Updated: May 18, 2021
As entrepreneurs and small business owners increasingly look to find ways to improve their companies and increase their profit amid a disruptive backdrop, the need for high quality consultancy has grown strongly. Growing demand for consulting services has expanded the number of firms and independent consultants in the industry. In the US for instance, the number of management consultants employed rose from 540,440 in 2012 to 684,470 last year. But alongside the overall trend of more consultants, there has been a specific rise in the popularity of specialist consultants across the world. Often when business think about consultants, they consider only very broad types of consultancy, such as management consultants, strategy consultants, or IT consultants. However, while this type of consultancy is obviously still hugely important for companies, there has been a far greater rise in the number of niche consultants. In a recent analysis by the Management Consultancies Association – the representative body for management consulting firms in the UK – the researchers found that in the UK, small firms have grown at a rate of 18%, well above the growth rate of large and mid-sized consultancies. This trend is not unique to just the UK; in several more mature consulting markets, clients are turning to smaller consulting firms in a bid to find a more specialist offering and an intimate client-consultant relationship. So why are niche consultancies gaining terrain? Three reasons: Small businesses spending more Firstly, increasingly diverse markets and the changing shape of businesses means that there is a need for more varied consultancy services. Crucially, smaller companies and family businesses – the backbone of the economy – are choosing to spend more money on consultants than ever before. The numbers are larger than often reported, as many analyst firms focus their market sizing efforts on the larger segments of consulting. In the UK alone, small and medium-sized businesses are spending £60 billion every year on expert consultants. Small businesses are more likely to work in unique market niches, and as such, are more likely to require more specific consulting support. Rather than needing standard marketing consultancy, a small business may require help with advertising in their own niche; or, rather than tapping a blueprint finance transformation approach, they may benefit from a more granular and tailored offering. And there is an increasing number of consultancy firms that are aligning to such demands. For small companies there is always a cost challenge involved with hiring new staff with specific expertise, so it can often make sense to work with consultants who can provide advice and assistance at a much lower overall cost. Consultants from niche consultancies typically have lower rates than their peers employed by large players such as the Big Four – Deloitte, EY, KPMGand PwC. Specific activities targeted But it is not only small businesses spending more that is pushing the growth of niche consultancy – larger organisations have a role to play as well. Many enterprise-level organisations are choosing to take a more specific approach to their consultancy, and working with specialist consultants on a broader range of activities. For example, businesses could be looking to improve and work on their customer service, and establish a better customer experience. Bringing in consultants with specific experience in enhancing the way that organisations treat their customers can be one of the most effective ways to do this, and may not be easily achieved with a more generalist consultancy firm. Additionally, while in the past an organisation might have worked with a general digital consultancy, the increasing sophistication of the marketplace means that it is necessary to work with specialists in specific fields. The digital transformation landscape is huge, and requires a wide variety of areas of expertise, such as creative skills, design thinking, deep technology capabilities, and digital project management to combine for a successful proposition. Breaking activities down into specific niche areas is an increasingly common tactic used by clients as part of their quality control endeavors. Industry niche consultancy It is increasingly true that generalist consulting is being shunned in place of industry-specific advice. There are now consultants who specialize in advisory for industries as niche as opticians. It is seen to be the case that markets have so many nuances and individual issues, that consultants with extensive experience working in them can potentially provide the best advice. There are many reasons that these kinds of smaller consultancies can be more effective. First, they may be able to get to the bottom of a problem that has its roots in the industry itself – something that larger and less specific consultants could miss. Secondly, partners of smaller consultancies tend to operate more agilely, providing clients with a quicker and more direct line of reporting. Third, smaller consulting firms can, on the back of their customer intimacy, be more flexible in their pricing and risk-sharing models.