... where visionaries, game changers, and challengers discuss business models
Well, the answer may depend on where the consulting firm chooses to focus... In my world, I'd say the epi-center is some combination of "offer-driven" and "customer-driven." We're being forced to respond, like it or not, due to a shift in buying power. Our traditional clients have less power as economic buyers, given the centralization of control in the hands of the procurement people and the squeeze to reduce the number of "authorized vendors."
When I started my consulting firm 15 years ago, most of my gigs were with brand-name Fortune 200 firms. These days, they're too much trouble: they pay too slowly, demand too much in the way of contractual hurdles. Their people are so oppressed... It's downright unattractive. Especially for someone like me, who spent her formative years at Apple...
Mine is more of a boutique firm, so I've found myself gravitating more toward mid-market clients where those buyer-side pressures are less fierce. Focusing on mid-market clients is about the only way to have a direct relationship with the client, unless your firm has a lot of clout in its own right. Or privileged status.
In Seattle if you want to serve Microsoft, for example, you live or die based on your status as "an authorized vendor." (I hate the word vendor.) So if you want to work with Microsoft clients, you end up changing your channel model, going indirect -- and having the economic relationship managed by another firm. Which means you have to give up a lot of margin, for the so-called benefits those firms offer.
I'm using Microsoft as an example of the changes I've seen in how the leading West Coast tech companies are buying services from consultants. The increased power by the procurement folks, who know how to buy on price but not necessarily discern differences in competence, has forced the shift to aggregations of consultants (or contractors) working through what we refer to here as "body shops."
So in my case, facing a value proposition that no longer resonates as well as it used to, I'm exploring "offer-driven changes," as well as flirting with a different channel model.
Does that answer your question? Never having worked for a large management consulting firm, I don't feel qualified to respond on their behalf...
This conversation is of real interest to me.
For the past 25 years I have been running a brand design and development consultancy. Like many who have already weighed in, 10 years ago our work was with name-brand companies: Reebok, Rollerblade, Lotus Development, Polaroid, FX Networks... the money was good but too often we were ghettoized in the lower ranks of the "marketing" department. Yet in most cases we - as consultants - noticed that marketing and branding was being employed too late in the product or service development process. With few exceptions - ESPN is one - a company's story was being used to cover up or disguise much deeper, structural issues, issues that typically were symptoms of muddy mission, or lack of internal agreement and direction.
Here's the rub. To create great brand identity, it is essential that you engage ALL of the stakeholders, and engage buy-in and agreement between them all. The brand identity process IS the design process, and to many companies this very simple (but challenging) process is completely foreign.
Long story short: in the past 10 years I have been showing clients how to use the SAME efforts to improve messaging to improve both mission and message: both internally (first) and (then!) externally.
Clients love it because it's practical and real. AND it saves them money. They get better internal flow and direction and better brand identity together.
Message and mission. Yin and yang. Beans and cornbread.
I am currently working on integrated strategic/communications plans and programs for a half dozen regional non-profits. I find that they are the ones most receptive to this integrated approach because they are the ones who ran out of money first. But I now have case studies to show and I believe the idea ready to scale.
And oh yeah, during the same period we morphed from 20 people working in very expensive downtown real estate to completely virtual teams who are chosen for their specific experience and expertise. So i can now sell the same deliverables that I once charged $250,000 for (and still sometimes lost money) for less than half of that for the same, national-quality product.
Anyone want to help?
Christine's thoughts resonate particularly strong for my case.
Here in Egypt, where I currently am based, the consultancy - we are talking about just ANY type of consultancy - does not sell by itself. The perceived value of consultancy is so downright low that it is nearly impossible to scale or grow one. While we all face a similar problem, MENA region is much further on the road of "debunking" the consultancy business.
What works here, at least so far, is solutions. This usually implies a business side of things (such as market/needs/industry/etc analysis and consultancy) and a technical side (IT, web, CRM, etc). The packaging is what allows an otherwise consulting firm to survive. For this model however to work, these consultancies make partnerships and agreements with different "technical solutions" providers. One good example of such a model is WSI (We Simplify the Internet), the biggest Internet franchising network.
