Consulting Industry
Generating hundreds of billions of dollars in revenue a year, the consulting industry is among the most lucrative, prestigious and quickly-growing sectors in the the broader field of professional services. Now spanning six domains of advisory services, the industry has its roots in management consulting. This new field of technical expertise emerged in American universities more than a century ago to support a commercial world grappling with the unprecedented growth of the industrial revolution.
A chemist at MIT — Arthur Dehon Little — is credited with founding the first management consultancy in the late 1890s. By the time James O. McKinsey, a professor at the University of Chicago, established McKinsey and Company in 1926, consulting had evolved as a speciality to the extent that the firm entered the history books as the world’s first ‘pure’ management consultancy. As the science of management made huge strides forward in the 1930s, other US-based firms, including Booz Allen Hamilton and A.T. Kearney, became synonymous with the exciting new discipline.
Many of today’s most recognizable names in consulting entered the public consciousness as pioneers of a bold, analytical approach to management theory. This took shape in the 1960s and 1970s —the same period which saw consulting spread from the US to Europe and around the globe. The Boston Consulting Group (BGC), founded in 1963, brought analytics to strategy and, alongside Bain & Co (founded ten years later) and McKinsey, went on to form the Big Three of Strategy Consulting. German national Roland Berger was one of the first European visionaries to see the coming tide. He established his eponymous generalist strategy consulting firm in 1967.
A staggering rate of expansion across Western markets meant that, by the 1990s, MBAs were in vogue on top Ivy League campuses, where consulting firms aggressively recruited new talent. Worldwide revenue was now in the tens of billions of dollars as the consulting industry enjoyed a golden age of growth, buoyed by the collapse of communism, globalization, and the rise of emerging economies. Information Technology was in its infancy compared to today’s era of digital disruption, but it had evolved rapidly since Steve Jobs founded Apple in 1976, and a new sector of IT consultancy was born.
This pattern of accelerating and diversifying growth was briefly interrupted in the early 21st century as a consequence of the dot-com bubble bursting in 2001 and the Great Recession rocking the global economy in 2008. Coping with clients’ tightened purse strings posed a real challenge for advisory firms, but consulting’s real story during the first decade of the 21st century was told in the emergence of new specialist consultancies and the dynamic realignment at the top of the management consulting food-chain. As the Big Three explored the world beyond business, winning lucrative government contracts, the consultancy arms of the Big Four professional services firms — Deloitte, KPMG, PwC and EY — became titans of equal stature in the field.
As the 21st century marches into its third decade, the consulting industry is turning over record revenue and profit. Critical to success has been the role of consultants in helping clients understand, embrace and exploit digitalization, disruptive technologies and a business landscape evolving at breathtaking speed. The same phenomena are now beginning to reshape consulting industry itself, which has until recently proven immune to disruption — due in no small part to the measured agility of top consulting firms and their freedom from fixed capital and resource dependency.
Consultants today work in an industry that is not only on the brink of radical change but one in which the dividing lines are increasingly blurred. Six major consulting sectors — Management, Strategy, Operations, Technology, HR, and Financial Advisory — overlap frequently with one another and oversee the provision of advisory services to clients in hundreds of different industries and functional areas.
A US-based consultant is still far more likely to be found working for a large or mid-sized firm, but the number of freelance operators is steadily rising and the majority of consulting firms are actually solo enterprises. Internal consulting — in which organisations cultivate their own in-house consulting capabilities — is itself a rapidly evolving field. Clients also increasingly expect their consultants to possess specialist expertise and this perceived market gap for niche knowledge is being readily exploited by disruptive newcomers to the consultancy game.
