A lot of new businesses I see are
related to providing strategic consulting services or advisory services. These
businesses are set up with good intent and a lot of enthusiasm for the topic,
but almost all fail, so I thought I’d share some of my observations from the
industry over the last ten years.
Experience
You need to have recognised
industry experience to be successful in this game. This can be senior
management (C-suite) experience at a big company, or well known smaller
company, or it can be deep technical/subject mastery.
In other words not only do you
know your stuff, you need to show you know your stuff.
Put yourself in your customer’s
shoes for a moment. If you are a senior manager at a company you are going to want
to tell your colleagues and Board that you found someone who can really make a
difference as they have demonstrated experience and/or knowledge. You aren’t
going to hire a nobody.
Branding
The major established advisory
and consulting firms have built a reputation for providing their service over
many years, if not decades. Yes, you can probably do as good, if not a better
job for less, but you don’t have the brand recognition that goes with it.
Brand can be an antidote to lack
of experience. Larger consulting firms can show their organisation’s
experience, good systems and processes, and experience partners/lead
consultants.
Having experience at a well known
consulting company certainly helps when setting up a consulting company,
however, many learn the hard way that the former clients they got on so well
with no longer wish to know them.
If you are totally new to the
business then you only have any brand recognition with people who you have
worked with before.
Loss of face
One of the more subtle problems
with providing strategic consulting and advisory services is that you need your
clients to admit they are doing things incorrectly.
Not many people make it to senior
management roles by admitting mistakes readily. So when you walk in to an
organisation saying that you will help fix up or prevent the problems at that
organisation, what they are hearing is “you are idiots and I have come to save
you.”
More than anything, I think this
is one of the largest barriers to success in the business.
An ounce of prevention may be
worth a pound of cure, but nobody wants to know you until things have gone
horribly wrong, then they’ll get you to fix it up.
I know quite a few experienced
and capable consultants who would love to prevent the problems they see
cropping up everywhere, but they keep on getting called in to sweep up the mess
and staunch the bleeding.
Trust
A lot of quite senior people set
up their own consulting company when they leave a permanent role. They then try
to sell themselves as providing that same role as a freelancer.
In their prior place of
employment these people held a lot of influence and controlled quite a lot of
resources. To put it simply, they built up trust through their performance at
their previous employers.
With the exception of major
project delivery, it is very rare for a consultant or contractor to be trusted
with a senior management role.
Scalability
By definition strategic advisory firms are difficult to
scale up in size. Let me give you a simple analogy to explain why.
In a given business or profession there are three general
levels of competency. There are those who follow the recipes given to them, there
are those who have the recipe book and then there are those who can write
recipes.
To be a strategic advisor in its purest form means that you
can write recipes. That is, you can go into an organisation, understand their
business, their market, their culture and also where they need to be and what
they need to do. This means that there will be you and maybe a couple of others
with complementary skill sets who will work on a problem together. You cannot
just duplicate your skillset and grow the company.
Many of the larger management consulting firms actually have
a recipe book based on studying companies and industries, so they are providing
you with recipes which were written by others. These firms can scale up based
on having years of research and a good brand name. This is going to be
difficult for any small consulting firm unless you have a strong academic
background.
The Answer
Strategic consulting is about telling companies what to do.
However, companies only want you to write the recipe, they don’t want you to
cook as well.
So, if you want to succeed you also need to provide a team
of lower priced and competent people who can actually deliver on the processes
and change management required for the company.
Start off with people who know what you can do as strangers
won’t trust you in the beginning. Your brand will grow over time and you will
be able to scale up considerably, but probably not until somewhere between years
five and 15.
