Management Consulting Business – Its History and Role
August 19, 2020
Mr. Takao Shiomi
Chairman, P&E Directions, Inc.
Management consulting businesses emerged in the USA around late 19th / early 20th century when the automotive industry was undergoing significant transformation from build-to-order manufacturing to mass production developed by Henry Ford. How to reduce manufacturing costs was a major business challenge to ensure economic growth, income increase and market expansion. Around that time, Frederick Taylor, known as one of the first management consultants, revolutionized management practices by applying scientific method to maximize productivity and efficiency at manufacturing plants across different industries. As the economy grew and the society became more affluent in the 20th century, there was an increasing demand for consultants with strategic thinking required to adapt effectively to the ever-changing business environment and to meet diverse consumer needs. A number of prestigious consulting firms were founded, many of which have expanded their operations on a global scale today.
Here in Japan, the establishment of the Japan Management Association in 1942 was believed to mark the beginning of consulting business. However, it was during the post-war rapid economic growth period in the late 1960s when the industry took root, which coincided with the advancement of major US consulting firms into our country. New consulting firms mushroomed in the 1970s and 1980s, putting some influential consultants into the limelight, and the industry flourished in the 1990s when companies went through massive transformation in the post-bubble period that required strategic management to advance “selection and concentration” and to strengthen competitiveness in a globalized and computerized economy.
While the consulting industry has enjoyed steady growth until quite recently, we are seeing significant changes in its business climate today, due to 1) enhanced intelligence level of our clients, 2) structural transformation of its human resources, and 3) shift in the scope of services and value offered. The key task for consultants remains unchanged, it is “to think”. Yet thinking alone won’t create any value. Consultants are expected to formulate strategies, implement them and deliver results that exceed expectations. To be more specific, consultants can play an instrumental role in building new relationships among different businesses and talents that extend across sectoral boundaries. A renowned economist Joseph Schumpeter once defined that “innovation is the execution of new combinations”. I believe extensive networks established by consultants or consulting firms can facilitate new connections, create new value and build a brighter future for all. Consultants are surely knowledgeable and resourceful, yet the ability to “make connections that bridge the differences” will count more in the future.