Will Crowdsourcing Become A New Business Model For Consulting Firms?
27 October 2014 Leave a comment
Consulting firms have had their ups and downs over the past decades. Since the downturn started six years ago, assignments have been going down in a drastic way, many companies even had to close their business. I think that the blame is not entirely on account of the crisis. Many customers learnt to survive financially and have therefore tighter budgets for external consultants. So they execute all kinds of activities previously carried out by consultants. Needless to say that there’s a danger in this approach, internals lack the knowledge about certain specialties. Is there a solution to this challenge?
What is Crowdsourcing
This short animated film by Crowdsourcing.org, describes the four different ways Crowdsourcing works and the five different categories of things you can do with crowdsourcing. See how to tap the power of the crowd for creative projects (Crowd Creativity), to collect and organize knowledge (Distributed Knowledge), how to use the crowd to develop and test new ideas (Open Innovation), to access an on-demand scalable workforce (Cloud Labor) and how to use the crowd to raise capital (Crowdfunding).
Those were the days, my friend
The traditional consulting business model is based on a time and materials basis. Clients pay for hours worked and expenses made by consultants on the agreed engagement. Sometimes (partly) in advance, but usually based on a periodical report of time spent. Originating from a shared ambition to eliminate risks and create actual change, more results-based business models have emerged. In addition, fixed fee models have lowered the uncertainty on the client’s side. You could discuss the impact of results-based and fixed fee models here, but that would not be the right discussion in current and challenging times. Mainly because these innovations have not significantly changed the consulting profession and are targeted towards a higher-quality consulting process with better results and lower risks. These innovations can therefore be classified as sustaining innovations. Consulting however, is in disruption. Sustaining the traditional business model is not enough.
Why your Customers will move from traditional Consulting to Crowdsourcing
To get to the heart of the matter on why crowdsourcing is this decade’s business mega trend, several immediate reasons come to mind:
- Crowdsourcing is Disruptive –Crowdsourcing has created a new guard that in many ways threatens the old guard. For example, your customer’s manager may believe that crowdsourcing consulting challenges is a sign of failure because his team couldn’t solve problems on their own. Or, he may believe that opening the challenge up to problem solvers from outside the organization risks intellectual property leakage
- Crowdsourcing provides On-Demand Talent Capacity – Labor is expensive and good talent is scarce. Think about the cost of adding ten additional consultants to your 100-person consulting firm. You’ve increased your consulting capacity by 10%, but at a significant cost – and, a significant fixed cost. If demand on these resources fluctuates you may find that they are not always fully utilized
- Crowdsourcing enables Pay for Performance –With crowdsourcing your clients pay for solutions, not effort, which predictably sometimes results in failure. But with crowdsourcing, your customer doesn’t bear the cost of failure
- Crowdsourcing allows you to provide Expert Services and Skills that your Customers don’t possess – As a crowdsourcing service providers you possess unique talent, expertise, methodologies and experience to help organizations rapidly achieve their goals, be it solving innovation challenges, or designing high profile custom prize competitions
From Crowdsourcing to Knowledge Management
Crowdsourcing is about tapping into your knowledge pool internally or externally in order to produce ideas and insights which can give your customer a competitive advantage. Tapping into such collective intelligence can be done through various forms. Crowdsourcing can be divided into two types, internal and external:
- External (Consulting Side) Crowdsourcing – This refers to an open call to your crowd (community of employees plus external professionals) to contribute ideas. It can be very insightful and minimize risks associated with uncertain marketplace demand because it involves customers in key marketing, branding and product development processes. External crowdsourcing is also a great way to engage customers with end users for product design and development, not necessarily via research and development alone, but from crowd ideas. External crowdsourcing is usually done via social media or web portals. If you have a Crowdsourcing platform you will notice that it can have a huge impact on your customers’ performance in terms of demand driven products and services, not to mention brand engagement from the public
- Internal (Client Side) Crowdsourcing – The second type of crowdsourcing is to tap into the collective intelligence of your customer organization among employees without prejudice. So anyone, regardless of rank and file, education background or experience, can have the chance to submit an idea. This could help to improve processes or even potentially be a game changing idea for your customer. Their employees are given the opportunity to contribute, comment and vote for ideas put forward to improve business related tasks and services. The best ideas bubble to the top and feasible ideas get rewarded. Ideas which are not feasible are also given some recognition for their effort. This is a best practice which engages staff at all levels to play an active role in helping your customer to succeed.
The liberalization of knowledge management is the key to success in an ever changing market environment. Insights to demand creation can be quickly understood as compared to numerical data which is often skewed towards the supply side. Crowdsourcing has proven to be a strategic approach to improve open innovation and creativity while minimizing labor and research expenses. It is convenient and time saving, especially with the use of the Internet to solicit feedback from an active and passionate community of fans. Organizations should consider crowdsourcing as a serious initiative to remain competitive and innovative especially in an ever changing business environment today.
Many consulting firms are experiencing challenges eroding their margins because of fierce competition and a significant drop in the number of assignments. Some consultants even had to close their business. Customers have become more demanding and have limited budgets. A solution for consultants to recover territory will be to change their business model to crowdsourcing. This will ultimately improve their customers’ experience, because customers will receive a better service at a lower cost. Crowdsourcing can be divided in an internal and external type.
Now it’s your turn
What is your opinion about consultants and new business models like crowdsourcing? Share your experience in the comments.
About the author
I’m a seasoned Business Consultant specialized in Business Development, Business Modelling and Pipeline Management, including Digital Marketing, Lead Management,Marketing Technology and Marketing & Sales Alignment. I’m owner of a company called Bizzmaxx. Download Bizzmaxx Company Profile here.