Consulting is an episodic line of work. That’s great for the individual consultant because of the sheer variety it provides: different industries, companies, people, jobs and problems to solve. You get to see not only how many unique ways companies do similar things, but (if you’re paying attention) you’ll understand why. Plus, every problem calls for different sets of knowledge and skills, meaning you’ll get the chance to learn as much as you already know.
The episodic model has been good for me. It’s given me the opportunity to work in a wide range of industries: commercial insurance; investment and retail banking; wealth management and proprietary trading; commercial leasing; heavy equipment manufacturing; philanthropy. I’ve been able to work on a wide range of problems, from order to cash, shop floor to trading floor, new machines to service parts to used machines and more service parts, raw materials purchasing to finished goods shipping, underwriting to claim filing, credit formation to fraud prevention. Plus, I’ve been able to solve for multiple layers of a single stage of a solution (the experience, the technical architecture, the accounting transactions, the code) as well as the problems unique to different stages (the business case, the development of the solution, the rescue, the rescue of the rescuers, the acceptance testing and certification, the migration and cutover, the cleanup, the crisis room after a bumpy rollout, the celebration for pulling off the implementation everybody said couldn’t be done.)
(Yes, that’s a lot of run-on sentences. It’s been a run-on career.)
At some point in time, with a company you’ve never worked with in an industry you’ve never been in before, you recognize classes of need when nobody else does. You see things differently. I’d like to believe this is the benefit of working with an experienced consultant.
The episodic nature of the work provides meaningful variety for the consultant provided the consultant does not get staffed in the same role to perform the same task over and over again. Variability of experience evolves the individual; specialization stunts career development. While a person can become valuable as the go-to person for a specific need at a particular moment in time, needs, like fashions, come and go. To wit: ISO 9001 compliance consultants, SAP implementation project managers and Agile coaches don’t command the hourly rates they once did. To the extent that those things have value today, the knowledge of the nouns is more valuable than knowledge of the verbs.
There are career risks and downsides to being in an episodic profession. Consultant labor is part of some other company’s secondary workforce: when economic times get tough, it’s easier for the buyers to cull the consultants than badged employees. Even when the economy is humming along, the contract will eventually run its course and it’s time to move on. The consultant can’t talk publicly about the companies they’ve done business with and must be judicious in anything they do share. And for every company with the toxic culture and petty employees you tolerate because you know you won’t have to work with them for long, there’s a company with a healthy culture and great people you wish you could work with for the rest of your career. But that’s not an option, because you’re valuable to any one client for what you learn by working with many, many others.
Still, on the whole, it’s a great line of work.
The episodic nature of consulting is great for consulting companies when there is more demand for services than there is supply. This is especially true when that demand is ambitious in nature: the proliferation of affordable personal computing in the 1980s, the commercialization of the internet in the 1990s, the mass adoption of mobile computing in the 2000s, the expansion of cloud computing in the 2010s. Big technology changes meant big spending, and wave after wave didn’t just fuel growth of services, it smoothed out what would otherwise have been more volatile boom and bust cycles for technology services firms.
When the spending pullback comes, consulting companies don’t much like the episodic nature of their business model. The income statement lurches and contracts. A surprise pullback by two or three clients leaves consultant labor idle. A surge in proposals expected to close but not yet closed creates uncertainty as to if, when, and how many new people to hire. Uncertainty frustrates investors and stresses out managers.
Recurring revenue, on the other hand, means predictability in cash flows, which means fewer ulcers and less frequent boardroom rants. In consulting, recurring revenue comes from the more mundane aspects of technology, things like long term care and feeding of digital infrastructure and legacy software assets. (Software development consultancies have tried to use the “products not projects” mantra to change buying patterns to no avail: it remains episodic.)
Repeatable revenue comes from repeating tasks. While there are episodic events in the delivery of those repeating tasks - incremental improvements to deployment scripts and production monitoring - there is considerably less variability in the nature of the work itself. Repeatability industrializes the work, and with it the workforce. Where labor and employer share the risks of the episodic nature of project-based consulting, labor carries the bulk of the risk of the repeating revenue: the incremental improvements that reduce labor intensity; the codification of tasks that enable the work to shift from a low cost labor market to a lower cost labor market, and to a still lower cost labor market after that.
The software services industry hopes that AI is the next incarnation of demand for consultant labor. As I wrote last month, AI has not yet proven to be a boon to consulting firms in the same way that cloud, mobile computing, internet and personal computing were.
At the same time, there is a lot of hand wringing over the damage AI has the potential to do to employee development. If AI is ever truly capable of replacing swaths of software developers, the skills development pipeline will thin out considerably. If it is “I do and I learn” as the old saw goes, then there is reason to be concerned with “AI does it for me and I’m none the wiser”. (Again, please do not misunderstand this as a statement of imminent doom for fundamental skill acquisition among junior consultants. Maybe someday, certainly not today.)
But I can’t help but think a preference for recurring over episodic work will have a bigger impact on the development - more accurately, the impairment of the development - of future knowledge workers in consulting firms. Business models built around specialization of knowledge curtail the variety of the variety to which people are exposed. As I wrote above, it isn’t just exposure to a variety of different projects, it’s a variety of different solutions in different stages of their evolution to different problems in different businesses. (Jimmy Collins missed the mark quite badly in that regard. As, of course, did so many among the pantheon of his anointed “greats”.)
This preference for recurring over episodic income streams is playing out in a lot of industries, including automotive and high tech manufacturing. This portends a curtailment of product innovation and with it, the advancement of capabilities: while a manufacturer may squeeze more functionality out of deployed hardware through services, it will be functionality of convenience more than capability. Simply put, the OEM uses the incumbency it has (through e.g., high switching costs) with captive customers to extract more rent for the solutions it engineered in the past. Loyalty isn’t earned as much as it is exploited.
In consulting, a preference for the recurring over the episodic portends smoother cash flows but a depletion - potentially quite rapid - of competency in its workforce. A consulting firm is a services firm, but a services firm is not necessarily a consulting firm. A services firm may be a supplier of specialized labor, but a specialist and an expert are very different things. A services firm incubates specialists with training and certifications; a consulting firm incubates experts with exposure to diverse clients, projects and responsibilities. The two can cohabitate, but a services firm will have a dominant ethos: provider of utility services or provider of value generative services. The prior supplies specialists to fill roles; the latter supplies experts to frame opportunities and develop solutions.
Companies in growth industries grow by gambling on their smarts. Companies in ex-growth industries grow by extracting more rents from captive customers. A consultancy pursuing rents no longer believes in, and perhaps no longer has, its smarts.
