The consulting industry

demand and stimulate further demand, the larger consultancies are increasingly offering more tangible “commodities” – systems, methodologies, application and training packages, learning programmes and materials, etc., as already mentioned in Chapter 1. While commoditization is not a new phenomenon and its elements could be observed in work study and industrial engineering services more than 70 years ago, we are currently witnessing developments of a different scope and impact. Most large consultancies, and even some small ones, are offering sets of more or less standard products, claiming that it is more advantageous to clients to purchase their “brand” product, with or even without adaptation. In many cases these products are the consultants’legally protected intellectual property and have to be treated as such by clients and other users. Some of these products may be unique and distinctly better than competing products. However, most commoditized products tend to differ from each other more in name and presentation, and sometimes in price, than in substance. Consultants who have opted for service commoditization have been relentless in promoting their products’ uniqueness and superiority, and have increasingly invested in advertising.

New operating modes

Commoditization, based on tested knowledge and experience, reduces the need to use experienced consultants and modifies the structure of the consulting cycle. For example, the diagnostic phase may be eliminated or reduced to a few questions set out in a standard instrument. There may be no broad survey or the client may be expected to make such a survey himself or herself and then tell the consultant what is to be delivered. This approach has development costs for the consultant (the need to create and maintain standard instruments, systems and packages), but reduces operating costs. As it permits employment of junior and relatively inexperienced consultants under minimum supervision, it is a prerequisite of fast growth rates. It helps to overcome a shortage of highly skilled professional manpower. Clients appreciate the faster and cheaper services, but many are increasingly worried about the absence of experience and a broader outlook in consulting assignments. The exception to this may be projects in new and rapidly evolving fields and technologies, where experience tends to play a less important role.

The scene is set for further developments and structural changes in consulting as well as other professional service sectors. The markets for consulting and other business services are liberal, vibrant and receptive to innovations and structural changes. The knowledge economy and the growing complexity of the business world create new demands and new opportunities for consulting and other professional services.

2.3Range of services provided

The range of services provided by management consultants mirrors the development of management and business, and of the environmental and other

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challenges they face. Today’s management consultants may be asked to assist with any type of management or business problem in any sort and size of organization, virtually in any sector and part of the world. The same problem may be approached differently by different consultants, hence the service provided will be different. The consultants’ service portfolio is extremely wide and diversified, and is evolving fast. Service offerings are changing, partly under the pressure of clients’ changing needs, but also as a result of the consulting firms’ own research and innovation aiming to anticipate clients’ needs and offer new and better services to them. In consulting, service innovation and new ways of service integration are key differentiating factors.

There have been many attempts to describe and classify consulting services. Information and publicity leaflets of consulting firms often give a listing and description of areas of expertise, but in the absence of standard terminology and service description, firms may use identical terms to mean different things. New terminology is often invented to underline uniqueness and novelty. Generally acceptable and easy-to-understand terms and classifications are yet to be developed.

Management functions, processes and systems

Traditionally, management consulting services were structured in accordance with the prevailing structures of management functions and processes. Services were offered in production organization and management, factory management, marketing and sales, distribution, personnel administration and management, training and development, office organization, financial management, general management and organization, and similar fields. This traditional structuring of service offerings has been very much preserved.

Information technology, however, has transformed this area of consulting radically. Currently many consultants assist their clients in implementing IT systems, including assessing needs and feasibility; selecting, developing, adapting, introducing and debugging a system; training staff; and modifying procedures, documentation and work methods accordingly. The general trend has been away from separate systems for each area (production, personnel, etc.) to system coordination and integration, a dominant and promising approach at present.

