Consulting and Advisory Services Curriculum 1

CONSULTING
AND
ADVISORY SERVICERS
1
CONSULTING AND ADVISORY SERVICES
The rise of Consulting Firms
• While academics determined how
strategy was to be taught in business
schools, their insistence that strategy was
idiosyncratic to each individual firm meant
that growing demand for standardized
strategic frameworks could be only
addressed by ‘Consulting Firms’. This
singular thought brought in consulting
services direct to the arena of business. 2
The rise of consulting firms
• The Boston Consulting Group (BCG),
founded in 1963, for example, was a
pioneering consultancy that introduced
influential concepts such as the
“experience curve” and the “growth-
share matrix” (Stern and Stalk 1998).
3
• The experience curve concept held
that total costs would decline by a
certain percentage every time
cumulative production doubled.
4
• The idea of “experience curve”
spurred corporations to expand
aggressively their capacity, focus on
cost minimization, and seek higher
demand, often by keen price
competition.
5
• The growth-share matrix viewed
companies as a portfolio of businesses
and was intended to help senior
managers identity the cash-flow
requirements of different businesses and
take resource allocation decisions about
them.
6
• When using the growth-share matrix,
businesses are grouped in strategic
businesses units (SBUs)and are mapped
on a matrix along two dimensions:
industry growth rate and relative market
share.`
7
• Improved models of portfolio planning
techniques have been developed, which
address some of the flaws, one example
being the McKinsey/GE matrix.
8
• Even though such models are definite
improvements over the BCG matrix, in
that they address a much higher number
of relevant dimensions of industry
attractiveness and business strength, they
still have some drawbacks.
9
• They still tend to regard businesses as
independent, downplay diversification as
a strategy for creating value since they
focus on existing businesses, and
undervalue the need to leverage
distinctive competencies and resources
across business units to achieve synergies.
10
• A significant alternative approach is
Hamel and Prahalad’s view of the
corporation as a portfolio of core
competencies as opposed to a portfolio of
businesses (Hamel and Prahalad 1994).
11
• Building on the resource-based view of
the firm (Wernerfelt 1984), this view has
important implications for investment
decisions that are quite different from the
implications arising from using portfolio
tools such as the BCG matrix.
12
• The aim shifts from strict maximization
of financial performance of SBUs in the
short term, to longer-term investment in
the nurturing and creation of core
competencies across SBUs that can enable
the company to be a winner in the future;
they thus focus on “opportunity share”
rather than simply market share. 13
The Backdrop
 The future is nothing but realigned
priorities
 Looking for sustainable growth
 Staying in shape
 Preparing for a new landscape
14
Offerings
 Holistic thinking
 Multidisciplinary skill
 Organization transformation
 Optimization of risks
 Restructuring operations
15
Unfolding Consultancy
Management Consulting
Better decisions, reduce costs, build more
effective organizations and develop
appropriate technology approach.
16
Management Consulting
Management consultancy is the creation of
value for organizations, through the
application of knowledge, techniques and
assets, to improve performance. This is
achieved through the rendering of
objective advice and/or the
implementation of business solutions.
17
Risk Consulting
Transforming risk into advantage.
18
Transactions & Restructuring
Response to business opportunities
and challenges
19
Management Consulting Risk Consulting
Consulting &
Advisory
Services
Transaction & Restructuring 20

