Posts Tagged ‘strategy consultants’

Why You Need A Consultant With Hands-On Experience

Thursday, October 6th, 2011

The word on the grapevine is that the “brand name” consulting companies are getting push back from their clients.

Why, because business owners want results not just recommendations. And the “brand name” companies may not be able to deliver.

One reason is that they use associates in their mid-twenties or early thirties, usually the recent products of MBA programs, to do the front line work. While they bring a ton of theory to a project they have absolutely no practical, operational experience.

1. Why is operational experience so important now?

It’s the difficult economic times – which, if you believe the pundits, are here to stay for much longer than in recent recessions. The pressure is on to not only get an acceptable return on every dollar spent/invested, but also to get it quickly.

But the nature of a consulting assignment – particularly strategy consulting – is that the consultant is long gone before the actual results of acting on the output from the assignment can be determined. If the output – e.g. recommended action, new systems or processes – doesn’t work the dollars spent/invested in fees will either fail to produce an acceptable return – or produce no return at all.

So unless some way can be found to keep the consultants around, or bring them back, when the actual results appear, there is no way to hold them accountable. This means that the most a client can do is minimize the risk of the new systems or recommendations failing.

2. There are at least 3 factors which affect the risk of failure.

The first is the analytical skills, knowledge of business models and process, logic and creativity the consultant applies to the situation. Even MBA’s in their mid-twenties or early thirties should have the first two.

Second is industry or subject matter knowledge. Consulting companies provide this by focusing on either one or two industries or business processes and developing repeatable “models” which they apply with future clients.

Finally there’s operational experience gained actually implementing similar recommendations or installing similar processes/systems while responsible and accountable for the results.

This kind of experience comes from holding a management/executive role in an operating company. The more senior the role, the greater the experience. Because there’s no substitute for the stomach churning, cold sweat inducing realization that the buck stops with you.

3. A consultant with operational experience offers a client 2 clear advantages.

One – she will use the lessons learned from her practical experience to reduce the risk of her recommendations failing in ways that a consultant who only has theoretical or subject matter knowledge cannot.

Two – she is used to being held accountable and will expect it from a client.

4. The consulting industry has to change too.

I believe that the industry, built on telling everyone else what to do, is going to have to change itself. Consultants – particularly strategy consultants – have to develop business models which enable them to:
• Put more people with operational experience in front of clients.
• Remain involved until the results of our advice become apparent.
• Link our fees to our performance.

We, and some others, are working on ways to do both of those things (call us if you want to know more). But many are not. It’s as if the industry that’s paid to show other companies how to adapt for the future is firmly in denial.

If you enjoyed this post you’ll want to read “How to Keep Control When You Work With Consultants” and “3 Reasons Why Consulting Assignments Fail“.

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Strategy and Planning – How Business Owners Think

Thursday, January 27th, 2011

1. A Great Question.

The other day I was talking to a friend who is Chair of a TEC group. He told me about the owner of a successful business he’d met recently. The guy insisted that there was no value to be had in paying anyone to help with strategy or business planning.

Knowing what we do, my friend asked me how we dealt with this attitude. A couple of days later I saw a great article in the current edition of Inc. magazine called “How Great Entrepreneurs Think”.  Had I seen it before talking to him it would have helped me do a better job of answering his question than I was able to do.

2. How Successful Business Owners Think.

The article is about a very credible piece of research carried out with a group of entrepreneurs who had:
• At least 15 years’ experience.
• Started multiple companies.
• Successful businesses and failures.
• Taken at least one company public.

It was the brain child of Saras Sarasvathy and was supervised by Herbert Simon who won a Nobel Prize for his research on decision making. Participants were asked to imagine that they were the founders of a start-up that had developed a computer game.

When experienced entrepreneurs start a company they use effectual reasoning. This means that instead of setting out with concrete goals, they use their personal strengths and the resources at hand to develop goals as they go along.

Brilliant improvisers, entrepreneurs are impatient with extensive planning. They just want to get started. Instead of traditional market research they believe they’ll learn what the obstacles are, which questions have to be answered and which prices are acceptable by going out and trying to make some sales.

And it’s not only market research they reject. At start-up, these entrepreneurs don’t believe in prediction of any kind because they don’t believe the future is predictable – and if it is they don’t want to be in that space.

3. How Successful Executives Think.

Sarasvathy wanted something to compare the entrepreneurs’ approach to. So the same experiment was repeated with a group of highly successful corporate executives.

Executives use causal thinking which is typified by setting a goal and then diligently looking for the best ways to achieve it. This means, for example, that they will want to carry out structured research before launching.

