When economic historians come to write the final chapter of capitalism - the one where companies stop making goods that people need and start producing services that capitalism wants - Fiona Czerniawska's entrepreneurial prowess will probably get a mention. Ms Czerniawska is the managing director of Arke - a management consultancy firm with a difference. It is "a metaconsultancy" - it exists specifically to give business advice to management consultancies which in turn exist to give advice to other companies about how to run their businesses. And it is growing.

"It's a case of physician heal thyself," says Ms Czerniawska. "The greater the level of change, the more opportunities there are for consultancies. There is a lot of change at the moment and consultancies have to deal with that just like any other business."

It was probably only a matter of time before consultants brought in their own consultants. Like therapists who treat other therapists, they are fuelled by a lucrative, self-justifying logic all of their own. For every problem consultants found a solution, which engendered another problem, which in turn demanded another solution. Firms who brought them in to deal with something specific started acting as though they could not do without them. McKinsey & Co, one of the world's largest consultants, has an almost permanent presence at the BBC, which spent £22 million sterling (#33 million) last year on consultants.

So the handful of troubleshooters who were going into large companies in the early 60s and telling them how to become leaner, meaner and generally more efficient have become large companies themselves. An industry that scarcely existed at the end of the war is now worth more than $40 billion (#38 billion) worldwide. It employs around one quarter of a million staff and is growing by 16 per cent a year.

A business, it seems, is not a business unless it has someone from outside telling its managers how it could be run better. Last year 90 per cent of Britain's top 300 companies employed outside consultants. Their aim at one stage was to act like crack squads who could come into a company with a fresh eye and root out institutional stasis. Now they are part of the institutions.

But what has been good for business has been bad for PR. By the late 1980s, management consultants had a reputation for sending young, over-paid people with lap-tops into industries they knew nothing about and leaving a trail of jargon in their wake.

Stories spread of their "cookie cutter" approach of applying the same commercial logic to very different companies, particularly when they started moving into the public sector and employing the same logic for Pizza Hut as for the public health service. "It is not unheard of for people to give advice to the wrong company," said one consultant. "They go in and make a 20-minute presentation about, say, how to sell more fruit juice and then find that the company doesn't sell fruit juice and never has."

Now some are even saying that what has been good for the consultancy business in particular is beginning to prove detrimental to business in general. "We are now raising a generation of managers who don't know how to take risks and make decisions," Eileen Shapiro, who once worked for McKinsey, told Channel 4's Masters of the Universe series. "I can't think of anything that is more scary for business in a capitalist society."

An industry that owes its existence to making managers sharper has now created a business environment where managers are not only insulated from the rigours of the market but unwilling to make tough decisions too. One consultant says managers have hired consultants simply to do their dirty work. "Quite often management would bring consultants in to give them the answer they wanted which was to sack some people," he says. "So we would come in and tell them the obvious and then they could turn around and blame us."

But, under the watchful eye of the likes of Ms Czerniawska, a lecturer at Kingston University and author of Management Consultancy In The 21st Century, consultancies are now trying change. The thrust is moving from concentrating simply on profit, cost and revenue to focusing on ideas and creativity.

"By the end of the last recession companies realised that they had gone as far as they could by just cutting costs and started looking for other ways to get an edge on their competitors," says Ms Czerniawska. "They found it in innovative ideas and intellectual capital. For years they have been recruiting in their own image. Now they have to cast their net wider to draw in people who can really give them an edge."

With the growth of the Internet, which most businesses have invested huge amounts of money in without any certainty of how or when they will get it back, consultancies are increasingly seeking a lively imagination rather than a well-educated brain and a safe pair of hands. Moreover, as the world of employment has changed it is a creative edge that their clients want.

"The people who have the best ideas and have them quickest are the ones who come to market first and who can make the best profits," said Paul Edwards, chief executive of the Henley Centre for Forecasting and Research. "In this contractual employment world where you don't show loyalty to me and I don't show loyalty to you, I have to find ways of attracting you to stay with me, and I want the brightest, the cleverest and the most creative people to stay for longer."

Management consultancies have become a new type of breeding ground for the new generation of leaders - William Hague, Adair Turner and Howard Davies were all management consultants - and the industry has a language all of its own, complete with "burning platforms" (taking the plunge into new markets with no guarantee of success), "win/win paradigms" (alternatives where the client cannot lose), business scenarios in which you can "boil the ocean dry" (exhaust every possible area of cost-cutting ) or "peel the onion" (keep taking a problem apart until you have got to the heart of it).

"You can issue a mission statement, re-engineer, you can total quality management yourself," says Ms Shapiro. "And then you can down-size; you can right-size. Really, it's just your imagination for phrases that limit you in the kinds of things you can do to insulate yourself from actually thinking about what the problem is."

Consultants are also intensely secretive: few publish revenues, many do not belong to trade associations and nobody who works for them or is about to work for them (and even few who have left them) will speak about them on the record unless authorised.

At the turn of the century Frederick Taylor developed the theory of "scientific management", which provided the theoretical backbone for the division of labour into specific, specialised tasks. "In the past, man has been first. In the future, the system will be first."

It was the Harvard Business School that developed the theory, independent of economics and economists who were far too fixated on supply and demand to see the potential in examining how business could and should develop. The introduction of information technology meant businesses had equipment that they didn't know how to use and consultancies were expanded.

Soon, young men and women in braces and stripey shirts were touring boardrooms spreading the gospel. There was the "portfolio matrix" which divided up the world into cows, dogs, stars and question marks, the life of a management consultant was relatively straightforward.

The cows (cash cows) represented steady sources of income; the dogs brought in very little revenue with little prospect of growth; the stars were goods in expanding markets which brought in very little income; the question marks were risks. The aim was to keep the cows, sell the dogs to finance the question marks and work to turn the stars into cows before the cows you have turn into dogs - obvious really. There was also the experience curve, which meant that the more a firm knows about a market, the more it can lower its price and increase its market share.

The trouble with these theories was not only that they passed off truisms as revelations but that as more companies began to use management consultants their attraction inevitably waned. "Everyone was basically getting the same information," said one former consultant.

One of the gurus of the management consultancy world, Tom Peters, made his name with a book co-written with Robert Waterman called In Search of Excellence. Of the companies he cited as examples of excellence, two-thirds were to run into trouble. With his theory soundly disproved by reality, Mr Peters remarked: "My principles have survived intact - it's just that the companies haven't."