Management Consulting: A Look Inside
•Growth
•Data and Insight
•Efficiency
•Cost Management
•IT
•Operations
•Shared Chain
•Human Capital Management 21
Management Consultancy: Why?
•Continuous exposure to external and
internal threats
•Business has to achieve superlative
performance
•Management Consultancy provides
360° view of challenges as against
organizational myopic vision
22
Risk Consulting: A Look Inside
• Accounting
• Development Sector Advisory
• Financial Risk Management
• Forensic
• Governance Risk and Compliance
• Sustainability
23
Risk Consultancy: Why?
•Embedded Risk management culture
•Tougher regulatory regime
•Heightened expectations of
Stakeholders
•Need for better discipline and
compliance.
24
•Financial Risks : brutal in nature
•Financial Curve Vs. Invisible Curves.
25
•Risks from Suppliers: default in
contacts
•Fraud Risk
•Risks from Disputes/litigations
•Internal Audit office turns into a mere
function
26
Transaction & Restructure: A Look Inside
• Sales
•Due Diligence
•Financial Modeling
•Integration
•Mergers and Acquisitions
•Private Equity Advisory
•Restructuring Advisory
•Valuations 27
Transaction & Restructuring: Why ?
• To preserve and create value in major
transactions
•M & A Advisory Skill
•Value Driver + Risks + Opportunities =
Value Creation
28
• Diligence
•Financial
•Tax
•Commercial
•Operational
•Vendor selection
29
• Synergy Assessment
•Post-deal support
30
• Underperforming Business: Support &
Advice
• Improvement in Cash flows
• Corporate balance sheet
In short, how to make a business
transaction successful.
31
Consultancy : Traditional two streams
• Operations Consultants
• fine-tuning & tinkering with internal
processes to run them better
•Strategy Consultants
• Advice on make-or-break deals
•Business Model Innovations
32
Consultancy :Traditional two streams
A caricature
Strategy consultants stay in the back, not
paying attention, throwing paper airplanes.
But they still get the girls and get rich
(Source: The Economist, 9th Nov, 2013). Like
so many caricatures, this one is cruel but
contains a grain of truth.
33
Although in practice their work overlaps, the two have
until now remained distinct businesses. Strategy firms
like McKinsey, Bain and the Boston Consulting Group
hire from the top universities, are packed with highly
paid partners and whisper their counsel in CEO’s ears.
34
In contrast, operations specialists such as IBM,
Accenture and the Big Four accounting firms
(Deloitte, EY, KPMG and PWC) employ armies of
lower-paid grunts; and tend to answer to the client
firm’s finance or tech chiefs.
Operations Specialists Strategy Specialists
35
Consultancy : Blurring the Distinction?
This year, however, that line has begun to blur. In
January Deloitte became the largest of the Big Four by
scooping up the assets of Monitor, a strategy firm that
had gone bust. And on October 30th its closest rival,
PWC, said it would buy another strategy firm, Booz &
Company, for a reported $1 billion. If Booz’s partners
approve the deal, it will vault PWC back into first place.
36
Consultancy : Blurring the Distinction
• The accountancies’ push into strategy has been a decade in
the making. During the late-1990s technology bubble they
beefed up their IT-consulting arms. But in 2001 Enron, an
energy-trading firm, went bust and took its auditor, Arthur
Andersen down with it.
• In response, America’s Congress passed the Sarbanes-Oxley
corporate-governance reform, which banned firms from doing
systems consulting for companies they audited.
• The Big Four made a fortune helping clients comply with the
new law.
37
Consultancy : Blurring the Distinction
Just as the workload from Sarbanes-Oxley began to dwindle,
the 2008-09 financial crisis hit, causing consulting revenues
started to dip
38
Consultancy : Blurring Distinction?
• But once the economy recovered, the climate for the Big Four
started to improve.
•They began to rush back into consultancy, encouraged by its
high margins and double-digit annual growth rates at a time
when revenue growth from auditing and tax work had slowed.
•Deloitte and PWC began gobbling up operations consultancies
as they sparred for the top spot.
39
Consultancy: Blurring Distinction
• For years the strategy firms remained beyond the Big Four’s
grasp. During the 2000s they had mostly prospered on their
own.
•After the financial crisis, however, midsized strategy
consultants hit hard times. Cost-conscious companies with
globalizing businesses wanted either to hire boutiques with
deep knowledge of their industries, or to benefit from the scale
of generalist firms with offices everywhere.
• Too big for some clients and too small for others, Monitor
went under, and Booz-a spin-off from Booz allen Hamilton,
which now focuses on operations work for governments – went
on the block. 40
Consultancy : Blurring Distinction
• Both Booz and PWC say that the two sides of
consulting are converging, and that more clients
want a one-stop shop that can both devise a
strategy and execute it.
•Deloitte and Monitor claim their integration is
already bearing fruit. “There’s been a very healthy
two-way cross-selling opportunity,” says Mike
Canning of Deloitte.
41
• On the other hand, Booz’s leadership faced a hard sell to get a
deal passed. In 2010 the company’s partners voted down a
proposed merger with A T Kearney, another midsized strategy
firm.
•This marriage involved far more risks. A significant number of
Booz’s clients would immediately be in doubt because PWC
audits them – strategy consulting for audit clients is banned in
many countries, and even where it is legal it is frowned upon
42
• Most important, each of Booz’s 300 partners would have to
trade meaningful sway over the direction of a highly profitable
firm for a minuscule stake in a diversified, lower-margin empire.
•If the sale is approved, the test of its success will come in a few
