Why So Many Consulting Firms Fail - Biz Smarter€¦ · Chain Mgmt, Lean Six Sigma, Sustainability...
Transcript of Why So Many Consulting Firms Fail - Biz Smarter€¦ · Chain Mgmt, Lean Six Sigma, Sustainability...
Why Many Consulting Firms Fail! Creative Disruption Hits The
Consulting Industry
Presentation to IMC April 14, 2017 Phil Andrews
1
First Of All, It Is NOT A Unique Phenomenon To The Consulting Industry
• From the early ‘70s to today, 70% of the F-500 have either went out of business or were absorbed by their competition – PanAm, TWA, Eastern … – Pen Central … – US Steel, LTV, Bethlehem Steel … – RCA, NCR … – DuPont … – American Motors … – Citgo, Getty Oil, Mobil, Texaco, SOHIO …
Phil Andrews - Copyright 2
Here Is More Scary News
3 Phil Andrews - Copyright
The News Is Even Worse For SMEs
• "About half (50%) of all new establishments survive five years or more and about one third (33%) survive 10 years or more. As one would expect, the probability of survival increases with a firm’s age. Survival rates have changed little over time.”
Source: U.S. Bureau of Labor Statistics
Phil Andrews - Copyright 4
What Do You Think Is The Failure Rate For Consulting Firms?
• 50%?
• 60%?
• 70%?
• 80%?
• 90%?
Phil Andrews - Copyright 5
The Answer: (Over the last 20 years)
Phil Andrews - Copyright 6
Over
To Be Fair …
• The country has witnessed an explosion of consultants the last decade (or so) because many people that were laid off and could not reenter the workforce have become consultants – USA has become the land of the consultants
• ≈600K registered, well over 1M unregistered
• However, most of them are subject matter
experts, and not real consultants!
Phil Andrews - Copyright 7
Some Notable Consulting Failures and Flubs
• Bearing Point (KPMG) European Firm • Booz & Company PwC • Monitor Group (Michael Porter’s firm) Deloitte • Thomas Group • Ollie Wight • EDS/AT Kearney Consulting (split) • George S. May (GSM) and 100+ of their clones (i.e.: IPA
and Strategic Business Partners)
• ABC (still around because they have gov. institution support)
• XYZ (2 projects in 3 years --- all 1099 employees)
Phil Andrews - Copyright 8
Why Do So Many Subject Matter Experts Fail?
1. Narrow breadth of industry knowledge 2. They still behave and think as employees 3. Their tools, techniques, methodologies … and
communications are not the best 4. They are not exactly client-focused (although they
think they are). They are project focused 5. They are too sensitive (when challenged) 6. They don’t develop their own brand 7. They don’t network effectively
Phil Andrews - Copyright 9
Business Fads Come And Go … and So Do Thousands of “Experts”
The key to survival is to keep reinventing one’s self!
10
Consulting is in a constant state of Evolution!
Note: NOT a complete chart
And This Trend Will Continue … Actually Accelerate
Phil Andrews - Copyright 11
The gap is getting bigger
1995
This is the typical problem – most experts become stuck on one
body of knowledge, like LSS, for 20+ years
LSS today is NOT a strategic enabler --- just the ante to stay
in the game
This is both the opportunity and the
trapdoor for consulting firms
Why Do “Average” Consulting Firms Fail?
• Most of them are stuck in old this old consulting business model (popularized by George S. May)
1 2
3
1. Telemarketing, Cold Calls and Sales
2. Analysis 3. Consulting
So, what is wrong with this model?
12
Desperation
“Have hit wall”
Foresight
“See the wall”
Ambition
“Build a wall behind them”
Them You
Panic
“Trying to Stop” 80%
2%
8%
10%
The “average” consulting firms target these types of companies
A KEY FACT WHERE COMPANIES STAND
Phil Andrews - Copyright 13
The premier consulting firms like McKinsey,
and Bain target these types of companies
In Other Words, Most Of The Consulting Clients Are “Oxcart In The Ditch”
The Outsourcing Industry also went after them as well because selling one’s services is easy to one that is in trouble!
It is easy pickings! But the big question is: “Is it worth it”?
EDS found out the hard way that it is NOT worth it! … and so did GSM and thousands of others!
14
WHY? Here Is An Old Nugget Of Wisdom
• When one chases the maimed and wounded (like the Ambulance Chasers), eventually she or he will only end up competing on price, NOT on VALUE!
But in the consulting world, one CANNOT afford to become the Wal-Mart of the industry because that perception is deadly. Consultants are supposed to be thought leaders, intellectuals and scholars, demanding/deserving a premium price!
