Pure Advisers may want to Dirty their Hands

Date: 19-11-2007
Source: Financial Times

The classic model of consultancy had the client receiving truly independent advice unsullied by any desire to sell implementation services.

But the revenue volatility associated with unpredictable one-off projects has long encouraged most consultancies to try to help implement the solutions they propose. Some offer to manage and staff the transformed parts of the organisation under an outsourcing contract.

"Historically, consultants were purely advisers who wrote reports, but 20 years ago they moved into implementation," says Fiona Czerniawska, director of the think tank at the Management Consultancies Association. "However, in the last three years the pendulum has swung (back) to advisory work, particularly with the re-entry into the consulting market of three of the big four accounting firms. It is pretty balanced at the moment, but the advisory element is just in the ascendency."

Consultancies with this approach tend to hold the intellectual high ground and attract the best consultants. "The client gets deep capabilities and competencies," says Michael von Uechtritz und Steinkirch, market research director at Gartner, the analyst.

However, these skills come at a price and day rates are perceived as higher than those of a more broadly-based consultancy. Georgina O'Toole, a senior analyst at Ovum, says that it is partly historical and partly that they pay top salaries to attract and hold on to higher calibre people.

Another disadvantage of this approach is that without the implementation skills, the strategy may be more theoretical than practical. This can lead to problems later on, once the consultant has moved on, that can reduce the value realised from the work undertaken.

"Neutrality is expensive and is not always the best option," says Ms O'Toole. "Clients should question the benefits of independence, because they may not need or benefit from neutrality. There are often advantages in using technology suppliers to implement the strategy, because of their experience of doing, rather than just advising on it. Clients should be intelligent enough to deal with the lack of neutrality if they have a trusting and open relationship with the supplier."

She also warns that pure advisory consultancies are accused of trying to make work for themselves by creating a long-term relationship with the client. In a changing world, they continually want to update the advice and strategy.

"Not everybody thinks the pure-play businesses are truly independent," she says. "They are also accused of trying to sell other services going forward."

Even if strategic advice is insightful and offers sound solutions, its value depends upon well-executed implementation. A Deloitte survey of 120 senior executives found poor execution was the factor most likely to impede company growth.

Many consultancies therefore offer to stay with the client and implement their own advice. This is good for the client in ensuring the strategy is implementable and will be properly executed by people who understand the objectives. It is also good for the consultancy, in that it provides ongoing income, and some consultancies go further by employing the staff and managing the transformed operation under an outsourcing contract, so providing an "end-to-end" solution.

Paul Toner, senior vice president at BearingPoint, says planning an operational strategy with the knowledge of how it will be executed makes for a far more successful and "implementable" strategy.

"Many clients have expressed dissatisfaction at consultants who come in, tell them what is wrong, make change recommendations and then leave," says Paul Marshall, managing director at Protiviti. "This misses out what clients seem to value most, which is assistance in implementing the recommended changes."

However, KPMG partner Alan Downey argues that few clients actually buy into the lifecycle concept, from strategy to outsourcing, and are right not to. "Clients are more sophisticated and want a specialist at each stage," he says. "There are more likely to be two or three consultancies than one. There are not many assignments going from boardroom strategy to managing desktop computers!"

Mr von Uechtritz und Steinkirch warns that the sheer scale of big transformation projects undertaken by a single consultancy means they may want to exploit the intellectual property they create.

"You must watch it carefully," he says. "Consider who has the financial and economic benefit after the solution has been created. If the consultant starts to replicate the solution with other clients, the end-user may have paid for the standardisation and industrialisation of the solution for the next client."

Many consultancies claim to have competencies across a significant number of industries and all have references. Mr von Uechtritz und Steinkirch advises clients to try to understand the investment the potential consultancy has made to create innovative solutions, which is what clients really demand.

He also warns that not every consulting company in today's market has consultants with strategic, change management and technology skills. Even if they do, staff turnover during a long project can cause problems.

At the less glamorous end of the market are the execution-only consultancies, who understand a particular technology, process or industry and may even be owned by a leading supplier. Although not independent, they have deep knowledge of implementation in their area of specialism.

"They may lack strategy perspective and objectivity," says Mr von Uechtritz und Steinkirch, "but they will have vertical solutions, operational models and quality assurance systems in place and are good at execution."

Ms O'Toole says they are not coming at implementation from a purely theoretical stance, but have hands-on experience of implementing similar solutions and strategies. "They have a much more practical viewpoint," she says.

According to Ms Czerniawska, clients sometimes just want advice, sometimes just implementation and sometimes both. "It depends on individual circumstances and the type of consultancy they are after, what sort of relationship they have with their supplier and whether technology procurement is involved."

Ms Czerniawska points out that in an economic boom, organisations are both hungry for advice and have greater discretion to invest in consultancy.

"It's a time when they are thinking about ideas and strategy, rather than just implementation," she says. "When times are hard, they are more focused on rapid implementation."