Commando Consulting: January 2010 - Three Ways Of Positioning Consulting Firms

By Tom "Bald Dog" Varjan

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Scottish inventor John Logie Baird gave the first public demonstration of television in 1926 in Soho, London. Ten years later there were only 100 TVs in the whole world. Somehow the word was spreading about the new phenomenon with the speed of a somnolent sloth.

So, how does this relate to management consulting firms?

Almost a century after Claude Hopkins wrote his marketing masterpiece, Scientific Advertising, only a handful of consulting firms really understand marketing, and how to position themselves in the marketplace. And even fewer practise proper market positioning.

But so many of them spend lots of their time, money and effort on responding RFPs and battling it out with bargain-seeking purchasing agents.

So, to help the situation a little bit, let us discuss in a few words how consulting firms can better position themselves for higher demand, recognition and compensation.

In terms of market positioning, consulting firms fall into one of three distinct categories.

1. Commodity type volume work


2. Commercialised one size fits all or our unique approach


3. Highly personalised premium work

"Commodity Type Volume Work" Firms

These firms' mantra is to tactically out-brawn the competition with backbreaking hard work and bottom-achingly low prices, earning a living through sheer brute drudgery. This is basically the Wal-Mart approach of providing consulting services.

This type of firms deal with a preponderance of one-shot customers (definitely no clients) won through bidding wars, employing an army of trade barbarians, that is, people with great subject matter expertise but lacking of other necessary skills.

And these people are working hard to churn out high volume of low margin commodity deliverables.

The typical examples of these businesses are many website developers and seminar companies. These firms have rigid policies and procedures to follow, and the idea is that they can hire low-skilled underpaid "labourers" who have enough skills to follow procedure manuals even with their eyes shut and standing on their heads.

In these firms we can't really talk about careers for the people. These firms offer jobs for their people for short-term survival. Usually people take these jobs as stop-gap measures, but do their best to move on as quickly as humanly possible.

These firms specialise in solving very specific problems in very specific ways. For example: If you have a computer problem, we install the newest IBM "box". The solution to every client problem is a new IBM "box", which IBM used to practise during the pre-Gerstner years.

And while IBM has stopped the practice after Gerstner's shake-up of the company, IBM peddlers (Well, they are formally called partners) keep doing it.

If IBM partners receive commission on the sale of each IBM "box" then the solution to every client problem happens to be those IBM "boxes" that offer the highest commission.

"In your specific case, you need a good old mercury filling."

- says your dentist, who also happens to be a shareholder in the local mercury mine.

Fee sensitivity is very high in these firms and they are willing to drop their prices in order to land any business. Remember the motto is high volume work whatever it takes.

To compensate for their competitive(ly low) hourly fees, these firms employ armies of junior staff on their projects, so they work on sheer volume.

One of the problems these firms are facing is that tomorrow someone else may be willing to do the same work cheaper (See Asia), so the commodity firm goes down is history as a perfect loser.

Commodity firms run on very high overheads, and often one way of cutting overheads is cutting corners. The typical example is overworked doctors. They have no time to properly diagnose their patients, so often they just follow their patients' leads...

"Hey, give me Tylenol. Tylenol's coming up. Here you are! Next!"

Since these firms operate like manufacturing plants, it is vitally important to implement quality assurance and productivity measurement processes. The value-added components of these firms are their processes, procedures and internal operating methods.

Most of these firms are operated and managed like large corporations, and operate more as contractors than as real consultants. The personal touch is almost non-existent and the emphasis is on churning out the next piece of work and moving on.

These firms are in the biggest danger of going extinct due to availability of talent in Asia that can do the work even cheaper.

"Our Unique One Size Fits All Approach" Firms

These firms have extensive institutional experience at solving certain types of problems. Individual talents are largely ignored because everyone is expected to feed the firm's institutional competency, which often becomes institutional dogma.

These firms' engagements have less diagnosis and more implementation of predictable, pre-packaged off-the-shelf solutions. At this level there is some collaboration with clients, but the work is largely based on the "doing it FOR you" approach.

There is quite a bit of leverage. Senior consultants, with some gray on the temples, go and close deals, and then an army of junior staff descends on clients to implement the project and bump up the otherwise competitively priced billable time.

Most of the work is done by junior associates in the consulting firm's back offices. Then these solutions are handed over to senior associates or partners who then present them to their clients.

Due to repeatability and increased operational structure, the major role shifts from senior professionals to junior staff and temporary help, including outsourced help in Asia.

The firm uses senior staff to hunt for new business.