years, after Booz’s partners receive their full payout and can
head off. An exodus would leave PWC empty-handed.
43
• The Big Four are also running a risk far greater than the cost of
their purchases. A decade ago they placated regulators by
retreating from advisory work. High-profile deals like the Booz-
PWC tie-up put the conflict of interest between auditing and
consulting back in the spotlight: after it was announced.
• Arthur Levitt, a former head of America’s Securities and
Exchange Commission, warned that the firms were “slipping
back” towards old, bad habits. Any gains from pushing into
strategy work might end up being outweighed by the cost of
another regulatory crackdown.
44
Consultancy : Towards Modularisation
• The rise of alternative professional services
firms such as Eden McCallum and Business
Talent Group (BTG), is indicative of the
modularization story.
•These firms assemble leaner project teams of
freelance consultants (mostly midlevel and
senior alumni of top consultancies) for clients
at a small fraction of the cost of traditional
competitors. 45
• They can achieve these economies in large
part because they do not carry the fixed costs
of unstaffed time, expensive downtown real
estate, recruiting and training.
•The have also thus far chosen to rely on
modular providers of research and data rather
than invest in proprietary knowledge
development. 46
• Although these alternative firms may not be
able to deliver the entire value proposition of
traditional firms, they do have certain
advantages, as Harvard Business School
researcher Heidi Gardner has learned through
her close study of Eden McCallum.
47
• Their project teams are generally staffed
with more experienced consultants who can
bring a greater degree of pragmatism and
candor to the engagement, and their model
assumes much more client control over the
approach and outcome.
48
• These attributes are particularly compelling
when projects are better defined and the
value at risk is not great enough to justify the
price of a prestigious consultancy.
• BTG’s CEO, Jody Miller, puts it,
“Democratization and access to data are
taking out a huge chunk of value and
differentiation from traditional consulting
firms. 49
• Eden McCallum and BTG are growing quickly
and zipping up market. While it’s fair to
question whether they will need to take on
some of the cost structure of incumbents as
they expand, their steady growth suggests
that they’ve been successful without doing
so.
50
• Eden McCallum launched in London in 2000
with a focus on smaller clients not
traditionally served by the big firms. Today its
client list includes Tesco, GSK, Llyod’s and
Whitbread, among many other leading
companies. In addition, some of its contacts
at smaller companies have moved into more-
senior positions at larger companies.
51
• Modularization has also fostered data-and
analytics-enabled consulting, or what Danier
Krauses, a research director at Gartner, calls,
“asset-based consulting”, of which McKinsey
solutions is an example.
•This trend involves the packaging of ideas,
processes, frameworks, analytics, and other
intellectual property for optimal delivery
through software or other technology. 52
• The amount of human intervention and
customization varies, but in general it’s less
than what the traditional consulting model
requires, meaning lower expenses spread out
over a longer period of time (usually through a
subscription or license-based fee).
•Certain tools can be more quickly & efficiently
leveraged by the client, and teams don’t have
to reinvent the wheel with each successive
client.
53
• This approach is most pertinent for
consulting jobs that have been routinized-that
is, the process for uncovering a solution is
well-known and the scope of the solution is
fairly well defined.
•Often these jobs must be repeated regularly
to be useful and many of them deal with large
quantities of data. 54
• For example, determining the pricing strategy
for a portfolio of products is no small feat, but
experienced consultants well understand what
analytics are needed. The impact of such
projects, which involve copious amounts of
data, can erode quickly as circumstances
change; the analysis must be updated
constantly. In such projects a value-added
process business model would be most
appropriate 55
• Scores of start-ups and some incumbents are
also exploring the possibility of using predictive
technology and big data analytics to deliver
value far faster than any traditional consulting
team ever could. One example is Narrative
Science, which uses artificial intelligence
algorithms to run analytics and extract key
insights that are then delivered to clients in
easy-to-read form.
56
Similar big data firms are growing explosively,

fueled by private equity and venture capital
eager to jump into the high-demand, high
margin market for such productized
professional services.
57
Only a limited number of consulting jobs can
currently be productized, but that will change
as consultants develop new intellectual
property. New IP leads to new tool kits and
frameworks, which in turn lead to further
automation and technology products. We
expect that as artificial intelligence and big data
capabilities improve, the pace of productization
will increase. 58
References:
1. Management Consulting in Practice, Fiona. C

& Paul May
2. Strategic Moves, The Economist, Nov, 2013
3. Consulting on the cusp Of Disruption,
Clayton M.C., Dina W and Derek V.B.
October, 2013
59
THANK YOU
60

Consulting and Advisory Services Curriculum 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Consulting and Advisory Services Curriculum 1

Uploaded by

Copyright:

Available Formats

CONSULTING

Transaction & Restructuring 20

Operations Specialists Strategy Specialists

Similar big data firms are growing explosively,

1. Management Consulting in Practice, Fiona. C

You might also like