Specific management problems and challenges

Many consulting services address distinct and separate business problems and challenges, usually cutting across several management functions and processes, reflecting new business opportunities and constraints that require a creative and innovative approach. In these cases the consultant may provide in-depth knowledge, experience and techniques to deal with a particular problem, and help to develop and apply an approach for dealing with the problem effectively in the client’ s particular context. Examples are: business expansion to a new

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territory, technology transfer, licensing agreements, investment project design, structuring and management, adaptation to new environmental legislation, cross-cultural management, starting an e-business or adding an e-business dimension to current business, and exploiting opportunities offered by deregulation and market liberalization.

Approaches to organizational change and performance improvement

Other consultants emphasize that their main strength and usefulness to clients lie not in a detailed knowledge of a specific technical area or system, but in their ability to share with the client their effective work method – for diagnosing and resolving organizational problems, devising action programmes for organizational change and performance improvement, introducing and improving knowledge management systems, and making sure that such programmes and systems are implemented. Their service is defined neither by the area of intervention (e.g. marketing) nor by the problem to be tackled (e.g. high production or distribution costs), but by the consulting approach or method used.

Examples are organizational development, with its wide range of intervention techniques, action learning, team building, business diagnosis, various problem-identification and problem-solving methodologies, creative thinking and innovation techniques, benchmarking, and business process re-engineering. Some of these methods and approaches are highly structured and are applied as complete consulting and training packages, which are often proprietary and protected by copyright. Some are passing fads or new labels for old things. Others are true innovations and their impact on organizational effectiveness and the consulting industry itself can be significant and lasting.

Consulting approaches to organizational change and performance improvement are increasingly offered in combination with special knowledge and skills in areas mentioned in the previous paragraphs.

Business strategy and transformation

At the top of the list of consulting services are those that address the very purpose and future of business. These services are in the areas of corporate strategy, strategic planning and decision-making, business alliances and partnerships, major business restructuring, privatization, mergers and acquisitions, total reorganizations, e-business strategies, divestment, and similar. These are “elite and prestige” consulting services as regards their image, required consultant expertise and style, and level of intervention in client organizations. Their impact on the whole organization can be significant and long-lasting. They are interdisciplinary, multifunctional and conceptual by definition, drawing on other groups of services and combining them as necessary. They are highly knowledge-intensive, require considerable experience and do not lend themselves easily to standardization and

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Management consulting

commoditization. Except in firms that specialize in this area, their volume in the service portfolio of consultant firms tends to be smaller than that of other service groups.

Human resource consulting services

A range of consulting services falls under the broad denomination “human resources”, “human resource management and development”, or “human capital”. Within this area, a number of different concepts and approaches have been practised by various firms over the years. The services include in particular:

●those related to employee benefits (social insurance, pensions, salaries);

●executive search and personnel recruitment services;

●personnel administration;

●human resource and human capital management and development, including training, and strategies and activities.

Sector-specific services

Some consultants have chosen a sectoral approach: they target all their work at one sector, or have established sectorally specialized divisions. The reasons may be both technical (the need for an intimate knowledge of sector technologies, economics, and business practices and culture) and commercial (many clients’ preference for consultants who know their sector). As some practitioners put it: “If you develop a reputation as a sugar-industry consultant, you get sugarindustry clients.” This can be quite useful in sectors that traditionally regard themselves as different from other sectors (e.g. the construction or mining industries) and are sceptical about the value of advice coming from outside the sector. In other cases, sectoral specialization may be the pragmatic choice of a consultant who knows one sector particularly well, or who happens to have a number of clients from the same sector.

The shifts in the sectoral focus of consulting reflect the structural changes in the economy. Originally, most consultants worked mainly for industrial and commercial enterprises. Today, consulting for the service sectors tends to be very important; this includes specialized sectoral services in banking, insurance, utilities, telecommunications, transport, community development, central and local government administration, education, health care, voluntary associations, leisure and entertainment.

Sectorally specialized services may encompass any of the areas described earlier, from strategy and company transformation issues to operations and efficiency, and may be provided in combination with services that are not sectorally specialized. Despite some obvious advantages, full sectoral specialization of services may lead to conflict of interest in serving clients who compete with each other within the same sector.

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