Skill-building is up to people's individual drive, and largely left in their own hands. The firm's mission is to exploit the skills these people have already acquired, and there is no interest in helping them to build new skills.

When these skills go obsolete, these people get laid off and new people are hired.

Senior talent is used mainly for managing engagements and reinforcing rigidly defined policies and procedures.

Since these firms deal with issues as problems to their pre-packaged solutions, there is a fairly high level of compartmentalisation.

There is a clear hierarchical difference between the implementers. a.k.a. junior staff in the back offices and business getters. a.k.a. senior staff in the frontlines and in the spotlights.

In these firms there is an increasing pressure to provide career opportunities for juniors, as opposed to merely giving them jobs and replacing them with cheaper staff.

However, juniors are still often treated as necessary evils eating away the senior associate's and partners' bonuses.

So, in many firms junior people are hired and laid off in the rhythm of projects.

"Frontier Type" Highly Personalised Premium Work

These firms do not have well-defined approaches. They can be regarded as "organised confusion", in which people of diverse backgrounds and expertise perform a pretty broad range of work in an unpredictable fashion. This firm's mantra is...

"How can we deliver higher client value at higher fees and higher level of enjoyment, but using less of our time, money and effort?"

They stay on the cutting edge of their disciplines and walk into every new assignment with a clean slate and an open mind. You can recognise them because they ask a hell of a lot of questions.

They ask the kind of questions that their clients' executives ask in their boardrooms.

The success of these firms is based on the unique knowledge base of their people. They don't have "standard approaches." Everything they do is "frontier" stuff, involving lots of fiddling, tinkering and experimentation.

The use of junior staff is almost zero. Leverage is usually achieved by using clients' own implementing teams, which also becomes part of the knowledge sharing process. This way one single consultant, co-ordinating the implementing team, can achieve amazing results.

And here we have to stop for a moment and look at some project management issues to manage the whole initiative.

In my view the project team, including the project leader, must come from the client's company.

So, what do consultants do?

They become advisors to project leaders.

This is vital to the overall dynamic of the project. After consultants' disengagements, people have to live with the results and the new situations they've created.

Therefore the creation of those situations must be in their hands, and not in the hands of outsiders.

So, consultants work collaboratively with project team leaders, guiding them and their teams through their change initiatives.

This is a major distinction to make sure that consultants are not employed and treated as labourers to perform tactical tasks.

It's vital that clients' people do the work because it's about their future.

Although I don't have first-hand experience at it, but let's think of parenting, which is pretty close to consulting.

Which parent is better? The one who works WITH her daughter helping her to do her homework or the one who does her daughter's homework FOR her, while she is out partying?

This problem often comes up in consulting.

Clients bugger off on vacations or playing golf, leaving their consultants behind with instructions like...

"I expect you to get this and that done by the time I return."

Difference In Focus

And here lies another difference. There is a huge difference in focus between the first two types of firms and premium firms.

The first two types of firms focus on tasks, activities and deliverables, and get paid for expended labour. For example...

"We write 12 1,000-page reports, we deliver 10 half-day workshops with 50-page student manuals."

Premium firms go for results and outcomes. For instance...

"We help you to increase sales. Let's aim at 20% within six months. We help you to reduce talent turnover. Let's aim at 15% within three months."

Can you see the difference? One firm can build you a website. It is nice but useless. The other firm can help you to reduce the cost of acquiring new business from the global market place. That is something.

The former is commodity but the latter is premium.

Having a website only for the sake of having a website is just as useful as putting a pimple on an elephant's arse. It makes no difference at all. At least not to the elephant. Well, unless it is a small elephant and a huge pimple, but now we are into hard-core zoology and that's outside the range of my expertise.

The other differentiating factor of these firms is that headcount is the bare minimum with minimum operating overheads and maximum margins.

The first two types of firms grow by headcount. They hire lots of people and then start hunting for projects to keep the whole "stable" busy.

By contrast, premium firms don't hire more people just to be able to take on more clients and projects. What they do is they are very selective with projects and turn down inappropriate business pretty often.

Most solo practitioners operate in this fashion, and we can see the difference.

After all the expenses are paid, on a per person basis, even less known solo consultants are much more profitable than highly reputable consulting firms.

I know quite a number of solo consultants who keep an annual $1 million plus (No, not what they make as gross revenue, but what they keep as net profit), whereas the profit per person in larger consulting firms is usually under $300,000.

Unlike in cattle farming, in consulting profitability is not the function of headcount but the application of brainpower.

Talking about "frontier" work, clients are looking for the best and most reputable firm. For the firm it is vitally important to seek this pre-eminence by building the reputation of individuals.