Having worked in the biggest regional profesisonal services firm and few smaller Internet business solutions companies, last year I started my own boutique consultancy network. We offer "growth and profitability" solutions. Taking WSI's business model as a base (at one of my previous stances, I was representinging my then company in this network), we built (are still building and expanding) a network of consultants (me being one of them) and tech agencies. We offer business solutions (business model analysis, growth/profit models, market research, etc) and have tech agencies implement it.
This model works so far, one of reasons being that we try to cover the entire IT range of clients' needs by including in the network agencies that allow vertical integrated of IT services (web, CRM, ERP, design, etc.). A one-stop-shop of sorts.
Our revenue model is different from traditional, as we realized that the traditional hourly-based or project-based models do not offer expected value. Admittedly, with few, mostly big clients, we have the traditional approach. With SMEs - which is a larger base of our clients - we have a KPI-based revenue model, charging either based on results (revenue or profit percentage) originating from our solutions, or on a pre-determined and agreed on monthly retainer fee. Both approaches aim a long-term relationship and are value rather then sales-centric. They also show our clients that we are interested in growing their business and grow ourselves.
Our consultants, apart having a business relationship with tech agencies, help them grow and get profitable. A growth from inside teh network. Mindset is again that of "if our partner agencies grow, we will grow."
Our client base, admittedly is still not significant, but things look optimistic, especially considering the current political situation in the region.
Just returned last night from Egypt (El Gouna) had a lovely week of sun and relaxation with my family at the Mövenpick Resort.
Your post sparked huge interest. I span a consultancy business out of E&Y in 1999/2000 at the height of the dot com boom (and then bust!) which was making use of Networked Economy concepts to build new consulting and business revenues. We had to go "offline" and back to traditional management consulting in the aftermath of the crash. The business was acquired by a big company and we went into the safe house of traditional models for most of the last 10 years.
We have now rekindled our business and EthosVO has been set up to contract to solutions and results just as you say. We go all the way from strategy to execution and in the first example started over a year ago we have produced a co-venture with the British Army (Team Army Limited) where we have re-engineered the way they raise sports sponsorships. The venture has been entirely cash positive for them, risk free and all upside. The only thing they provided to us you could say was the "market" and the serving General to be the CEO of the venture.
We are building our own community now (epp.ethosvo.org) based initially on a Ning platform like this one. Can you please tell me more about the WSI franchise you refer to - it sounds very interesting indeed.
I checked out EthosVO and I really like the problem-centric approach that you take based on networks. Also, the "valuable proposition" sounds like what the consultancies must be heading towards, aligning the offered value to a member/client/project with returns on effort/time/investment spent.
For more info about WSI, have a look at the two links below:
In brief, WSI is a network of consultants (with a strong emphasis and specilization in IT and web) surrounded by technical solution providers (there are few categories of WSI solution providers). WSI consultants talk/approach potential clients, do the entire assessment process, needs analysis and come up with a set of recommended solutions that best fit the potential customer. After taking an approval from the customer, who can alternatively ask to talk to potential technical solution providers, the WSI consultant proceeds having the solution implemented by the selected solution provider.
WSI organizes regular meetups of its consultants and solution providers, selecting "best consultant of the year" and "best solution provider of the year" in several categories (chosen based on platforms, solutions and trends that are most relevant in the WSI network).
Apart from that, our growth and profitability boutique is, as expected after all the political upheavals and economic slowdown in Egypt, facing difficulties, especially on the sales cycle side. While we try to standardize, optimize and visualize all dealings with clients from our side (meetings, proposals, pricing strategy, offered value proposition), the potential clients - and our main target is small and medium size companies - are willing to pay less and take longer time to get informaiton, approvals, etc. from their side. Recently, we got few bigger leads, and their bureacracy is slowing things down as well (number of deparment heads need to put their stamp on the final approval; president didn't see the final approval, etc.)
