1 - Editorial Preface [Seite 6]
2 - Foreword [Seite 8]
2.1 - Where do we get new skills? [Seite 8]
2.2 - Do we really know how organisations work? [Seite 8]
2.3 - Do we know how to manage people? Do we do it? [Seite 9]
2.4 - Do we manage? [Seite 10]
2.5 - References [Seite 10]
3 - Contents [Seite 12]
4 - PART I THE CHANGING NATURE OF CONSULTING [Seite 14]
4.1 - The Truth Seekers [Seite 16]
4.1.1 - 1. Strategies, not stories [Seite 16]
4.1.2 - 2. Insight - Diversity yields wisdom [Seite 17]
4.1.2.1 - 2.1 The Experience Curve (1966) [Seite 19]
4.1.2.2 - 2.2 The Portfolio Matrix (1972) [Seite 20]
4.1.2.3 - 2.3 Time-based Competition (1988) [Seite 21]
4.1.2.4 - 2.4 Deconstruction (1997) [Seite 21]
4.1.3 - 3. Impact - From insights to results [Seite 23]
4.1.4 - 4. Trust - The future of consulting [Seite 25]
4.1.5 - References [Seite 27]
4.2 - Dynamics of the Client-Consultant Relationship [Seite 28]
4.2.1 - 1. Introduction [Seite 28]
4.2.2 - 2. The setting of the client-consultant relationship [Seite 29]
4.2.3 - 3. Levels of value added [Seite 30]
4.2.4 - 4. The client's perspective [Seite 33]
4.2.5 - 5. Roles within the client-consultant relationship [Seite 34]
4.2.6 - 6. Development of the consulting profession [Seite 37]
4.2.7 - 7. A higher level of value added [Seite 38]
4.2.8 - 8. Outlook for consulting and consulting firms [Seite 40]
4.2.9 - References [Seite 41]
4.3 - From Exchangeable Methods to Implementable Results - The Utilization of Tools and Solution Competencies in Strategy Consulting [Seite 42]
4.3.1 - 1. Management methods: From trademark to tool kit [Seite 42]
4.3.2 - 2. Method know-how in consulting [Seite 45]
4.3.3 - 3. The use of methods in strategy consulting [Seite 47]
4.3.4 - 4. A system of coordinates for strategy development [Seite 49]
4.3.5 - References [Seite 52]
4.4 - Thought Leadership - In Action [Seite 54]
4.4.1 - 1. A.T. Kearney as example of an organisation striving for excellence [Seite 54]
4.4.2 - 2. Clients: Working with them - not for them [Seite 55]
4.4.3 - 3. People: Develop consultants individually [Seite 57]
4.4.4 - 4. Intellectual capital: Share knowledge [Seite 59]
5 - PART II MANAGING CONSULTING FIRMS [Seite 62]
5.1 - The Challenge of Growth - How to Manage a Consultancy [Seite 64]
5.1.1 - 1. Introduction [Seite 64]
5.1.2 - 2. The specifics of consultancies [Seite 64]
5.1.3 - 3. How to manage a consultancy - and its growth [Seite 71]
5.1.3.1 - 3.1 Clear responsibilities [Seite 72]
5.1.3.2 - 3.2 Quality assurance [Seite 74]
5.1.3.3 - 3.3 Systems [Seite 76]
5.1.3.4 - 3.4 Internal services [Seite 77]
5.1.3.5 - 3.5 Corporate culture [Seite 78]
5.1.4 - 4. Times are changing. Are consultancies fit for the future? [Seite 81]
5.1.5 - 5. Conclusion [Seite 83]
5.2 - The Third Revolution of Business Value Creation [Seite 84]
5.2.1 - 1. Introduction [Seite 84]
5.2.2 - 2. The first and the second revolution of business value creation [Seite 84]
5.2.3 - 3. The third revolution of business value creation [Seite 86]
5.2.4 - 4. The potential of the outsourcing market [Seite 87]
5.2.5 - 5. Consulting and implementation from a single source [Seite 89]
5.2.6 - 6. Business Innovation Partnerships [Seite 90]
5.2.7 - 7. How does the client-service provider relationship change? [Seite 92]
5.2.8 - 8. How are service providers changing? [Seite 93]
5.2.9 - 9. Business model [Seite 94]
5.2.10 - 10. Changing workforce model [Seite 95]
5.2.11 - 11. Accenture's company culture [Seite 96]
5.2.12 - 12. Leadership within Accenture [Seite 97]
5.2.13 - 13. Conclusion [Seite 97]
5.2.14 - References [Seite 98]
5.3 - Consulting Management in a Multi-Disciplinary Advisory Firm [Seite 100]
5.3.1 - 1. Introduction [Seite 100]
5.3.2 - 2. Defining the multi-disciplinary advisory firm [Seite 101]
5.3.3 - 3. Go-to-market approach [Seite 105]
5.3.4 - 4. Operating model [Seite 107]
5.3.5 - 5. How to grow a successful consulting business in an MDF environment [Seite 109]
5.4 - The Changing Balance of Power in the Consulting Market and Its Effects on Consulting Firms [Seite 112]
5.4.1 - 1. Introduction [Seite 112]
5.4.2 - 2. The changing balance of power in the consulting market [Seite 113]
