Thursday, February 14, 2013

Strategic consulting for beginners


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.