“CONSULTINGLAND[1]”: “A LAND OF MILK, HONEY AND MONEY” OR A “SIREN SONG”[2]?

Like the face of the Roman God Janus, the Covid-19 Pandemic poses a dual threat to each person’s survival both in terms of personal health as well as economic survival.[3] I leave the health aspect to the medical professionals, and will focus upon the almost equally important aspect of economic survival. Many individuals now face an economic crisis as jobs have evaporated, and furloughs and layoffs have become the classic response of terrified or simply conservative businesses. 

A recent article in the Los Angeles Times indicates that many individuals are turning to consulting as a “life raft” in the turbulent economic seas.[4] Specifically, the article by Kathy Kristof positions consulting as “a lucrative way to leverage your niche expertise.”[5] However, is consulting what Kristof suggests, a land of opportunity and of milk, honey and money; or is it a “Siren Song” where the unwary will be lured to their destruction? In Greek mythology, a Siren is a creature (half bird and half woman) who lured sailors to destruction by the sweetness of her song. The short answer to the question is that "Consultingland" is, like the two-sided face of Janus, both a land of significant opportunity and a possible danger zone for the inexperienced and unwary as well as for the experienced and savvy. 

Clearly, there are opportunities for well-designed and well-managed consulting firms. However, the seas in which a consulting firm navigates (just like the ocean itself) are always dangerous. Specifically, it is well established the 50 % of all new ventures fail within 5 years. In addition, even established consulting firms can go bankrupt, as did Harvard Professor Michael Porter’s Monitor Group.[6] Nevertheless, some do survive. For example, our firm will celebrate its 42nd anniversary on August 23, 2020.

PURPOSE: TO PROVIDE A “GUIDEBOOK” TO “CONSULTINGLAND”

Just as Lief Erikson (who found Iceland and Greenland as well as reportedly the land called America that was once attributed to Columbus) could have used a navigational guide, the purpose of this article is to explain how to navigate the turbulent and dangerous seas to get to “Consultingland” successfully. Specifically, I will draw upon more than 50 years of experience as a consultant and founder /CEO of a Consulting firm to provide an analog to what was called a “Rutter” in the times of the Portuguese navigators. A “Rutter” is a Navigator’s handbook of written sailing directions. It included secret charts, summaries of nautical data like currents, ocean levels, islands and sandbanks along with drawings of coastal areas, which was absolutely vital for safe navigation to guide the way to a destination. Before the advent of nautical charts, “Rutters” were the primary store of geographic information for navigation of the seas.

Currently, no “Rutter” exists on how to get to safely to “Consultingland.”

Accordingly, this will be the first of a series of articles on how to get there as well as how to survive and thrive over the long term. A series of articles is necessary rather than a single article because what is required to develop a successful consulting practice is virtually a manual or handbook, and not a single “recipe” of “Ten Easy Steps.”  

The series of articles will address some of the prerequisites or requirements for long term sustainable success as a consultant. These issues will be primarily addressed from the perspective of start-up consulting firms. However, this discussion will also be relevant to consulting firms that already have existed for some time, and might not have actually done all that is necessary for long term sustainable success, as the example of the failure of The Monitor Group, (the firm based upon Michael Porter’s strategy model), which, after several successful years, went bankrupt in 2012.[7]   

The focus of this particular article will be the two most important foundational issues in establishing a consulting practice: 1) finding a market, and 2) developing the core capabilities required to serve that market. I will discuss the nature and of these issues or tasks and illustrate them with an actual example of a consulting firm that has been in operation for more than 42 years and remain in business today.  

Context for My Perspective

What is the basis for my comments and perspective that will be shared in this article? In brief;

·       I have been engaged in consulting for 50 years.

·       I founded my own firm in 1978, which will celebrate its 22nd anniversary in August 2020.

·       We have had more than 1000 clients, not just in the US but also globally in Bulgaria, China, Israel, Kazakhstan, Singapore, Switzerland, and Vietnam.[8]

·       Our average client relationship is 3 to 5 years, and some relationships exceed 20 years.[9]  

·       Some clients like Starbucks have become leaders in their space.[10]

·       A very significant portion of our revenues come from existing client, returning clients and client referrals.