Among the three types of consulting firms, this is the only one that recognises that people build relationships, thus do business with people, not with companies.

On Summary

Now take some time and have a hard look at your own firm. Think about how you present your solutions and how you interact with your clients.

Which type of firm is yours?

How could you step up to the next level?

Who do you have to become and what do you have to do to be able to step up?

What would be the pay-offs of stepping up?

What would be the trade-offs to achieve those pay-offs?

In your view, is it worth bothering?

I believe as people are isolating themselves and seek out experts as they need them, traditional prospecting, like cold-calling harassment, becomes more and more obsolete.

At the moment harassed buyers merely hang up on callers, but I have a sneaking suspicion that in a few years, uninvited phone calls, just like emails, will be called spam, and cold callers will be sued left, right and centre.

So, instead of prospecting, firms have to focus on demonstrating thought leadership in the form of valuable bits and bobs they put out to demonstrate their expertise.

And here is the problem.

People who are good at this prospecting game say that this marketing stuff is for people who can't sell themselves out of a paper bag.

Maybe.

They essentially say that the way to success is to harass people who want to be left alone, and keep harassing them until they give in and buy something in order to have the caller bugger off.

But clients want to bring their problems to experts in those problems and relevant solutions not to firms that are experts only at cold calling.

Come and let's discuss this newsletter issue on my blog...

"Dynamic Duo" Mentor Programme... ...has 1 opening for July and 4 for August 2010. Click here to continue to read the fiendish details.

Recommended Reading

The Power Of Strategic Commitment: Achieving Extraordinary Results Through Total Alignment And Engagement

By Josh Leibner, Gershon Mader and Alan Weiss, Ph.D.

Although we live in the age of knowledge, and consulting firms are supposed to be the ultimate knowledge firms, for some incomprehensible reasons, they are not.

Far too many consulting firms operate as manufacturing companies, employing legions of identical MBA clones with equal dispassion and lack of enthusiasm who come to the office 40 hours a week to churn out mass-produced "solutions".

The fierce competition for the next piece of pie has been eroding passion, drive and enthusiasm.

So, in their offices, many consultants, instead of committing to great and exciting visions, merely comply with management's demands to go through another day and fill the between two weekends.

Yet, when these consultants leave their firms to start up their own practices, they are full of passion, euphoria and enthusiasm.

In this book the authors present 286 pages of wisdom to engage people at such a high level that they voluntarily commit to your firm's vision and give their best and brightest all day every day.

I've read some studies lately that with the recession not only revenues but employee morale too has plummeted. Sadly, it's not that the financial plummet that has caused the moral plummet. It's how firms' leaders address the recession issue. Or any other unexpected problems.

The authors emphasise STRATEGIC commitment, meaning that people unite to fulfil the company's vision and execute its strategy versus merely going through the daily activities to comply with management's demands.

I believe this is a valuable recipe book for firm leaders who want to improve their firms' performance by engaging their people at a higher level.

In George Bernard Shaw's play, Pygmalion, Eliza Dolittle marries Freddy Eynsford-Hill because she recognises something vitally important. She realises that in Professor Henry Higgins's eyes she is a cockney flower girl and he would treat her accordingly.

As she notes to Freddy...

"The difference between a flower girl and a lady is not how she behaves but how she is treated. I have always been and will always be a flower girl to Professor Higgins, because she treats me as one. But I also know that I will be a lady to you because you treat me as one."

After some 35 years of going to rock concerts, I've learnt that if the audience merely expects the band to play, there will be a good concert. But if the audience members give a standing ovation before the band plays one single tune, those guys on stage will play their hearts out.

Sometimes in the early 80s Carlos Santana was touring in Europe and he hopped in to do a gig in Hungary too. After the first half, there was an intermission, and then he carried on.

There was one huge difference. During the intermission he was notified about the birth of his son. The second half of the concert alone went on for three hours, and in spite of the heavy rain, no one left the stadium.

If you've been to any of Ozric Tentacles' New Year's Eve concerts at the Brixton Academy in London, UK, where they played from 10:00pm to 06:00am, then you know what I mean.

It was the audience that created an atmosphere where it was impossible not to play at full tilt.

Similarly, as a firm leader, it's your job to create an atmosphere where it's impossible not to play at full tilt.

Peak performance is an effect, and when you fiddle with the firm's culture, you, in turn, tweak people's contribution.

And when the energy of this "magnetic" culture goes beyond your firm's walls, top talents start queuing up at your front door wanting to talk to you about how they could bring their expertise to your firm.

Place your order with Amazon.com for The Power Of Strategic Commitment. You'll be glad you did.