The consulting firm’s

strategy.
Plan:
 A strategic approach.
 The scope of client services.
 The client base
 Strategic management in practic
 1 A strategic approach
 A strategic approach is justified if there is a need for it, not because it
has become fashionable. In the past, most consultants followed no
particular strategy and tried to react to any opportunity and any
expression of interest from a potential client. This has changed. More
and more consultants realize that they cannot be all things to all
clients, and that they stand a better chance of obtaining business by
offering a unique service, or by serving a market segment where they
can outperform other consultants. Successful consulting firms behave
increasingly as strategists even if the term “strategy” is not always used.
What sort of professional firm do we want
to be?
What will be our culture, our consulting philosophy and our role
in solving clients’ problems, in helping clients to achieve high
performance levels, and in developing their learning and
problem-solving capabilities?
Do we want to become leaders in technical terms, always at the
forefront of progress in technology and management methods,
and the first to offer new information and new services to clients?
Shall we confine ourselves to consulting in management, or
widen the range of our service offerings? What services should we
add in order to be more useful to clients?
What new services can we afford to add to our portfolio without
losing our identity and entering areas beyond our competence?
The second strategic dimension is that of a business
activity. The key questions to ask are:

 What does our consulting firm want to achieve as a business?

 Should our strategy ensure mere survival, moderate growth or rapid expansion?
 What position in the market for consulting services do we want to achieve?
 What earnings and profits should we aim for?
 What should our firm’s financial strength and independence be?

The unity of these two dimensions cannot be overstressed. Focusing only

on commercial goals could kill the firm professionally. Ignoring the
business side of strategy would undermine the firm’s financial health
and could make the proposed professional strategies unattainable.
Competitive edge in
consulting
 A strategic approach helps a firm to
achieve a competitive edge over
other providers of consulting
services. A starting question is:
What is our competitive advantage?
Why should a client turn to us
rather than to other consultants?
The reason could lie in special
technical expertise, a product that
is unavailable elsewhere, a wide
range of multidisciplinary expertise
required for complex business
problems, an intimate knowledge
of an industrial sector, speed and
reliability of service delivery, low
fees, good reputation and contacts
among public sector agencies, or
excellent relationships with existing
clients.
Strategy and operations
In our conception, strategic decisions of
consulting firms are those that will have a
significant impact on the shape or profile of
the firm in both professional and business
terms. It is plain to see that such decisions
cannot be separated from everyday operations.
If a consultant who has never worked for the
transport sector agrees to do a first assignment
for a road transport company, this may be
more than a simple operational decision. It
will turn out to be a strategic decision if
followed by more work from the same client
and if other firms from the transport sector
come with requests for advice.
If a strategic choice is made by the firm’s
management, it is essential to turn it into
marketing and operating decisions. New
clients, new services, different work for
existing clients, new intervention methods,
significant improvements in quality, changes
in the firm’s public image - these are all
strategic changes requiring changes in
marketing and operations. There is no
strategic change without change in operations.
Flexibility
 in the strategic approach
The main reasons for the need for flexibility in defining and redefining
strategy are not management errors, or competitors’ successes, but changes in
the business environment. Management consulting needs to reflect
developments in technology, markets, finance, legislation, national and
international politics, and any other significant factors that affect clients’
businesses. Consulting strategy has to follow, or preferably anticipate, these
changes. Once the financial markets have been internationalized and even
small firms can think of borrowing on the international money market, a
financial consultant’s strategy cannot be restricted to the national financial
market. Once the Internet and e-business have become a reality, no consultant
can ignore them.
 Furthermore, taking a strategic approach does not mean that the consultant
must use a heavy, time-consuming, and probably not very practical
methodology for strategic assessment and planning. There is no point in trying
to quantify what cannot be quantified and making detailed projections if the
future is uncertain. A light and flexible approach to strategic planning and
management is not only more effective, but is the only approach that has a
chance of being internalized and practised systematically in a professional
service firm.
 