That's what makes me really think hard as to how to make the cycle shorter and more effective on clients' side. Some extreme thoughts cross my mind like, for example, setting a sort of a deadline (2-3 weeks) form the first contact with the client and if by then the contract/deal is not finalized, then letting it go. Of course, we need to communicate this to the client from our very first meeting. Deadlines and other such "pressure" plays a psychological role of making the client really work for it (if the client is really motivated and willing to have the work done by us).
We didn't try this approach yet but are willing to give it a try and see what the reaction would be. Otherwise, there is a pipeline with number of small and big clients and efforts/time is spent on research/proposals/follow-ups/communication and outcome ratio is low compared to our plans and expectations.
Would love to ;-)
The stranglehold of industrial thinking, self-interest, time-and-material business models (input based), and consultant utilisation still underpins most large firms behaviours. Despite some language modification (has anyone seen HP's "own the outcome" strap-line for example?) the reality of fixed cost bases and cost-plus shareholder returns means that too many projects couldn't care less about outcomes (notice I said "projects" - I think that people, in general, care a great deal about outcomes).
Many, many innovative models exist - the virtual, variable cost base is an easy example. Change for established business poses a great challenge. Starting anew is perhaps simpler in many cases although persuading the market to insist on smarter solutions is sometimes as hard to achieve as convincing the established players to throw away old (and very profitable) practices.
It sounds really interesting. What's your company's website or anywhere where one can read more?
Mitch...always enjoy your inputs...I am currently looking at business development and managing change in the UK legal sector , basically a service sector product. Any words of wisdom from your US experience in the service sector....
This has been an excellent discussion. I have tried to pull together all the comments from the various replies.
Main issues identified: (we could use a good environmental scan around these issues.)
- consultants who use the bait and switch, start engagement with high level then switch to 'grunts' to do the work
- implementing the consultant's view as opposed to the customer's reality
- deteriorating customer perception of value of consultancy
- customers less willing to pay large consulting fees, less money available for consulting services
- sales cycles are longer, particularly for large consultant engagements, pay cycles are longer as well
- move to centralization of procurement, more hurdles to be accomplished
I have also pulled together some of the ideas on how the consultancy model can be changed:
Mike, I wasn't part of the team that co-wrote the first edition of BMG, so forgive me if this comment is off base. I wonder if we're facing a "patterns" challenge here — if there are in fact multiple business model canvases that we're conflating.
For example, to play out one scenario, here's my take on a Seattle consulting firm that's been experiencing rapid growth over the past decade (now with offices in 5 or 6 US metropolitan areas). Here are some of the success factors for their canvas:
I think we should develop several such scenarios, to see if they all fit the same theme (which I doubt) or if there are recurring patterns we could highlight.
@Christine, the canvas I posted was intended to focus the discussion bringing what I saw in the discussion together into a single picture. It was a compilation of possibilities. You are most definitely correct about there being multiple 'patterns' possible in the innovations identified in the discussions.
As we should all know instinctively, there is no approved solution in this game. That is why prototyping is so important. Using these possibilities in different combinations, one might find the winning pattern for a given context. There is no guarantee any particular pattern will work will all segments, so the next step would be to test the new pattern, what Steve Blank identifies as the 'customer validation' process.
Just a few of comments on the points on your pattern.
These are all really great ideas. It presents a very interesting map for someone launching a new company. It might be a massive change to an existing organization. In that case, one could build a long term strategy of changing to the new pattern by slicing parts of the over all map and evolving over time. It would also allow the existing company to pilot some of the changes before scaling them.
bravo on bringing in the very tool of what has us be here Mike!
While i realize it's been 4 years, I'm sure this inquiry is still very much alive.
What is the interest level of a bunch of us on this thread gathering around a canvas on a hangout or other screensharing technology and making it a real-time dialogue?