As with the airline industry, consulting firms have become highly commoditized with little client service and the willingness to serve others
-Kevin Parikh, Avasant, June 2014
In Part 1, Avasant's CEO Kevin Parikh talked about his emerging advisory firm and how it intends to help its clients tackle digital transformation. In Part II we warm up the talk to cogitate the impending talent crunch, the democratization of sourcing and the new levers enterprises can pull in their relentless quest to find new productivity… so without further ado, here's Part 2:
Phil Fersht, CEO, HfS Research: Kevin, traditionally outsourcing advisors were focused primarily on reducing labor cost more than anything else. But now it looks like the decisions of driving out labor costs are democratized within companies. Let’s say they came out to look at Cloud; they can look at crowd sourcing type solutions. They can look at robotics. They can look at a lot of things and not just outsourcing. In fact, in many cases outsourcing is like a band-aid. Do you feel today’s advisors are really equipped to help their clients think through all these variables?
Kevin Parikh, CEO and Senior Partner, Avasant: Phil, I love how you put it—the democratization of sourcing selection. We all have a vote. We can take what we want.
Kevin: And I think Cloud has enabled us to do that. Are the typical advisors prepared to enter this market? Absolutely not. The traditional outsourcing advisor is focused on towers of service, offering templates and financial models. This really requires a strategy-oriented consultant coupled with a sourcing consultant, and that is where we have been investing so much of our time and funding for many years. That is why we are in the globalization space and also focusing in the digital areas because we see this market as requiring strategy consultants. We are seeing that our traditional competition is not really the focus anymore. We find ourselves competing with other strategy firms. I believe this is because Avasant has entered into the revenue-side of the business, not into the cost-saving side of the business. Now it is a different set of competition, and it is a different kind of consultant that needs to do this work.
Phil: Now, that is very interesting...
Kevin: I am equally interested in hearing your take on this, Phil.
Phil: We are entering a phase where we are talking about true societal impacts of change, Kevin. Five years ago, it was about the possibility of a few jobs getting lost to some offshore arbitrage. But now labor costs have almost become a dirty word in many enterprises. There is an increased focus for executives to drive out as much labor cost as they can in operational areas. And what frightens me is there are a lot of mid-career executives today who are stuck between the new world and the old world, and they are not developing their skills. Many of these operational folks in IT and business operations, in the short to medium term, are going to feel more pressure to add more value to their outputs. They are going to be expected to be more analytical, more strategic and creative, and they are going to need to get more involved in front-office type activities; and those jobs are not going to be available for everybody – there aren’t going to be as many of them.
I do think we are reaching a possible talent crisis in the industry over the next few years. And it is these types of rapid developments we are seeing in Cloud and robotic automation as well as just more mature outsourcing models, which is driving all of it. This is something I believe to be a societal problem. It is not just a political or corporate issue.
Kevin: Agreed. There is a labor gap, and we have significant underemployment, even in our own industry. And that lack of ability to align talent with the available and required expertise is our challenge as well. As we hire and bring in more strategic consultants, we are also looking for the people that we can train and grow in the industry with us. We are looking for high talent; we are not necessarily looking for the traditional sourcing advisor who has done 100 deals or 1,000 deals. Those individuals for Avasant, are increasingly a commoditized expertise, and that is not what our clients are asking for today. Clients do not invest their spend with us on our large transactions because they want us to do a sourcing deal for them. Yes, that is part of the deal. But what they really want is for Avasant to help them with whatever disruptive technology they are trying to implement or the strategy they want to implement or transformation. That is where Avasant is able to drive higher value for the client engagement.
Phil: It is interesting because when I talk with your competitors, they are all saying the same thing: There is not a shortage of business out there; there is a real shortage of finding the talented consultants who can steer clients to where they want to go, and it is getting harder to do that. The traditional consulting model does not often cater for that type of experience. Have you managed to counteract this trend?
Kevin: Yes, but I believe it is first about culture. We have a high retention rate in Avasant. We focus on knowledge management and consultant education. Although we are not a research firm, we have a significant amount of knowledge management, which means keeping information, models and strategic documentation that can be used and reused. As we continue to quickly evolve in this industry, it is not just about the human factor, it is also about the kind of intellectual property we can keep, that we can consistently make available to our consultants over time; that enables us to bring in smart consultants that can take immediate advantage to achieve the customer’s objectives.
You are correct. There is a talent gap in our industry. Our challenge is to move faster than our competition. We believe Avasant can continue to adapt to the industry more quickly because we are structured to ensure ongoing innovation, and it is rooted in our culture to do so. Rather than partaking in the “race to the bottom,” where the only driving factor is cost reduction, we are focusing on value. As we continue to focus on a broader set of services -- you mentioned robotics, SMAC, and digital strategy—we will also continue to create more value for Avasant customer.
Phil: I have one final question for you: say you are given a role where you can be Lord of the Consulting industry for one whole week. What two changes would you make to that industry that you would like to see happen?
Kevin: Well, I never really thought of being the lord of anything. I am not sure I care about being lord of the sourcing industry [laugh]. Especially an industry that is changing the way it is today, but what I do care about is investing in a fantastic consultant culture and creating extraordinary service for Avasant’s clients.
So if you think about what I would like to change in our industry, and maybe we are driving it, is if you look at the airline industry today as an example. In the old days, and not all that long ago, traveling on an airline was a bit of an experience. You would have a nice meal, you might even have a nice smile and courteous service. Today we do not expect anything but a no-frills experience. As with the airline industry, consulting firms have become the same and highly commoditized with little client service and the willingness to serve others and be that steward the client is seeking. This is a key differentiator about how Avasant approaches the industry; we focus on providing extraordinary service. That means going and doing a few extra things and doing them very well. We will sponsor our clients to go to networking events to learn from their peers; we will sponsor client education programs, and through this process we ensure longer lasting relationships and more successful deals. We also sponsor corporate social responsibility and do a lot of nonprofit work with our clients.
If you are asking me what I would want to see as lord of the sourcing advisor industry for a day or for a week, I would say it is more about returning to quality and great client service. That is what Avasant continues to focus on today with each client encounter.
Phil: Well answered! Thanks for your time today, Kevin – and for being a good sport!
Kevin Parikh is Global CEO and Senior Partner at Avasant (click here for bio)