2 The
Some scope of
consultants are client
reluctantservices
to be explicit and precise in describing the
services that they are able to provide. Some think that such a description
could be restrictive and that they may not be considered for work that does
not exactly fit the service description. Others feel confident that their
analytical and problem-solving expertise is so strong that they can handle
virtually any problem. Yet service and product definition is a basic building-
block of consulting strategy. It determines the firm’s identity and profile,
tells clients what they can ask for and expect to get, determines the expertise
that the firm must build up and maintain up to date, and has considerable
impact on consulting style and methodology. Increasingly, clients want to
know precisely what services they can expect from their consultants. They
want to be sure that, if the consulting firm includes a particular service
among its offerings (e.g. organizing sales networks or assessing staff
competencies), this has been a deliberate and responsible strategic choice,
which is consistent with the firm’s resources and experience.
The firm’s core competencies
A useful perspective in choosing products and services is that of the firm’s core
competencies. Core competencies are defined by activity areas (these can be
subjects, intervention methods, sectors, special skills or others) in which the
firm has developed excellent knowledge and know-how, employs a sufficient
number of well-trained professionals, keeps abreast of developments and can
without any major difficulty undertake various assignments and serve a wide
range of clients. The firm would normally confine its service offerings to its
core competency areas, without trying to branch out into areas where it does
not feel strong enough. If there is a need and demand for work outside the
core competencies (e.g. in complex assignments), rather than improvising or
doing second-rate work the firm would turn to subcontracting, sharing the
work with an alliance partner or another convenient formula. A firm
recognized as highly competent for certain sorts of services would not spoil
its reputation by amateurish work in other areas.
The concept of core competencies cannot be static. Competencies change with
changing experience and as a result of changes in the professional staff
structure. They can be enhanced by staff development, or lost because of
inertia, lack of dynamism and poor personnel policies.
Your special product
 Some consultants have found it
useful to develop, and offer to
clients, special products, different
from services or products available
from other consultants.
 Special products should be different
from, and superior to, comparable
products offered by other
consultants. It is not wise to try to
fool clients by using fancy brand
names to market standardized
consulting services that offer
nothing special or different.
Product innovation
 Like any other product, a
professional service has its life-
cycle; it passes through periods of
design and development, testing,
launching on the market, growth,
maturity, saturation and decline.
Some services become obsolete
and have to be phased out sooner
than others. As far as possible, in
planning strategy the consultant
should analyse the life-cycle of his
or her particular services in order
to avoid their obsolescence and be
ready to change existing services
or introduce new services at an
appropriate moment.
A practical approach is to classify services in groups, using criteria
such as the contribution of the service to the firm’s income, the
rate of growth of the service, expected future demand or the cost
involved in developing and marketing it. Various methods of
strategic analysis can be used to reveal, for example:
services that are not growing any more, but that continue to generate a
substantial part of the total income;
services that are growing rapidly, though their relative importance in the
firm’s total income remains small;
services whose volume is stagnating in certain markets, but that are in
demand in other markets;
services that could easily be redesigned and adapted for new markets (client
groups, sectors, countries, etc.);
services whose marketing and maintenance costs are excessively high;
services that have become standardized and commodified, and can be
handled by junior consultants;
services that provide opportunities for developing new competencies and
entering new markets.
 