4. The Important Point.

But the important point is that the study determined that successful entrepreneurs did adopt more formal planning practices as time went on. In fact, their ability to do so – to become causal as well as effectual thinkers – helped them grow with their companies.

And that’s the answer to my friend’s question. Some business owners adapt as their companies grow, others don’t. Hopefully the ones who do never substitute one way of thinking for the other but rather use them to complement each other.

Those who adapt also know what they don’t know. And, provided there’s clearly perceived value and a proven solution, those entrepreneurs will hire people with the knowledge, skills and experience that they don’t have.

And that’s how people like strategy consultants make a living.

Why Strategy Is Still Worth A Business Owner’s Time

Sunday, January 23rd, 2011

1. Is strategic planning still worth doing?

A couple of months ago I asked our LinkedIn Group the question “Is the strategic planning process as we know it still relevant?” That was because I’d seen articles and blogs arguing that strategic planning;
• Uses tools which are no longer relevant or
• Is no longer worthwhile because everything changes so quickly now.

2. What do the big names think – and is that important?

So a question in the recent McKinsey Quarterly caught my eye. Asked “What’s the new thing in strategy?” the answer was “there’s always new stuff out there, and most of it’s not very good…… it’s probably better to be thorough about what we know is true.”

McKinsey is a thought leader on the topic of strategy. So the answer kicks the point about the tools no longer being relevant into touch doesn’t it?

Then last week I found an article containing 5 video clips from a presentation given by Jonathon Goodman of the Monitor Group – another authority on strategy. The title is “Why Strategy Matters, And Now More Than Ever”. And that, by itself, disposes of the question of whether strategic planning is no longer worthwhile.

You can argue that McKinsey and Monitor work with large corporations so what they say offers no benefit to smaller, privately owned companies.

But I disagree; after all we founded ProfitPATH to adapt the tools used by corporations for owner managed businesses. If what McKinsey and Monitor say about strategy makes sense, then it makes sense for everyone.

The difference between corporations and owner managed businesses lies in how to apply what they’re saying.

3. Three things for business owners to think about.

I’ve picked 3 quotes from Goodman’s presentation. Each one makes an important point that’s easy to overlook or ignore.

“Strategy is the filter to distinguish distractions from opportunities.” Monitor views strategy as the outcome of making an integrated set of choices about, for example the company’s goals; its target markets; how it will win (its value proposition, sources of competitive advantage etc.);and its capabilities.

For a strategy to be successful each choice must reinforce the others so that all of the pieces of the strategy are aligned. The strategy drives resource allocation and is the thing that connects all parts of the organization.

It makes sense to compare any new initiative which arises to the strategy. If the initiative supports the strategy, it really is an opportunity. If it doesn’t, it is simply a resource wasting distraction.

But how often do we miss applying this critical test as our eyes glaze over with excitement about the profits the new initiative can generate?

(ProfitPATH will shortly introduce a new service to help clients focus on opportunities and avoid distractions.)

“It is useful to produce different versions of the future and ask – what would it take to win?” Business owners can use trends which might emerge or events that could shock any aspect of the environment to create 2 or 3 different versions of the future.

Goodman suggests asking 3 questions about each version. Will our current strategy be effective? If not, what will it take to win? What is the difference between what it will take to win then and what it takes to win today?

“Being flexible is not a strategy.” Monitor argues that the changes in the business environment make developing a coherent strategy more important than ever.

Companies that have one can determine the areas in which they can be flexible e.g. by knowing where to seed opportunities for new products and markets and by building flexibility into capabilities so that they can be deployed in different ways.

But despite the emphasis being heaped on the need for flexibility it cannot, by itself, form the basis of a strategy.

4. Wrapping it up.

Strategy and strategic planning will always be critical to long term success and increasing the value of a company. The big guys can’t be right all of the time – after all who is? But their experience and resources have to be worth something.

Execution – Flexibility In Practice

Wednesday, December 22nd, 2010

There’s been a lot written about the need to be flexible now that uncertainty plays such a part in the new normal. And, like so much else, it sounds like good, profound advice. Especially when you’re giving it, which, as strategy consultants, is something we have been doing for some of our business owner clients.

But, every now and then, life hands us a very practical opportunity to practice what we preach.

For example, for a number of reasons, I have to go to the U.K. at Christmas. For the first 5 or 6 years I did this my travel plans went smoothly. Last year I had a few weather related challenges coming back to Canada. Still, it was manageable.

But this year I have already been handed an opportunity to develop my flexibility – and I haven’t left yet!

I was supposed to fly out last Sunday night but, that morning, my flight was cancelled. Not a “biggie”, I reworked my strategy, developed an action plan and began to implement it.

