We consider the formal practice of thought leadership marketing to have begun in the management consulting industry exactly 50 years, when McKinsey & Co. published the first issue of its venerable journal, McKinsey Quarterly. Since then many other consulting firms have followed suit with their own versions of McKinsey Quarterly, including FTI Consulting, Bain, Boston Consulting Group, Booz & Co. (now part of PwC), Roland Berger and Deloitte. Business books authored by consulting firms have also proliferated. Most consultants I know would like to be a published author.
And the desire goes way beyond the consulting sector today; lots of companies in other industries are clamoring to be thought leaders. We know this first hand. Over the last year, we’ve had interest from, or begun to work for, companies far beyond our traditional consulting and IT services niche. Two are major providers of information to businesses; a third is a big law firm; a fourth is a big wealth management firm; and another sells research management services to pharmaceutical companies.
And this week, I’m presenting on thought leadership at a conference of more than 100 people at architectural and engineering services firms. I greatly look forward to imparting thought leadership lessons consulting firms have learned to a sector that has started to embrace the concept.
Why are some companies in these industries intent on becoming thought leaders? I'm not sure. But perhaps they are being driven by the same factors that began driving the consulting industry to thought leadership 50 years ago:
- Growing business complexity. By a number of metrics, running a profitable business today is much more complex than it was 50 years ago. One reason is the impact of information technology. Using U.S. Department of Commerce data, Forrester Research says that the ratio of IT investments to Gross Domestic Product in the U.S. has risen from less than 1% in the 1960s and ‘70s, to more than 3% today. IT has changed the way companies design and run their business processes, and digital technologies are now forcing many companies to rethink their basic business strategies and even business models. In an age of such profound complexity, executives gravitate toward people with clear, substantiated ideas about how to run their businesses better – ideas that create coherence out of chaos. Real thought leadership does exactly that.
- Swelling competition. Consulting firms have needed thought leadership to differentiate their expertise against a fast-growing number of competitors. Between 1998 and 2011 (the latest data available), the number of U.S. consulting firms grew 77% (from 62,000 to nearly 111,000) and headcount increased 55%, according to the Census Bureau. Standing out from the crowd requires consultancies to show off their expertise in print, online and on the podium.
- Globalizing demand and supply. Many consultants' ideas have global applicability. Consulting firms have realized this, printing their books and management journals in foreign languages. (Jim Collins' 2001 mega-bestselling book Good to Great (4 million copies sold) has been translated into 35 languages; the 1990s' business blockbuster, Reengineering the Corporation, was published in 17. It's become easy over the last 20 years to spread a hot management concept with ubiquitous applicability across the world -- over the Web, of course. But to get clients to easily find its messages amongst the noise on the Web, a consulting firm's expertise needs to rise to the top of online searches (especially on Google, the dominant search engine). That, in turn, requires producing highly informative content on their website -- in other words, lots of thought leadership. And that may be one reason why the three largest strategy consulting firms – McKinsey, Bain & Co. and Boston Consulting Group – have opened so many offices outside the U.S. (from less than 30 in total in the 1980s to more than 180 today). The advice they have peddled in their publications and books has traveled rapidly across the globe -- much faster than it would have in the 1970s and '80s.
- Commoditization. The near doubling of U.S. consulting firms since 1998 has not been accompanied by much high billing rates. Revenue per employee in consulting firms between 1998 and 2008 (a proxy for billing rates) rose only a half-percentage point more per year than the annual inflation rate. Broadly speaking, that suggests consulting clients haven’t been willing to pay a lot more for most consulting services than they did in 1998 (with, of course, some exceptions). Without knowing, I would be inclined to believe that many of the consultancies that have boldly increased their billing rates are the ones that have established themselves as thought leaders. Clients will pay much more for truly differentiated and proven expertise.
- Increasing buyer risk. Much more appears to ride today in choosing the right consulting firm, especially for CEOs. An average 13% of big-company North American CEOs were replaced annually between 2000 and 2013, according to Strategy& (the new name of Booz & Company since its acquisition by PwC). If your job depends on selecting the right consulting firm (or architecture or law or accounting or another firm), you’ll do all you can to make the right choice. One of the best ways to judge the expertise of a firm is to see what its professionals have written about their professed areas of expertise -- along with what their clients have to say about them. In this way, thought leadership marketing helps reduce the buyer’s risk of making the wrong choice.
I imagine a number of executives from architecture and engineering companies will relate to these factors when I discuss them on Wednesday at the KA Connect conference in San Francisco. I’ll be very interested to hear whether they apply and (if they do) even more so how they’re using thought leadership to respond to them.