Research and development
Every consultant has to decidestrategy
whether or not to carry out research for product and
methodology development, and if not, how to acquire the new knowledge and expertise
without which product innovation is impossible. Some large and medium-sized
consulting firms have chosen to do their own research, aimed mainly, but not exclusively,
at developing new services. Another major benefit, which several consulting firms have
already derived from research, is the demonstration of intimate knowledge of the
business and management scene and of the firm’s readiness to share knowledge and
experience with clients and a wider management public.
Sole practitioners and small firms are in a different situation; their limited resources prevent
them from engaging in extensive research and development activities. Small and focused
projects, however, are within their reach. They can, furthermore, keep informed about
ongoing research in universities and management institutes and participate in workshops
reviewing the methods and the results of recent research. Joint research involving several
consulting firms, and research organized by consultants’ associations for the benefit of
their members, are under-used and deserve to be explored.
In deciding to do research, a consulting firm has to face the question of relationships
between research and operations. Research projects and teams separated from current
client work do not seem to be the most effective solution. Better results have been
obtained from research based on work for clients, using client assignments both as a
source of information and for testing and applying research results. However, adequate
organizational, time and financial provision must be made if research objectives are to be
pursued in parallel with operational objectives. Without proper arrangements, it would
be unrealistic to expect that operating consultants would also find time and energy for
research and new product development
 3. The client base
Consulting services and products are always intended for a particular
client base. Defining and developing this base are other key elements
of strategy formulation. This includes considerations on serving:
 existing or new clients;
 organizations of different size (small, medium, large, very large);
 organizations in one or more sectors (e.g. energy, transport, health,
banking, etc.);
 private, public or mixed-ownership organizations;
 organizations with management systems at different levels of sophistication
(e.g. firms that are very advanced in applying new manufacturing and
management technologies);
 firms in a limited geographical area, in a whole country, in other countries
and regions, or multinational firms;
 a larger or smaller number of clients.
In consulting, as in other professional services, having a solid clientele is
probably even more important than having an excellent product to offer.
Clients who know and trust the consulting firm from previous experience,
and are prepared to return to it with new work, are a major asset.
Relationships of trust and collaboration with such clients constitute what
some authors call the consultant’s “relationship capital” or “customer
capital”, which is defined as “the value of the organization’s relationships
with the people with whom it does business”.
Invariably, the strategists of the consulting profession put great emphasis on
retaining existing clients and on knowledge-sharing, marketing and other
strategies aimed at these clients. In some firms, repeat business accounts for
75-85 per cent of total earnings.
This, however, has to be considered in conjunction with service speciali­zation
and the firm’s overall development strategy. Growth and diversification may
be impossible without finding new clients, thus increasing and diversifying
the client base. Conversely, new products are needed to serve the existing
client base. Clients stay with you, trust you and recruit you again, only if
they see that you are developing your product line and your capabilities in
accordance with their changing needs. Otherwise they have no reason to
return to the same consultant.
There are, too, certain other strategy considerations. It is important to decide how
many clients to serve. This may be crucial in the case of a single practitioner or a
small firm. Getting large contracts from a small number of clients reduces the
amount of time spent on acquisition work and ensures regular income.
However, this may be a high-risk strategy, since it tends to create an excessive
dependence on one or a small number of major clients, and even on individual
managers in the client organizations. It may also narrow down the consultant’s
horizon and limit the chances to learn from new clients.
Further, the level of the clients’ sophistication should be compared with the
sophistication of the services that the consultant is able to provide. There are
differences between clients (and countries and sectors) in terms of
sophistication of their management systems, and competence of their
managerial and specialist staff. Not every client requires, or can use, the latest
innovations in management science and technology. Not every consultant can
claim to operate at the cutting edge of management technology, and a realistic
assessment of one’s own level of sophistication can be one of the soundest
strategic moves.
 4. Strategic management in practice
Strategic management is an approach, a way of thinking. Strategy
is primarily synthesis, not analysis. It must not be a cumbersome
procedure with a lot of paperwork and endless meetings. If it
turns into bureaucracy, or if it becomes the guarded province of
specialized planning units, line management and professional
workers will lose interest in it. Consultants advise clients to
prevent such a degeneration of strategic planning, and they must
avoid this pitfall themselves. This, however, does not preclude
the use of a structured strategic assessment and planning
methodology, if the consultant is versed in one and has had good
experience with it. There are quite a few on the market.
Self-assessment
The relationship between consultants and
A thorough and honest self-assessment is a
necessary starting-point irrespective of
the procedure and methodology chosen.
It is sometimes called a “strategic audit”
to emphasize the focus and purpose of
the exercise. Many consultants will be
able to undertake it themselves, although
it is never easy to be detached and
objective in assessing one’s own
performance, capabilities and
perspectives. A peer audit may be helpful.
In some situations, however, it will be
preferable to turn to an independent
adviser versed in the management of
professional service firms. In any event,
the audit should be based on facts and
figures, not on illusions.
Learning from clients
their clients lies at the very heart of the
consulting profession.First of all, the firm
must know precisely what the clients
think about it. Feedback from clients
concerning the services provided may be
available from assignment evaluation,
contacts with the managers of client
organizations, industry meetings and
conferences, and other sources . If your
firm has an active knowledge
management system , including client
information, a lot of this information will
be readily available. In addition, clients
can be asked specific questions
concerning their expected future needs
and requirements, and can make
invaluable suggestions to the consultant.
Looking at your future market
Assessing a potential market obviously
involves much more than finding
addresses of firms and some global
information on them. It requires a
thorough research effort; the
consultant must know his or her
potential market in considerable
depth and detail. Various sources of
information and research methods
can be combined in order to develop a
comprehensive picture of the market
(business publications and reports,
trade journals, official statistics,
stock-market information, training
events and management conferences,
individual contacts and interviews,
and so on). Information obtained
directly from existing and potential
clients is particularly useful.
The definition of a potential market
is a delicate matter for a new
consulting firm, which does not
have any clientele and faces the
risk of adopting either an
excessively wide or an unduly
narrow definition of its market.
In the first case, the firm’s
marketing effort will be too
costly and largely impractical and
unproductive, embracing
organizations that are unlikely to
become clients. In the second
case, good opportunities of
finding assignments may be
missed by omitting certain
prospective clients.
Some consultants regard all organizations in the field of their specialization as a potential
market, while others use a more restrictive definition and regard their market as
consisting of organizations that have problems and require the consultant’s help. Both
approaches have their rationale. An organization that does not need a consultant today
may need one tomorrow, or next year, and it will be an advantage for you if it is aware of
the existence and reputation of your consulting firm. Some marketing effort may therefore
be directed at creating this awareness. At the same time, every consulting firm needs
assignments that will keep it occupied today, and these will be found in organizations that
are experiencing problems. This includes not only organizations in difficulty, but also
prosperous firms that are seeking new opportunities for developing and improving their
business.
The concept of market segmentation is helpful in analysing the chances of a consulting firm
successfully entering a new market. Segmenting the market involves subdividing potential
clients and their business and management problems into smaller groups, by one or more
criteria - size, geographical location, technology used, ownership pattern, financial
difficulties experienced (shortage of working capital, foreign exchange problems), market
served (local market, exporting, re-export), or other issues. Such segmentation is
meaningful if it identifies some common characteristics of the organizations involved,
reflected in their common consulting needs and in the kind of services required. It will be
useful to find a market segment, or niche, which (a) is likely to need a special service or
product that you are able to provide, and (b) is not fully occupied by other consultants.