger Mark in the Race for New Business
Currently, the top methods that clients use to find a consulting firm are recommendations from peers/colleagues and conducting research online. However, as specialist skills become more important to clients, so referrals are becoming less effective at finding the right consultant for the task. Instead, many clients now start their search for support by googling their problem. Search results, driven by relevant, authoritative, narrowly focused content can help the client find the firm they are looking for. Which is why keyword research and search engine optimisation is the second most important tactic utilised by high-growth consultancies.
Whether it’s clients conducting their own search, or hearing recommendations from peers/colleagues and then reviewing that consultancy on Google and LinkedIn, it all leads to the same digital space. Consultancies who can better shape their digital presence to help prospects understand the depth and relevance of their firm’s expertise will attract clients in a more consistent and predictable way in 2023.
A major impact of the pandemic has been the ‘silo effect’ of working. With employees scattered and operating remotely, digital links, research, and work execution have risen exponentially. Digital interactions are replacing many face to face interactions, which reduces the effectiveness of recommendations and heightens the need for businesses to display powerful digital content and effective SEO to attract business. Online search will play an increasing role in the way customers find suppliers and commission project work. With this in mind, UK businesses will, need to take heed.
Say Hello to Expertise, Goodbye to Legacy
Client behaviour and expectations are shifting. Organisations are now less impressed by how recognisable a consultancy’s brand is and more by the results a firm demonstrates it can achieve. In other words, legacy, as a client attraction device, is no longer working. This is why the power of a firm’s name and visibility fell from 23.1% in 2020 to 14.6% in 2022.
Expertise-led (bottom-up) is how differentiation gets created in consulting. Brand-led (top-down) is how awareness for that differentiation gets strengthened or scaled. Opportunities abound for those consultancies who can demonstrate a strong track record of success - and who can effectively promote those successes in online media. In contrast, consulting firms who rely on legacy reputation and brand awareness to compete against results-led (versus brand-led) competitors may suffer, even as the global consulting pie continues to expand.
Achievements and endorsements will be worth more than brand name and reputation for many businesses – especially in B2B service industries such as IT and tech. SMEs who can demonstrate strong and verifiable results will have an advantage over competitors who rely on legacy to increase sales. Once again, insufficient manpower may force UK clients to shop offshore for support, exposing them to all the risks and issues that come with cross-border trade.
Challenges in the Consulting Industry
Short of a worldwide economic meltdown, the remorseless growth in the global consulting industry will continue in 2023. However, the industry is re-inventing itself, becoming less of an ‘old boys’ club’ and more of a ‘winner takes all’ competition where winners must excel in every area. Even as the consulting industry charges forwards this year, hurdles will remain. Consultancies who fail to jump to the challenges of the new ways of working will likely fall hard.
Legal Thickets Will Only Get Thicker
Globalisation has brought nations into ever-greater economic competition. To protect markets and support industries, new laws and rules are constantly proposed, and existing regulations altered to fit the prevailing narrative. Such changes in legislation have an impact on how consultancies operate across the globe. For example, in the US, ongoing rulings over intellectual property, work for hire contracts, and "claims made" vs. "occurrence" liability insurance coverage continue to have influence on regular business operations, while Brexit is having massive impact on firms in the UK. Consultancies should expect these legal issues to increase in 2023, as inflationary pressures, tax avoidance schemes, and a raft of geo-political threats goad lawmakers into the creation of even more defensive measures.
Expect more regulation in the way money flows across borders, as cash-strapped governments move to counter cybercrime and prevent tax revenues fleeing to opaque locations. Businesses that sell internationally will likely face increased regulation and reporting in 2023. This may impact online payment systems and slow bank to bank receipts. Companies that make or accept international payments should take early action to ensure future compliance.
The Dawning of the Age of Specialisation
Businesses in all major industries are suffering from a critical lack of internal expertise and no immediate availability of these experts on the open labour market. Business challenges include digital disruption threats, supply chain muddles, inflation, cyber security, hybrid working, energy costs, war concerns, and labour shortages.
In answer to these wildly different problems, businesses will often have no choice but to turn to highly specialised consultancies for support. Recent research found that client organisations place the need for industry knowledge and deep subject matter expertise from consultancies rising by 7% between 2020 and 2022. Specialisation is the new black, and it suggests niche consultancies with strong positioning and reputational footprint will be the first in line for projects, while generalist firms with no core discipline will struggle to attract new business in 2023.
What you know is replacing who you know as the driver of success. This is good news for start-ups, less well-connected businesses and organisations that operate internationally, where personal contacts are more difficult to secure and maintain. Deep knowledge in a niche area of a given discipline will be in demand, particularly in sectors such as tech, finance, energy, and food production.
Specialisation: A Key Undercurrent in a Sea Change for Consulting
Consulting is undergoing seismic change, largely driven by the demand for specialist skills across a range of industries. As generalist agencies lose their allure and niche services gain in value, acute shortages in manpower for some sectors will become ever more evident. Global clients will be forced to scour the planet to locate the support they need - a phenomenon that may give rise to a new breed of consultant in 2023 - the international specialist.
As Consulting Expands Internationally, Financial Headaches Await
Global demand for specialist skills will increase the opportunities for consultancies to capture more international business this year. However, collaborating with overseas clientele brings with it a host of issues that many small to mid-size consultancies may not be familiar with. Most importantly, consultancies that engage in cross-border trade must reduce the financial impact of potential uncertainties by mitigating their exposure to currency risk.
As specialists in foreign exchange, we know that exchanging money into another currency and transferring it overseas can be daunting and confusing. That’s why when you sign up to become a client with Clear Treasury you will be assigned a dedicated account manager to help you cut through the jargon. Our API service provides businesses that conduct high volumes of foreign exchange transactions with the convenience they need to manage their requirements effectively. By acting as your embedded API partner, we can help you exchange currencies and execute international payments in a matter of seconds at scale.
We can also facilitate frictionless international payments to help your business leverage virtual IBANs: a non-tangible account that enables you to send and receive money internationally hassle-free, through the routing of multiple ‘virtual’ accounts to a single ‘physical’ account. This strategy allows you to enjoy faster and more cost-effective transactions, improved security, and greater visibility over your transactions.
Start mitigating the impact of currency risk on your international payments, with forward contracts and stop losses today. Become a Clear Treasury client today and start making quick, secure, and cost-effective international currency transfers.
Become A Client
Daily Analysis: All Eyes on Monthly US Jobs Data
Our daily analysis of EUR, GBP and USD.
Weekly Round-Up & The Week Ahead
Our weekly round-up and a look at the week ahead for EUR, GBP and USD.
The Rise of B2B Cross-Border Payments
Businesses that wish to protect their overseas markets or expand their international trade, must innovate their payments processes internally, or in concert with a technologically advanced fintech provider. Read on to discover more about the rise of cross-border B2B payments and what your business needs to do to stay ahead.