The human side of the digital age: the Extended Company

06 April 2021
By Carlo Maria PRANDINI and Maurice BECKER, Grande Ecole programme students

Nowadays we are observing the trend of digitalization in all business industries. Many people have raised questions like: “Is the future of consulting only about IT tools? Will they replace human consultants soon?” Charles-Yves Mahé, Vice President of the team of People, Change & Transformation at CGI Business Consulting, does not think so.

Mr. Mahé is primarily involved in activities where human impact is crucial. Hence, it is interesting to have his feedback on a potential loss of importance of the consultant’s role to the detriment of the introduction of automated IT processes.

Artificial intelligence (AI) is not only a vision anymore. It is already applied in different business practices by companies that are trying to enhance their performances by implementing IT tools in their everyday activities. However, in Mr. Mahé’s opinion, this represents only a part of the “future of consultancies”: AI will help accelerate consulting practices, leaving more time for value-added activities. For instance, digital tools such as Robotic Process Automation (RPA) are becoming a useful alternative to repetitive and easily standardizable tasks.

Mr. Mahé gives the example of taking IQ tests into consideration in recruitment processes. Their fully automated approach has been proved to be more reliable than a classic interview, nevertheless, the importance of human factors remains critical. HR people, being able to interpret answers by using their experience and point of view, can go beyond the precise data analysis of the tests. AI consequently is not described as a complete substitute for human capabilities but as an additional tool.

Thus, given that sophisticated IT tools will be accessible to all the big players in the market, what will be the future of consulting? Furthermore, if it goes beyond digitalization, how can consultancies create a competitive advantage in the digital era?

According to Mr. Mahé, the answer could be represented by a different consulting approach: the co-creation of innovative solutions in the model that he defines as the “Extended Company”.

This phenomenon is characterized by constant collaboration between the consulting firm and its clients (and sometimes even with competitors) to develop modern, innovative, and specific solutions, “extending” their horizons. Human ideation will therefore still be crucial in tackling the most challenging problems, offering more complete answers than the ones proposed by automated digital devices. The creation of software tools such as SAP Enterprise Product Development shows that an increasing number of companies are asking for collaboration. This software allows firms to overcome geographical barriers, digitally collaborate and co-create with their partners from hubs all over the world.

Regardless of the type of cooperation, online via software or offline, why would you engage in these partnerships? In a nutshell, it is a win-win scenario. The Extended Company model is not only applied to solve problems, it can also lead to significant cost and time savings in the development of innovations. Also, intellectual property related to co-creation offers major advantages for both parties. On the one hand, consultants can sell the solution to different firms, profiting from it; on the other hand, clients can be the first ones on the market to access innovation, consequently achieving a competitive advantage. Another reason to engage in partnerships is to minimize expenditure. Mr. Mahé explains that companies can save up to 30% of costs if they externalize and outsource one of their departments. This is because the consultancy takes over the same activities of the acquired division, managing it more efficiently.

Now you are probably thinking: “How does the process work? When does the collaboration start?” It is quite easy. Very often, the consultancy is already working for the client on some tasks. They notice that they can help them thanks to their expertise, directly taking over a department or some specific internal activities. The consulting firm, through its offer, has to prove that it will either increase revenues or save costs. In the proposal, the consultancy could suggest the outsourcing of some business practices to its client.

The described collaboration also might have some limitations since it is primarily based on trust. Consequently, a possible issue could be establishing the ownership of intellectual property generated by the collaboration. For this reason, it will be necessary to develop very clear and transparent contracts before establishing a partnership.

Another interesting aspect to consider is risk management. Since a close relationship will be established between the two counterparts, the consulting firm may have to assume a portion of the risk itself, an unusual practice in the current consulting scenario. Therefore, a potential solution to this could be identified in royalty agreements. They could be stipulated between consultants and businesses to develop innovations on an ongoing and long-term basis. In these legal deals, one party accepts to pay the other “royalty fees” based on sales of intellectual property.

In the interviewee’s opinion, large organizations are the main candidates for using the Extended Company model, having the economic availability to make substantial investments from a technological point of view. Small creative consultancy firms are likely to be bought by market leaders, intending to increase their internal competencies, while trying to develop new ones through partnerships.

In conclusion, the interview clearly demonstrates why businesses should not only focus on AI. It will be an important component, but the key to success, at least in the near future, lies in “innovation through collaboration”. Certainly, software solutions, such as SAP Enterprise Product Development, can be integrated into the Extended Company approach allowing companies to dynamically cooperate and co-create. Nonetheless, the human side embedded in interdisciplinary teamwork will be essential to reach a competitive advantage, broadening firms’ opportunities through synergy between internal and external knowledge. The Extended Company will enable businesses to save both time and money, mitigating their internal risk, while continuously providing cutting-edge solutions.

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