5.4.2.1 - 2.1 General economic conditions and the demand for consulting services [Seite 113]
5.4.2.2 - 2.2 Supply of consulting services [Seite 115]
5.4.2.3 - 2.3 The changing balance of power in the consulting market [Seite 118]
5.4.3 - 3. Organisational systems for competing in a changing market space [Seite 120]
5.4.3.1 - 3.1 Ownership and governance [Seite 120]
5.4.3.2 - 3.2 Organisational design [Seite 123]
5.4.3.3 - 3.3 Alternative systems of consulting firms [Seite 125]
5.4.3.4 - 3.4 The bifurcation in the consulting market [Seite 128]
5.4.4 - References [Seite 130]
6 - PART III THE DEVELOPMENT OF THE CONSULTING INDUSTRY [Seite 132]
6.1 - Life Cycle Phenomena in the Consulting Sector - Driving Forces of Fundamental Value Changes [Seite 134]
6.1.1 - 1. From craftsmanship to a maturing industry [Seite 134]
6.1.2 - 2. What are the driving forces of change? [Seite 135]
6.1.3 - 3. What are the business dynamics? [Seite 136]
6.1.4 - 4. We are experiencing another transition [Seite 137]
6.1.5 - 5. Which consulting firms can gain credibility for the new value propositions? [Seite 138]
6.1.6 - 6. Will the consulting sector overcome its symptoms of maturing? [Seite 139]
6.1.7 - References [Seite 141]
6.2 - The Role of Governance and Values in the Consulting Industry [Seite 142]
6.2.1 - 1. Introduction [Seite 142]
6.2.2 - 2. Current challenges in consulting, and critical success factors going forward [Seite 143]
6.2.2.1 - 2.1 Turbulent times for consultants [Seite 144]
6.2.2.2 - 2.2 Critical success factors going forward [Seite 145]
6.2.2.3 - 2.3 Governance, ownership, consulting and values [Seite 147]
6.2.3 - 3. The value compass - its importance in business, and in a demanding economic climate [Seite 149]
6.2.3.1 - 3.1 Values - the economic benefit [Seite 150]
6.2.3.2 - 3.2 Which values? [Seite 151]
6.2.3.3 - 3.3 Shifting values [Seite 152]
6.2.3.4 - 3.4 New values [Seite 153]
6.2.3.5 - 3.5 Lived values [Seite 153]
6.2.3.6 - 3.6 Incentivising values [Seite 154]
6.2.3.7 - 3.7 Importance of CEO leadership [Seite 155]
6.2.4 - 4. The importance of value systems for consulting firms [Seite 156]
6.2.4.1 - 4.1 The Booz Allen Hamilton governance model and value system [Seite 157]
6.2.4.2 - 4.2 Lived values at Booz Allen Hamilton [Seite 158]
6.2.5 - 5. Summary [Seite 160]
6.2.6 - References [Seite 161]
6.3 - The Impact of Offshoring on the Consulting Industry [Seite 162]
6.3.1 - 1. Introduction [Seite 162]
6.3.2 - 2. The uncertainties of demand [Seite 163]
6.3.2.1 - 2.1 How important is face-to-face contact? [Seite 164]
6.3.2.2 - 2.2 How risky will offshoring be perceived to be? [Seite 166]
6.3.3 - 3. Four scenarios for the future of offshoring [Seite 166]
6.3.3.1 - 3.1 Scenario 1: Constant confrontation (High Risk - Low Interaction) [Seite 167]
6.3.3.2 - 3.2 Scenario 2: Profitable distrust (High Risk - High Interaction) [Seite 168]
6.3.3.3 - 3.3 Scenario 3: Onshore returns (Low Risk - High Interaction) [Seite 169]
6.3.3.4 - 3.4 Scenario 4: Offshore Rules (Low Risk - Low Interaction) [Seite 169]
6.3.4 - 4. Winners and losers [Seite 170]
6.3.4.1 - 4.1 Scenario 1: Constant confrontation [Seite 170]
6.3.4.2 - 4.2 Scenario 2: Profitable distrust [Seite 171]
6.3.4.3 - 4.3 Scenario 3: Onshore returns [Seite 171]
6.3.4.4 - 4.4 Scenario 4: Offshore rules [Seite 172]
7 - About the Authors [Seite 174]
8 - Index of Names [Seite 180]
The Changing Balance of Power in the Consulting Market and Its Effects on Consulting Firms (p. 111-112)
Ansgar Richter
1. Introduction
In a recent interview, a partner in one of the major consulting firms told me: "I joined this firm only eight years ago, but I have the feeling that this is not any longer the firm I entered". When asked what had changed, he said: "Through the downturn of the last few years, our company has become so much more businesslike. I never thought about my firm as a business. For me, it had always been an institution which had to be nurtured and upheld for its own sake. We did not even have anything like a strategy, and nobody thought we needed one. Now, everybody is talking about revenue streams, cost controls and utilisation ratios. To be sure, there are many good aspects to that. I believe that the firm is now on a much sounder footing than it used to be, and as the market is picking up again, we can reap the fruits of many of the measures we have taken. But I do not think this firm will ever return to the old regime, and somehow, that is sad". Similar sentiments can be heard frequently when talking to senior consultants from a cross-section of firms.
