Digital Transformation Is Changing The Market For Consulting – Observations About Internal Cultural Transformation At PWC
Professional services firms must go through their own digital transformation before they can truly help their customers. In this comment we highlight some observations we made during a recent analyst event of one of the leading global professional services firms PWC.
Digital strategies will not translate into sustainable business models for the digital age
PWC is right to state that customers do not need digital strategies. Instead, they need support to prepare themselves for the digital age. But digital transformation projects are not so much about technology as about redesigning business models and changing the style of doing business. Hence, successful CIOs recognize that:
- Cultural transformation is the main challenge for digital transformation. Digital businesses map out customer journeys and ensure that products turn into plug-ins for broader digital propositions. These propositions are connected through data, communities, and collaboration. This allows the business to understand who the customers are and how they use products. It’s easier to implement technology innovations than to change habits and culture. Technology is only the catalyst for cultural and organizational transformation. The transition of Philips towards a vendor of digital propositions is a case in point.
- Vendors that embrace a fundamental cultural transformation are more credible. Clinging to traditional man-hours based and silo-oriented practices undermine the claim of being the right partner to support digital transformation. PWC has understood the need to engage in a fundamental cultural transformation of their approach to consulting. It changed its incentive structures to support interdisciplinary collaboration and reward team play over self-obsessed silo thinking.
Listen to the preacher who practices what he preaches
Encouragingly, PwC is designing digital solutions from the customer’s perspective rather than from a technology perspective. This matches Forrester’s vision of business technology. Most CIOs / CMOs realize that digitization is both, a challenge and an opportunity for their organization. Yet, few businesses are skillful and experienced enough to tackle digitization on their own. But each CIO has the opportunity to act as a key driver of digital transformation initiatives. It is one task for them to navigate the hardware and software vendor landscape and perhaps to choose the right cloud service provider. However, it is an altogether different matter to find the partner that will support the change management during the digital transformation process. Digital transformation projects are not business as usual as:
- Very few businesses will go through the digital transformation without outside help. In the digital world, businesses have to fundamentally rethink their business processes and above all their business models to succeed. CIOs must prepare and support this fundamental transformation. Hence, we believe that professional service providers like PWC, are working in an area of fantastic opportunity, one that comes along maybe once in a generation.
- The right choice of vendor for digitation transformation is business critical. Given the magnitude of change that firms are facing in the form of digitization, the choice of vendor for the digital transformation project will have longer-term implications than traditional IT and change management projects. It needs to be a firm that understands the sector, the customer and the organization’s people – not just its technology.
Your vendor’s comprehensive digital portfolio is just the starting point
The times when professional services firms could charge large upfront fees for services delivered at a later stage are coming to an end. Outcome-based pricing generates much greater confidence amongst customers. At the analyst event, WPP emphasized that it found reassurance from PWC given that the vendor had “skin in the game” itself. But CIOs face additional challenges when devising digital transformation strategies as:
- CIOs are at risk of being lured into easy and half-baked solutions. It is understandable that a CIO, who has the task of addressing a short term requirement of bringing a digital offering to market quickly, is looking for an easy solution. Yet, we believe it is risky to think that any business can address the digital transformation, which impacts all business areas, through a quick-fix.
- Professional firms are assembling a pretty similar base of assets and skill sets. PWC demonstrated an impressive set of assets to address this space with a wide range of offerings, in particular the analytics space. Many of these specialist assets for the digital opportunity came to PwC as a result of M&A activities, such as Logan & Tod, the analytics firm. PwC is not unique in the range of digital assets that it has at its disposal but its combination of skills and approach is potentially differentiated from smaller competitors.
Successful CIOs will readjust the process how they evaluate their digital solution vendors
For us the key takeaways from the event were:
- Most professional services firms offer a similar basket of assets and skills. The leading global professional services firms have assembled a similar set of assets and expertise. CIOs will not find it easy to choose the most appropriate professional services firm based on asset and expertise comparison alone. Execution and delivery capabilities matter greatly. Boutique firms and agencies will find it challenging to provide true end-to-end digital transformation support.
- Vendors that have not undergone a digital cultural transformation cannot lead. Most informed market observers would agree that digitization is one of the most significant transformative events for the wider economy and society in the last several decades. It is a process that is new to everybody and there are few certainties that any CIO can build on when devising his digital transformation strategy and initiative. There are few vendors that can provide a digitization roadmap based on certainties of outcome. In fact, there is a real risk of the blind vendors leading the blind CIOs. Hence, be aware and think for yourself.
- Lean towards those vendors that have a more authentic internal digital culture. The traditional management consulting model is coming under enormous strain. Traditional management consulting partnership models and their silo-practices are unlikely to deliver CIOs the most appropriate solutions for a digital age. CIOs do not need a digital strategy. They need the right support to survive and thrive in a digital economy. Those vendors that live and breathe the digital world internally and have restructured organizationally and in terms of incentive structures are ahead of the pack in supporting their clients through the digital transformation.
We learned about PwC’s own internal transformations. We recommend that PwC – like the other professional services firms – should communicate more openly about their own cultural transformations as this will help raise trust in their ability to become a credible supporter of digital transformation. And trust in a digital world is an essential asset.
Longer-term, we believe that management consulting itself is under threat by digitization unless it continues to transform. The collaborative economy is opening up the opportunity for customers to get access to the best possible expertise and insights irrespective of which firms the experts work for. Although this is far from industry practice, PwC is already engaging in internal crowd consulting activities to deliver the best possible value to clients. Traditional partners who try to ring fence “their” areas of expertise will find it difficult to continue doing business as usual.