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I'm always confused by the different properties people imbue with the term "scale". Accenture is an example that consulting does scale by definition, because it
by cbsmith 3y ago
I'm always confused by the different properties people imbue with the term "scale". Accenture is an example that consulting does scale by definition, because it's a profitable business that is operating at a much larger scale. It just that when it scales, the profit tends to grow linearly, or even sub linearly. This is in contrast with businesses like Google or Meta where the expectation is that they'll scale exponentially —though you'll notice that once they reach a certain size, they tend to shift back to more linear or sub linear profit growth... That's a niggly detail best left ignored by investors. ;-)
- 01100011 3y agoIt depends on the context. In all of the discussions I've had on this topic, the quality people are concerned with is the performance of a company as an investment. In that sense, consulting does not scale. Sure, you can build a big, mildly profitable, consulting company, but that isn't very interesting to most folks.
- cbsmith 3y ago> In that sense, consulting does not scale. Again, I believe you are presuming an exponential scale. Yes, if you invest in a consulting business, the rate of return isn't likely to grow exponentially, but it will grow, and it's entirely possible profits will grow proportionately with the investment. Saying a business doesn't scale, from an investment perspective, means that the business can't leverage the investment to increase profits. That's certainly true of some businesses, and certainly true of some consulting businesses, but observably not true for any sector Fortune 500's are in.