Knowledge Management and Competition in the Consulting Industry

This article analyzes how Knowledge Management (KM) is likely to affect competition in the management consulting industry. KM represents a fundamental and qualitative change in this industry's basic production technology. Because management consultants acquire information directly from their customers, for these firms, KM technology exhibits increasing returns to scale. As such, although KM clearly represents an opportunity for some consultants to build a sustainable competitive advantage, it is likely to lead to a shake-out. Based on the industry's early experience with KM systems, this article describes a number of possible future outcomes as well as strategies that consultants can follow.