By Maximilian Clarke

Innovation in UK consultancy firms is at risk of being stifled by a number of challenges, a new report finds.

The report, ‘Management Innovation in Consulting’, was published by The Institute of Consulting and undertaken by the Advanced Institute of Management. It reveals that a lack of time for generating new ideas; pressures to focus more on client billing than on innovation; reduced training and development for consultants; and lower profit margins are all adding pressure on the vital consultancy industry.

Just one in five consultancies admitted they had a formal process in place to develop innovative services, and there is concern in the industry that clients are too risk averse- with 83% reporting that procurement processes hamper the sale of innovative consulting services.

“This report is a timely wake up call for consultants,” says Huw Hilditch-Roberts, Director in charge of the Institute. “The value a consultant brings to a business is new ideas, innovation and smarter and better ways of doing things. Firms must not lose sight of this. Yes, consultancies like all businesses are under financial pressure right now, but this is no excuse to neglect innovation. It is as important as billing clients. If a consultant loses their ability to innovate, their role is effectively redundant and the industry fundamentally at risk. Consultants also need to demonstrate the value of innovation to their clients as a way of gaining much needed competitive advantage.”

Dr Joe O’Mahoney, author of the report, encourages consultants and clients to think differently about how to approach innovation, “In difficult times there is a tendency to seek tried and tested products and methods, but research shows that companies investing in innovation during a recession are more likely to come out of it faster than competitors. A risk-reward form of payment is a good way for clients to share risk while still reaping the rewards of innovative consultancy solutions.”

In spite of these worries, innovation in consultancy has increased in the past five years according to 69% of respondents and 36% of firms stated they had introduced innovative new consultancy services during this period.

The report also showed that the nature of innovation is changing. Today’s innovation is less about ‘big ideas’ such as Total Quality Management and Business Process Re-engineering and more about local, client-focused developments. Clients are becoming more wary of the ‘one-size fits all’ products and are looking for more tailored approaches.

Much of the growth in innovation identified in the report is in partnerships that offer clients more control and consultancies reduced overheads. This trend of partnership is a common theme throughout the industry and has been seen in large co-funded ‘innovation centres’ staffed with clients and consultants sharing expertise and intellectual property rights to sole-owner consultants developing proprietary programmes for individual clients.

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