Consulting

An Overview Seminar to

Indiana University MBA Students

Eugene B. Lieb

Custom Decision Support, Inc.

http://www.lieb.com

ã Copyright Custom Decision Support, Inc. (2001)

September 2001

Agenda

  • The Nature of Consulting
  • Types of Consulting Services
  • Using Consultants
  • So You Want to be an Independent Consultant

Consultancies

  • "Consultancies" is Vaguely Defined
  • Spectrum of Services Provided by Consultancies
  • Outsourced Services are well Defined Products (Contracts)
  • Advisory Service Often Go Along for the Ride

Traditional Outsourced Services

(Doing Things)

  • Advertising and Promotion Placement
  • Market Information and Marketing Research
  • Legal Services and Support
  • Information Systems Development and Support
  • Accounting Services
  • Training
  • Tool Manufacture

STRICTLY Advisory Services

(Finding out Whatís Wrong)

  • Financial Audits
    • Independent Financial Statement Audits*
    • Financial "Deal" Audit (New Businesses)
    • Control Audits

  • Strategic Audits
    • Portfolio Audits
    • Forecast Audits
    • Marketing Audits

  • Operational Audits and Certifications
    • Quality Audits and Certification
    • Manufacturing Reviews (Benchmarking)
    • Process Audits
    • Policy Audits

In-Between

(Finding Out What to Do)

  • Planning Support
  • Operational Development
  • Market Evaluation
  • Marketing Research
  • Meeting Facilitation
  • Advertising Creation
  • Forecasting Systems
  • Decision Support Systems Development

UNOFFICIAL Advisory Functions of an Independent Consultant (or Why Use One?)

  • An Outsiderís View
  • A Communications Conduit
    • From the Troops to Management
    • From Management to the Troops
    • Saying the Unsaid

  • Asking the Unaskable Questions (Emperorís Clothes)
  • Based on the "Temporary" Assumption

Classic Advisory activities

  • Large Consulting Firms
  • Accenture, KPMG, BCG, Bain, McKensey & Co., etc.
  • Contracts: The Highest Level of Management
  • Customer Value:
    • Compelling Directions for Action
    • Due Diligence

Strategic Audits

  • Goal: To derive optimum directions through the analysis of operations and business conditions.
  • Based on Extensive Analysis of Internal Data
  • Supported by Interviews with Key Personnel
  • And Proprietary Market Information
  • Customer Value:
    • Buy-in to Strategic Directions
    • Excuse for Radical Reorganization
    • Board Level Support

MIs Needs Audits

  • Goal: To propose an optimum Information Systems to obtain justifying competitive advantage
  • Preliminary for an Implementation Contract, (Loss Leader?)
  • Customer Value:
    • Justification for a Large Investment
    • Insight into Unknown Technology
    • Experienced Advisors

Themes of the "Month"

  • Goals: To be Ahead of the Curve in the New Management Procedures
    • Total Quality Management
    • Management Orientation
    • E-Business

  • Programs in Support of On-Going Clients
  • Customer Value:
    • Improved Profitable Management Organization
    • Meet Customers Expectations
    • Provide a Halo of Management Competence

Traditional Complaints - Large Firms

  • The "Green Team" (Inexperienced Workers)
  • "Telling me what I already know"
  • Using Our Own Data
  • Excessively Expensive
  • Nothing New
  • Donít Stay Long Enough to Do Anything

Power and Influence

  • The Effect of the Consultant Acts through the Client
  • Large Firms Interface with Upper Senior Management
    • Downward focused Authority
    • Value is Credibility

  • Small Firms Interface on the Business Level
    • Downward authority with in the Business Unit
    • Only Influence Upward

Small Consultancies

  • Covers a Broad Range
    • Single Practitioner supported by Technology
    • Medium Size Specialty House (The Kotler Group, ARBOR, etc.)

  • Focus is on the Service Provided
  • Customer Value:
    • Solution to a Problem
    • Support (Advisory Services) Supplement

  • Example will be Custom Decision Support, Inc.

