The pace of change brought about by the ‘digital revolution’ is disrupting the traditional technology and management consulting market. This is evident, for example, in the ability of new, predictive technology to automatically process massive amounts of complex data and produce informed analytics and recommendations. This happens faster and usually cheaper than an external Analyst/Consultant can do it. This has led to the disaggregation of consulting services, with the big consultancies no longer being the obvious one-stop shop for the entire technology strategy and solution. The following trends have contributed;

  • the so-called democratisation of access to data and knowledge
  • a trend towards hard knowledge assets versus reliance on human capital -productising professional services
  • the advent of the freelance/gig economy
  • and the establishment of digitally connected networks of experts versus traditional hierarchical structures.

These, in turn, have enabled the rise of the boutique or specialist consultancy who are challenging the dominance of the traditional players. However, one of the most significant market disruptions has been the advent of the internal consultancy (the ‘IC’). Internal specialist teams who are increasingly supplementing or winning business from external consultancies.

Where is this happening?

IC’s aim to solve business-critical strategic and operational problems by delivering in-house professional services of a consultative or advisory nature, comparable to those provided by external consultancies, but often at a much-reduced cost to the parent. Strategy, process improvement, and change management services are becoming increasingly popular IC offers, especially in the global technology and finance/banking sectors. Google, IBM, Cisco and Dell are leading the way and the majority of global Banks all operate in-house consultancy services. 

In the UK, major corporations, local authorities,  central government departments, and not-for-profits have set up ICs. Examples include The National Trust, the Department for Business, Energy & Industrial Strategy, and Kent County Council. In the NHS, organisations such as ‘The Strategy Unit’, ‘The Transformation Unit’ and ‘mHabitat’ operate independently as self-funding units that successfully compete for work in both the NHS market and the wider health and care sector. Such teams help retain business-critical expertise in-house, whilst often delivering services at a much more competitive rate.

What can we learn from this?

Perform Green was recently commissioned to produce a ‘Leading Practice’ report on how organisations have approached the creation and operation of internal consultancies, and what lessons can be learned from their experience. The purpose of the report was to provide an external perspective to inform a business case for the creation of an IC, as part of a change programme the Perform Green team are leading. Based on our research, the table below summarises the general pros and cons of operating an IC. We explored these themes in detail in our report, where we also examined the pitfalls, good practice and lessons learned that the case study organisations encountered.

The pros and cons of internal consultancy:

Pros Cons
Have a company-wide perspective Relatively new, therefore, limited best practice
Greater confidentiality  Widely varying practices and effectiveness
Broaden & offer additional career path options; contributes to company-wide talent strategy Freedom to operate from the parent can be restricted
Cost-effectiveness (known / agreed internal rate card) Independence of advice can be challenged if not recognised as objective
Continuity in strategy to implementation Compliance with internal procedures can cause operating issues
Shared / core values / high trust relationships Focus on the company it serves means less opportunity to develop relationships or experiences with counterparts in similar/external organisations resulting in experiential knowledge gap (but the opportunity to leverage this could optimise their value)
Enhance parent reputation with defined in-house expertise
Opportunity to broaden markets if deliver consultancy services/products externally

To complete the report, we conducted original research, through interviews and case studies into organisations in both the public and private sectors. The ICs we studied provide digital transformation, strategic transformation and change management services either to the open market and/or to a parent. Analysis of the pitfalls, good practice and lessons learned led to the production of a comprehensive set of key findings and recommendations. These were used to inform our client’s strategic case for change, the development of a Target Operating Model, and the organisation’s transition plan. 

When ‘one-size’ does not fit all:

Given that organisational context and sector influences vary widely we do not recommend a universal business model or standard operating practices for an IC. Instead, Perform Green make recommendations specific to our client’s vision and objectives. However, as a result of our research, we have identified a set of interrelated operating practices that impact the decisions to be made regarding people, operations and service offers. Based on this, we have produced example recommendations for organisations to consider, including:

Demand: Invest time in understanding and profiling the demand for your expertise; consider future growth, be incremental or ambitious but do not have too rigid a plan! Be ready to take advantage of new opportunities for revenue generation. 

Control: Identify and agree with parent what proportion of and how margin can be retained in the team to develop its people, services and future business growth.

Expertise: Understand it, articulate it, be explicit, stick to the expertise the team has. Constantly innovate and experiment to ensure it remains at the forefront of the market. Be a link in the value chain of transformation. Be clear about what you don’t do. 

Values and Purpose: Define and embed them in everything you do; use your value proposition to underpin delivery and build client relationships.

Engagement: Build in time for business development in all consultancy roles and put relationship management at the core of delivery.

Organise: Understand how to attract talent and how a consultancy can best be organised to deliver transformation through innovation, collaboration, and experimentation. 

Culture: Don’t overlook or underestimate the required cultural and behavioural change to transition a successful internal consultancy. Consider culturally what enables the delivery of transformation in the digital age and how a consultancy can embody this.

Lead: And finally, provide visible and compelling leadership to guarantee that the values and purpose are ingrained whilst the culture and performance, to ensure delivery of commercially effective, radical and dramatic transformational outcomes for the client. 

Interested in learning more?

If you are contemplating the value an internal consultancy could bring to your organisation Perform Green can help you:

  • validate your thinking
  • create a compelling case for change
  • facilitate the design of a Target Operating Model
  • lead the implementation of the change.

For an informal discussion contact:

Clare Hewitt or Toby Rhodes