From their work in the industries of their clients, consultants understand that the shape of firms reflects the realities of their industries, and of the economy at large. They know that in times of economic crisis and adverse industry conditions, companies in many industries tend to reduce the size of their head offices, cut perks, and eliminate staff positions that add little value. Yet for consultants, it may be difficult to see how the conditions in their own sector affect the structure of their own organisations. In this chapter, I look into these transmission mechanisms.
My overall argument is that the organisational changes that we see among consulting firms reflect a fundamental shift in the relative abilities of consultants and clients to appropriate the rents generated from consulting services. As the balance of power shifts away from consultants in favour of clients, lower rents are left for the internal stakeholders of consulting firms (employed professionals, partners, support staff). In a tighter market environment, consultants adopt new strategies – they seek to occupy new market niches, which had hitherto appeared unattractive – and develop organisational forms that match these new strategic requirements. As a result, we see the landscape of consulting organisations changing.
During the boom period of the 1950s to the early 1970s, the so-called professional partnership model had become the dominant organisational form for consulting firms. In the 1980s and 1990s, the professional partnership model was complemented by managed professional businesses. Under the current pressures in the consulting market, the bifurcation between these two types of firms is increasing. Weaker players are increasingly excluded from entering the circle of professional partnership firms; they will seek to establish business models of a more operational type, diversify away from consulting, or leave the market altogether. Overall, the shift away from the consultants to clients in terms of their relative ability to appropriate value will lead to fundamental changes in the shape of consulting firms. The old order in the consulting market will never be established again.
2. The changing balance of power in the consulting market
Standard economics tells us that the purpose of the transformation of input factors into outputs is to generate added value. Customers buy goods or services because their value exceeds the price they need to pay for them. That price, in turn, has to exceed the total costs of the input factors (supplies, financial capital, labour) plus any additional costs such as taxes required to generate the outputs concerned in the first place, at least if the producer is to work profitably. As a result, under normal circumstances both buyers and suppliers of goods and services reap rents, in the form of a share of the total value added by the generation and consumption of goods and services. Shifts in the distribution of value between suppliers and buyers, however, are indicative of the relative ability of these various parties to appropriate value.
Market conditions are among the main drivers of such shifts. With respect to the consulting market, the balance of power between consultants as the providers of consulting services and clients as buyers has shifted significantly over the past few years, and indications are that this process is likely to continue. Overall, the shift has benefited clients, and reduced the relative ability of consultants to appropriate a share of the value generated by the rendering of their services. In this context, it is worth considering both the demand and the supply side factors that have contributed to this development.