Phil Andrews - Copyright 15
Be Aware
• Consultants who focus on the "oxcart in the ditch" tarnish the reputation of the consulting profession because their clients who fail blame the consultants
• Consulting profession gets a black eye – Primarily due the fiascos of GSM and their clones
• This is why the big consulting firms embrace the term Trusted Advisor, and avoid the word "Consultant”. (However, most SMEs do NOT know the difference between Subject Matter Experts, Consultants and Trusted Advisors)
Phil Andrews - Copyright 16
This Is How GSM Ended Up: • Average Duration of Analysis*: 2.5 Days • Average Cost of Analysis*: $400 • Maximum Cost of Analysis*: $1,000 • Lowest Cost of Analysis*: $0 • Avg. Length Of Engagement: 7- 8 Days • Avg. Satisfaction Rating: 5 (out of 10) • Avg. Customer Revenues: under $5M/yr
* GSM found it very difficult to sell Analyses to SMEs and this is the main reason for the low duration and fees
17 Phil Andrews - Copyright
Let's Get Back to How the Consulting Industry Has Changed
• Is there a new business model that represents “creative disruption” in the industry?
Phil Andrews - Copyright 18
Reminder https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption
19
Phil Andrews - Copyright 20 What other models are there?
Biz Smarter fits here,
but not exactly
Phil Andrews - Copyright 21
The Key Consulting Migrations (Trends)
22 … and that’s NOT all!
Interesting Point
• Most of the problems are tied to faulty or Missing Strategies … and yet most companies still ignore STRATEGY(ies)
Phil Andrews - Copyright 23
HR Finance
SCM
IT Ops
Business Marketing
Product
Brand
Alliances
Customer Service
Talent Maint.
Funding
PLM O/S
EH&S
Key Point
• Technology is one of the top two ways to cause seismic changes and major disruptions. The other one is Strategy (changing the Business Model). The choices that companies have:
Phil Andrews - Copyright 25
Plug every hole; “stop the bleeding”
Get a new, bigger and better bucket
Explaining The Difference
Phil Andrews - Copyright
• One can plug all the holes, stop the bleeding … and still lose the whole company – This is exactly why the Analytical and Diagnostic tools
are of limited value – Fixing problems represents the Bottom-Up
Approach (= Tactical & Reactive Thinking) (same mentality as Remedial Maintenance)
• Creative Disruption represents the Top-Down Approach (= Strategic and Proactive Thinking) (Same mentality as TPM)
26
Some Of The Best Disruptors
• Omniconvergence • Omni-channel • IoT / Industrial IoT • AI / Smart Robots • Big Data; Blockchain • Smart Businesses / Smart Factories • Smart Logistics / Smart SCM • Business and Innovation Ecosystems • Shared Economy
Phil Andrews - Copyright 27
Another Interesting Trend https://www.marketplace.org/2015/12/09/business/startup-disrupting-consulting-industry
Phil Andrews - Copyright 28
College grads going into consulting now have a new type of firm to apply to
— it's a startup called HourlyNerd.
Other Interesting Trends http://www.consultancy.uk/news/13111/trends-and-challenges-in-the-management-consulting-industry
http://www.infodesk.com/consulting-industry/key-trends-in-2017-for-the-consulting-industry
• Law Firms are now interested in starting consulting divisions … and so are Innovation Centers and Accelerators
• Online Consulting • Freelance Consulting; crowdsourcing and multi-
sourcing consulting delivery (see: https://www.expertdb.com/ )
• Partnerships with firms outside consulting • Performance-based pricing; multi-fee options and
flexible pricing • Stake in the outcome or equity position in a client’s
company in lieu of fees Phil Andrews - Copyright 29
How Consulting Firms Respond to Business Disruption
Phil Andrews - Copyright 30
Omniconvergence Design Thinking Holistic Thinking
Phil Andrews - Copyright 31
Niche Player Limited Growth, Limited Power, Impact and Influence
Thought Provokers
To Be Used For Discussion Purposes
32 Phil Andrews - Copyright
The Times and Paradigms Are A-Changing
Traditional Consulting • Going it alone • Point solutions • Knowledge and content
have value – Knowledge is power
• Focus on fixing or solving a particular problem, incl.: – Improving and
reengineering – Turning around and
transforming, etc.
