By Tom Rodenhauser, Managing Director, Advisory Services
Having been around consulting for the better part of two decades, I've reached a few conclusions. Mainly, that consulting:
- is more iterative than innovative;
- is incestuous … even closer than three-degrees of separation; and,
- can usually work around my first two conclusions to woo clients.
This time of year, I'm planning my annual pilgrimage to a handful of business schools. It's part of my give-back in terms of helping educate future practitioners. The forums are extremely satisfying—I provide insights on an industry that will employ more than a third of those graduates; and the students ask questions that more seasoned professionals would never deign to consider.
The classic query involves differentiating firms that are clustered by shorthand euphemisms: What are the differences among the 'Big 4' … 'Top-tier Strategists' … "IT Service companies.'" Let's face it, we use those terms because explaining the nuances between an Ernst & Young and KPMG isn't all that apparent. Most of us behave like Radar O'Reilly in the old M*A*S*H series.
The suave Hawkeye explains to Radar—the most bumpkin of bumpkins—the art of wooing a woman who appreciates classical music. Hawkeye: "When she talks about Bach, raise your hand and wave it ever so gently and say 'Ah … Bach.'" The mere utterance— "Ah … Bach,"—conveys knowledge, of course.
Suffice to say, the approach works. Thus proving that it's not what you know, but how you act when you don't know it. With consulting, we tend to nod knowingly when conversing about certain types of firms, even when we don't know those firms. Students—even MBAs at top-tier schools (another euphemism, by the way)—challenge the head-nodding by asking you to explain the differences that don't readily seem apparent.
To make sense of the consulting market, we categorize firms by services, industries-served, and geographic presence. The world's largest 25 to 30 consulting organizations, as measured by total revenue, cover virtually every one of those categories in blob-like fashion.
Beyond these global providers, we can identify extremely large consulting providers by any of those three dimensions. The classifications break down when looking at the long tail of consulting. There are literally thousands of niche providers whose limited size can limit their visibility, but not expertise.
To address that, we've developed a framework that de-emphasizes size and categorizes firms by capabilities and operating models. Having tested this against our decades of knowledge, we can identify four separate types of consulting organizations: 1) Management Advisor; 2) Expert-Led; 3)Competency-Led; 4) Industry Expertise.
Each market model possesses distinct attributes along a variety of elements, including professional staff composition, delivery of services, fee/utilization/compensation rates, and intellectual property development. By viewing providers in this fashion, we can compare boutique firms against the giants. We can also chart the lifecycle of firms based on their market model … or lack thereof!
This brings me back to my original assertion that consulting is more iterative than innovative. The vast majority of boutiques are the distilled vision formulated by the ex-partners of large firms. So these founders tend to adopt (or maybe adapt?) familiar practices.
The problem, of course, is when such boutiques make "Bach-like" claims based on their pedigree, not their reality. Resting on one's credentials generates a certain amount of business. Many boutiques can sustain themselves for years in this fashion. But in the end, good consulting firms that seek prominence don't rely on the past to chart their future.
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