Business Planning Support

  • Goal: To assist in the Solution of a Specific Business Problem through the Development of a Written Business Plan
  • Do what needs to be done:
    • Facilitation of Planning Meetings
    • Analysis of Operations
    • Writing of Drafts

  • Customer Value:
    • Outsourced Management Resource
    • Force to Resolve the Issue
    • Outsiders View

Marketing Research

  • Goal: To Understand the Market and Provide Due Diligence
  • Activities:
    • Problem Formulation
    • Design, Execution, Data Analysis
    • Interpretation

  • Customer Value:
    • A Quantitative Basis for Decision Making
    • Market Insight
    • Management and Troop Support for Actions

Decision Support systems

  • Goal: To be on the Leading Edge of Management Science and Provide Due Diligence
  • Models Cover a Broad Range
    • Pricing Models
    • Expansion (Industry) Models
    • Sales Aides

  • Customer Value:
    • Answering Some of the What-If Questions
    • Gaining Management Support
    • Obtaining Group Buy-in

Being Successful as a Consultant

Independent or Internal

  • Saying No!
  • Listening
  • Working with the Organization
  • Recognizing Who has Power (Influence)
  • Being Willing to Walk Away
  • Matching Personalities and Skills

Cultures, Businesses, and Consultants

  • Firms divide between "Professional" and "Entrepreneurial"
    • This is the traditional distinction between large and small
    • However, it is not a question of size but culture
  • Professional Organization Understands Specialization and Use Consultants
  • Entrepreneurial Organizations Focus on "Generalists" and Use Suppliers as Consultants
  • Most Truly Large Firms Sub-divide into the Units that Correspond to Relative Small and Medium Size Operations

Reasonable Expectations of Clients

  • To be Competent in the Field of Expertise
  • To have the "Best Interests" of the Clientís Firm in Mind (Trust and Loyalty)
  • To be "Honest" and Relatively "Open" with Client
  • To be Tactful and Discreet within and outside of the Clientís Organization
  • To Complete Projects On-Time and within Budget
  • Follow "Corporate Guidelines" when associated with the Clientís Firm

Reasonable Expectations of Consultants

  • To be Paid in Full and On-Time
  • Not to "Have Your Chain" Pulled (Consulting for Free)
  • To be Informed on Project and Business Status as Soon as Possible
  • To Have Access to the Internal Communications
  • To be "Honest" and Relatively "Open" with the Consultant

Successfully Using Consultants

  • Call in Consultants Only When You Need Them
    • Use Consultants Only for Their Expertise
  • Understand What You Expect from the Consultant
    • Objectives, Goals, Real Deadlines, and Budgets
  • Clearly and Repeatedly Communicate that to the Consultant and Yourself
    • Make the Consultant Reflect It Back
  • Do Not Expect the Consultants to Do Managementís Job
    • They Should Not Make the Decisions
  • Meet Your Organizations Commitments on Time
  • Make Clear End Points of Projects
  • Require Good Documentation with Presentations

So You Want to be an Independent Consultant!

  • Tough Clients are Almost Always Easier to Handle than Tough Bosses
  • Your Time is Under Your Control:
    • You Can Work Any 70 Hours a Week you Choose
    • Rationality Never Governs Client Demands

  • Though Some Independent Consultants Make a Good Living:
    • On Average Similar Level Managers Do at least as Well
    • Some Tax Breaks, Some New Taxes
    • High Uncertainty and Variation in Income
    • No Paid Insurance or Retirement Fund

  • It is Very Learning Business and Usually Not Boring
    • You Have to Do Everything!
    • Need to Stay Flexible.

Being Successful as an Independent Consultant

  • All responsibilities are yours
  • Control your time (Peter Drucker "The Effective Executive")
  • As with all business: The Key is Marketing and Sales
    • You Must Do It All the Time!

  • Know your weaknesses
    • Be very honest with yourself
    • Avoid situations which expose your weaknesses
    • Use resources and partnerships to support your weaknesses

  • Build on Relationships (Pay attention)
  • Exploit your Strengths

Success of a Start-up Consultancy (New Business)

  • You Need a "Sugar Daddy"
    • Large Quality Client
    • Willing to Stay with You
    • Willing to Support You for a Number Years

  • An Existing Market
    • You Canít Build a Market "Gittlemanís Law"
    • Provide Well Defined Existing Services

  • Give Exceptional Customer Value
    • Faster (more Response) than the Competition
    • Cheaper than the Competition
    • Better than the Competition

  • Control Costs and Your Ego

Observations on Consulting

  • Clients are Generally Unable to Differentiate Between Competence and Excellence
  • Clients are Hyper-sensitive to Responsiveness
  • Clients Always want more than they Say
  • Uninformed Troops are Always Suspicious of Consultants
  • Clients are less Price Sensitive than they appear

Summary

  • Consulting Covers a Wide Range of Services
  • The Customer Value focuses on Assistance and Advise
  • Clearly Defined Scope and Objectives is Critical for Successful Use of Consultants
  • Being an Independent Consultant is Rewarding but a Lot of Work