Leading Edge Consulting • Business ecosystem • Holistic solution • Knowledge and content
have low value and no power (democratization of info)
• Focus on anticipating and preparing, incl.: – Strategic Planning – Sustainability Planning – Creative Disruption
Planning
Phil Andrews - Copyright 33
Why Focus On:
• Because that’s where the real wealth is – AirBNB – Alibaba – Amazon – Dropbox – Facebook – Snap Inc. – SpaceX – Tesla – Twitter – Uber – Many others
Phil Andrews - Copyright 34
Customers want consultants that know how to achieve this
… Because We Reinventing Every Industry and … Our Entire Civilization
• Ag/Farming: Vertical Farms/Gardens, AGVs … • Manufacturing: 3-D Printing, AI, Smart Robots … • Transportation: Driverless Vehicles, Drones … • Retailing: Online 7X24 … • Health Care: Telehealth, Telemedicine … • Education: Online and Continuous Education … • Defense: Cyberwars, Robotic Soldiers … • Aerospace: Inter-planet Travel, Colonization … • Mining: Exploiting Resources Of Other Planets
Phil Andrews - Copyright 35
The Times and Paradigms Are A-Changing (cont’d)
Traditional Consulting • Approach: One-Size-Fits-
All • One sales channel • Few lead generation
engines • Usually stuck on
implementing 1-2 bodies of knowledge, like LSS
• Ignoring Change Management
Leading Edge Consulting • Approach: Customized
solutions • Multiple sales channels • Multiple lead generation
engines (there are 80+) • Leveraging all BOKs ---
better yet integrating them (e.g.: LSS + Green + Sustainability + Conscious Capitalism)
• Always applying Change Management
Phil Andrews - Copyright 36
This Is An Important Megatrend That Applies To All Industries, incl. Consulting
37 Phil Andrews - Copyright
This Is Who or What XYZ Really Is
38 The problem is that they don’t
know how to leverage it.
A Business Ecosystem for Consulting
Banking, Capital Growth &
Wealth Management
Legal Strategies &
Advise
Risk Management,
Safety & Insurance
Product, Service &
Distribution Design
HRM, Human Capital
Consulting & Exec. Comp.
Information Technology Consulting
Leadership & Organizational Development (Coaching & Mentoring)
Operational: Quality Mgmt,
Supply Chain Mgmt,
Lean Six Sigma, Sustainability
XYZ’s Business Ecosystem
Financial, Accounting, &
Taxation
Business
Development Branding/
Marketing/Sales
Enterprise Strategic Planning
M&A
Manufacturing
39 Their 250+ members fit into those types of “buckets”
This image was created by their own Marketing
Committee
40
Banking, Capital Growth &
Wealth Management
Legal Strategies &
Advise
Risk Management,
Safety & Insurance
Product, Service &
Distribution Design
HRM, Human Capital
Consulting & Exec. Comp.
Information Technology Consulting
Leadership & Organizational Development (Coaching & Mentoring)
Operational: Quality Mgmt,
Supply Chain Mgmt,
Lean Six Sigma, Sustainability
… But they only promote & espouse these services:
Financial, Accounting, &
Taxation
Business
Development Branding/
Marketing/Sales
Enterprise Strategic Planning
M&A
Manufacturing
One cannot sell the services that are not known to the clients
41
The Big 4 Consulting
Firms’ Approach
Leveraging The Ecosystem
• “I need a Business Strategy” We got it • “I need HR Help” We got it • “I need Leadership Development Help” We got it • “I need a personal Executive Coach” We got it • “I need a Fractional CFO” We got it • “I need a Wealth Management Plan” We got it • “I need a Risk Management Plan” We got it • “I need IT Outsourcing” We got it • “I need Payroll Outsourcing” We got it
42 This is part of the holistic
approach
Never-Never Say To A Prospect:
• “I am sorry, but we don’t do that!” (unless the proposal is unethical)
43
This response does not cut it and does not leave the door open for future interactions
or
Phil Andrews - Copyright
What It Takes To Manage The Business Ecosystem
• A solid and crisp Strategy • A crisp offering (product and service portfolios) • An organization (formal structure), similar to managing
a dynamic and High Performance Organization (HPO) – Managers for Marketing, Sales, and Ops are NOT enough – Relationships, interfaces and "handoffs" need managers, too – HPOs need budgets – Loyalty, stability and glue meld partners. 1099 employees lack
commitment • HPOs need business / technical, knowledge and
innovation infrastructures (see next slide)
Phil Andrews - Copyright 44
41
MIT’s Proven Model For Transformational Success
45
Offering
Organizational Boundary Business
Infrastructure
Culture
External Technological Environment
Social Political Economic
External Socioeconomic & Political Environment
Customers
Technical Infrastructure
Structure People, Skills
Strategy
Clarifications: a) Business and Innovation Infrastructures become one. b) Technical and Business Infrastructures include the Knowledge Infrastructure.
https://centricdigital.com/blog/digital-trends/disruption-in-consulting-how-consultants-are-adapting-to-help-
clients-succeed/
Phil Andrews - Copyright 46
Additional Reading
• http://edenmccallum.com/pdfs/Consulting_Firm_of_the_Future_2013.pdf
• http://www.roiinstitute.net/wp-content/uploads/2014/12/Building-a-Successful-Consulting-Practice.pdf
• http://aom.org/News/Press-Releases/Why-do-promising-management-practices-so-often-fail-New-research-blames-lack-of-expertise-among-consultants.aspx
• https://fail92fail.wordpress.com/2012/07/17/what-is-traditional-consultancy-and-why-it-mostly-fails/
Phil Andrews - Copyright 47