The Covid-19 pandemic has forced companies to pivot and rethink their priorities.

A growing number of companies are accelerating plans for digital transformation and will rely heavily on consultancies to help them manage one of the trickiest technological and organisational projects they may ever have attempted. 

It’s early days for many digital transformation projects, but they already have a dire success rate. According to Boston Consulting Group, 70% of digital transformation projects fall short of their objectives[1], often with “profound consequences”.

Other research reckons that the failure rate for digital transformation projects is even higher.

Is the high failure rate due to mistakes made by businesses or the advice they’re getting from consultants?

To find out − and get a wider view of why companies use consultants and what value they get from them − we surveyed 101 business leaders at UK businesses with more than 500 employees and with turnover of more than £250 million.

The results may surprise you.

Almost all (96%) of those we questioned said that they used consultants.

Half (49%) said that they planned to spend roughly the same amount on consultancy services. Eleven per cent said that they planned to increase spending on consultancy services. Nineteen per cent said that they planned to spend less on consultancy services.

The top three tasks the companies used consultants for were management consultancy (43%), digital transformation (40%) and business strategy (39%).

Are companies getting value for money from consultants? Many are not, according to our survey.

Four in ten (39%) said that consultancies didn’t provide good value for money, compared to 47% who said that they did.

Why are so many companies spending on services that they do not believe will help their businesses? Have they become lemming-like and hooked on consultancies?  

No one ever got sacked for hiring IBM, the old business saying about IT services used to go. The same today applies to a company hiring one of the global, multi-billion-dollar management consultancy firms.

Are you a senior manager or board director pushing for a big digital transformation project or company restructuring? Scared of getting the blame if the project goes wrong? Hire a consultancy firm and blame it if things go pear shaped. The consultancies will probably have left your workplace and be working with a new client by the time the recriminations and project post-mortems start.

The truth is a little more complicated. Both customers and consultants are to blame for the high failure rate for large projects.

Digital transformation and business strategy go hand on hand. Consultants can sell a dream of digital transformation: chatbots, AI, more digital channels, rebrand a company; make it leaner and introduce “agile working”; improve profit margins; disrupt industries. The list of fantastical and undeliverable promises goes on and an.

Unfortunately, much of the tech is bleeding edge or leading edge and will require major changes in how employees work, and the company is structured. Changes that employees may be reluctant to make.  Great ideas are smashed by reality.

What’s more, there is often no proof that customers want the technologies that the company plans to introduce, especially in contact centre markets. For example, a company may have 1000 contact centre agents, which are divided into teams, each with their own leaders, operations manager and their own performance targets. There is a framework for staffing, and  data and forecasting future demand. Within this, there will be different sales or service cultures.

If, as part of a digital transformation project, a company asks its contact centre staff to work differently and direct customers to a web site or app to sort their own complaints, rather than the contact centre employee dealing with the complaint, it may not be popular with employees. Bonuses may no longer be paid. Employees may feel demotivated and ignore what they feel are arbitrary targets imposed on them because of a digital transformation project.

How can we ensure that companies get better value from consultants? We have three suggestions.

One, consultants and customers need more realistic expectations about what projects can achieve.

Two, the focus of projects should be on speed and affordability, rather than billable hours for consultancy services. This charging method provides an incentive for consultants to make a project as expensive and long as possible to maximise their billable hours, rather than suggesting projects that are realistic and most likely to deliver the benefits expected.

Three, break projects into smaller chunks so they are easier to manage. Roll out new software applications or services in smaller iterations. Learn from any mistakes and correct them quickly in a blame-free culture.

We’re not saying it’s possible to transform the success rates of projects overnight or make all companies 100% happy with the service from their consultants. Nor are we saying that all consultancies get it wrong. But it is time to acknowledge that the way companies are currently using consultants, and the way consultants are using companies, isn’t working nearly as well as it should and needs to change.