By JJ Sendelbach
No matter what, consulting has gotten tougher. But there are some firms out there that seem to do surprisingly well. How come?
Let's start with a quick synopsis of the current state of the consulting industry:
• It is currently very difficult to sell a typical three- to six-month transformational project.
• Clients are in complete non-decision mode.
• Clients request a lot of dialog with their trusted advisors and hope for new ideas and push back on scenarios currently explored by them; handholding and babysitting are expected for free.
The heaviest client interest is around quick hit two-week "fire drills"; is this a paid-for marketing opportunity, or a long term relationship building exercise for free? Maintaining fees at 2008 levels is almost impossible; all sorts of discounting practices evolve without actually calling them discounts.
How are firms coping with this crisis?
• Firm A has instituted a crisis committee that meticulously tracks news and trends about client buying behavior and competitors' initiatives; a commendable course of action in good times, not in bad times though! You don't want to drive your car by only looking into the rearview mirror.
• Firm B has decided to work harder, make more calls, and penetrate existing relationships even deeper; this "more of the same" approach begs the question, why not adopt earlier if this approach is expected to deliver results?
• Firm C is entertaining the idea of body-leasing its consultants for now and to wait for better times to come during times of staff augmentation instead of consulting.
So what do the few firms do right that seem to take advantage of the crisis?
KIA expects to see Dominic Barton, the new global head of McKinsey & Company, execute on what he wrote in 2002: "For executives willing to make bold moves, a crisis can be a burning platform that creates an opportunity to change corporate culture and operations drastically. … For visionary leaders, this is the time to … adjust the organization's size, create a stronger and more performance-driven culture and throw out sacred cows." We will be watching closely:
• Recession-resistant consultancies clean house in terms of resources, processes, and clients. Yes, you read right, clearing the house of unprofitable clients isn't a bad thing. Keeping unprofitable relationships afloat just to keep the troops busy and to cover overhead is everybody's strategy. Dare to be different:
— Right-size aggressively
— Stabilize utilization levels
— Retain and incentivize the best
• Successful consultancies say out loud and in no uncertain terms what the client sometimes doesn't like to hear; no more lip-syncing with the client. Clients actually do appreciate it.
Dare to be different:
—Revisit recommendations as indicators change.
— Embrace your top clients, at any price.
— Implant "ears on the track" at your best clients, at any price.
• Winning consultancies try business models that in the past were thrown out as inappropriate for "our style." Dare to be different:
— "Variabilize" your own costs and pass through the savings to your top clients.
— Define floor billing rates and discount by providing longer team durations, rather than in hard dollars and by doing so keep utilization levels high.
— Manage DSO more aggressively, no qualms when going after your best clients. They are in the same situation. You may actually impress your client.
Of course, this may sound too simple to work. But as consultants know, the blueprint for success is easy. Implementation and realization is the tricky part.
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