I had to react quickly because there were lots of competitors also trying to grab the available seats. I had to alter my route, but I saw that as an opportunity to avoid Heathrow and the ongoing threat of bad weather there. And I may have saved a few dollars on the cost of the original fare. Bonus!

As in business, there were “knock-on” effects. But I rearranged the rental car and called in additional resources – my relatives. Their offers of help were gratefully accepted.

Now, it looks as if we (my wife is also scheduled to leave tomorrow night) are going to continue to have opportunities to work on our flexibility. Will our connecting flights be operating and will the roads on the final leg of our journey be passible? Then, in 10 days’ time, we have to get back home.

However like, I suspect, some of our business owner clients I find the mechanical aspects of being flexible – e.g. changing schedules or the start or completion dates of action plans or modifying budgets or forecasts – relatively easy.

But developing and executing an action plan to deal with the intangible aspects is more difficult. Chief amongst the intangibles in the case of my example is the impact on the person we are going to see – my Mother. She’s 82 years old, lives alone and her health is not as good as it used to be.

Reassuring (while not promising) her that everything will be fine and that we will be there for Christmas requires different “skills” than re-booking a flight or a rental car. Recent changes in her health have created new threats because she lives alone and mean that, while we’re there, we have to find new opportunities to provide support for her.

I find that responding to the requirements of being flexible is much harder when I’m managing people and their needs and expectations. I suspect that some of our clients find that too.

So perhaps being reminded that there’s more than one dimension to flexibility is the real lesson of the last few days. It’s an essential one because people are much more important than anything else.

And so my first New Year’s resolution is to bear that in mind when I work with our clients in 2011.

How To Keep Control When You Work With Consultants

Wednesday, November 3rd, 2010

Marie Wiese at Marketing CoPilot wrote in her blog last week that CEO’s begrudge – even hate – spending money on marketing services or marketing consulting. She says that’s because marketing feels like a series of unconnected projects and tasks with vague un-measurable results.

We often encounter similar objections when we meet business owners. Some haven’t worked with strategy consultants and just don’t know what to expect. Even those who have are concerned that they are getting into a situation over which they have no control.

Consulting assignments have a reputation for expanding beyond their original scope and budget. Then there are the results – or apparent lack thereof. Entrepreneurs and business owners who, by nature, want to be in control find this hard to deal with.

But it doesn’t have to be this way. Start by asking for a written proposal which contains the following 5 sections:

1. Our Understanding of the Situation. Look for a detailed description of the situation you now face and the factors which created it. This section should echo your discussions with the consultants – and should be written from their notes of those discussions.

2. Scope of Work. This should contain a step by step explanation of how the consultants will help you deal with the Situation. Ask for the full assignment to be broken into steps and laid out in a table with 3 columns:

  • A description of exactly what will be done by the consultants in each step.
  • A clear statement of the deliverable or deliverables for each step.
  • The resources that both the client and the consultant must provide in order to secure the deliverable(s).

3. Schedule. This section contains the estimated time required to complete each step. The consultant may provide a range of times if they perceive risk, e.g. they have not been able to examine documents being provided by you. Insist, however, that the lowest and highest estimates of the hours required, and the factors which determine them, are clear.

The Schedule should include a proposed start date and may have a target date for completion.

4. Fees and Payment. Preparing the Scope enables the consultant to determine who – e.g. partner, senior consultant, or research associate – will do the work. Completing the Schedule enables a realistic estimate to be made of the time required. Applying the rate for the person doing the work to the hours required to complete it generates the fee for each step. This section should also contain the total cost of the assignment. Ask for it to be broken out by partner etc.

Travel costs – e.g. mileage, air fares – or other expenses should be shown separately. (Note some consultants bill their clients for the time they spend travelling, others do not.)

We always include the statement, at this point, that no additional costs of any type will be incurred without the client’s prior approval.

Usually taxes e.g. HST are excluded from fees.

Make sure the proposal is clear on how and when the consultant is to be paid. In most cases, we send our clients an invoice when we complete a step and request payment on presentation. In this way they are constantly in control of how much they are spending on us.

5. Termination. Insist that you have the right to terminate an assignment at any time. Clarify the financial terms attached to termination before the work begins.

We tell our clients that if, if the deliverable(s) for any step are not completed, they can terminate the project at the end of that step. In that event we simply expect to be paid for the work we have completed.

There is no reason why entrepreneurs and business owners should not be in control when they work with consultants. Getting a clear, specific, written proposal will get you off to a good start. We’ll talk about other ways to stay in control in future posts.

Most consultants just want to deliver results – and we don’t want to be hard to deal with.

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