·       We have developed a set of empirically validated and proven frameworks, methodologies and tools.[11] 

·       We have published extensively about our frameworks, methodologies and tools, including:

o  The Leadership Crisis Playbook, Vandeplas Publishing, 2020

o  Growing Pains, Buildings Sustainably Successful Organizations, fifth Edition, Wiley, 2016

o  Building Family Business Champions, Stanford University Press, 2016

o  Corporate Culture; The Ultimate Strategic Asset, Stanford University Press, 2011

o  Leading Strategic Change, Cambridge University Press, 2008

o  Changing The Game, Oxford University Press, 1998

o  Effective Management Control, Kluwer Academic Press, 1996.

o  The Inner Game of Management, American Management Association, 1989[12]

·       For the past decade, we have a select group of licensed, trained and certified global affiliates who utilize our frameworks, methodologies and tools in Argentina, Bulgaria, China, India, Kazakhstan, Poland, Russia, Singapore, and Vietnam.[13] 

The bottom line is that we have considerable experience in Consultingland. Now let’s turn to the primary challenge for any consulting firm-- finding and defining a market segment to serve. 

The Primary Challenge: Identifying and Defining A Market Need

Kathy Kristrof’s well-intentioned, but misguided article, says: “Claim your niche.”[14] What she means is that you should utilize your experience and expertise in an area as the basis of your consulting. Unfortunately, while this seems to make sense on the surface, it is fundamentally flawed because its “backwards-thinking.”

In contrast to what Kristof proposes (“claim your niche"), the primary challenge for survival in “Consultingland” is identifying and defining a market need that you might be able to serve. Specifically, you actually need to begin with the needs of the market and not your capabilities. Of course, your capabilities matter, but they are secondary to the primary need to identify a market segment and its needs.

What is a “market’? In brief, a “market” is a set of present and potential customers or clients. The needs of potential clients, and not your current capabilities, will define your ability to “claim (or carve out) your niche.” Accordingly, the first step in "carving out you niche" (different than "claiming" your niche) is to identify a market segment that has a need and defining the nature and scope of that need. This must be accomplished by doing a “strategic assessment of the market and client needs.” A “Strategic Assessment of Client (Customer) Needs” involves answering the following core questions:

·       Who are your potential Clients (Customers)?

·       What are their needs?

·       What will they be willing to purchase?

This is essentially the first step in creating strategic planning for your business as a consultant.

The Related Challenge: Developing Core Capabilities Required for The Target Market.

The second and virtually equally important step is to developing the core capabilities required to serve the market you have identified.  This involves answering the questions identified below:

·       What is your value proposition?

·       How will you reach them to market (advertise) your “products” or services?

·       How will you deliver your “products” or services?

Taken together, this set of six key questions provide the basis for developing your consulting business. We will first illustrate the actual development of a consulting business and then flush our how these six key questions comprise a template for the development of a consulting business. 

In order to illustrate the process of identifying a market and developing the core capabilities required to serve that market, I will use the case example of our own firm, Management Systems Consulting Corporation (“Management Systems”), which was founded in 1978, but was the out-growth of previous consulting begun in 1970. 

An Illustration of Finding a Market thru a “Eureka Moment”![15]

I began doing consulting relatively early in my academic career as an Assistant Professor at UCLA. The consulting was related to my doctoral dissertation in an area now called “Human Resource Accounting.” At that time, my primary objective was to get data for publications rather than to earn consulting fees, and, in fact, I declined a consulting project that offered my twice my annual academic salary because it would have no strategic benefit (no data) for promotion at UCLA.  

One day in the early spring of 1976, I was sitting in my office at UCLA’s Graduate School of Business (now The Anderson School of Management) preparing to teach a class, when the phone rang. It was a woman (formerly from Germany), who was the Executive Assistant to a medical doctor who was also the President of a rapidly growing entrepreneurial firm that staffed Emergency Medical facilities at hospitals. She was looking for someone to “tutor” the founder and CEO of her firm in how to manage his firm. I asked her how she got to me and she said that she called the office of the Dean, who recommended me. I said that I did not do that and asked why he did not come to UCLA for an MBA. She replied that he had an “MD” from a leading university and did not want a degree; rather he wanted skills. She was persistent and asked me if I knew of anyone else that did that and I replied “no, I don’t." I asked her why she was looking for a “tutor” and she replied he had a tutor from UCLA for his hobby (astronomy), so she though the same thing might work for learning to manage his business. She then asked me if I was willing to meet with “Dr. Jeffrey H.” and I agreed to meet with him. The reader should note the “strong” entrepreneurial attitude with which I approached this conversation and opportunity: Specifically, “no, I don’t do this; no, I don’t know who does it; etc.

When we did meet, “Dr. H” hired me to tutor (or coach) him in how to be a CEO. For me it was an opportunity not only for some incremental financial support, but also a chance to see what was immediately relevant and practical from our MBA curriculum that could help this individual. 

We met about twice a week for a few hours each time, and I found the work very interesting. It was really a process of “individualized teaching.” Although I had actually “found” a market need, I was not fully aware of it at that time. The “Eureka Moment” of recognition was to come just a bit later.

The “Eureka Moment” of identifying a market need came out of another independent but related incident. I had been doing some consulting/research for a CPA firm in Chicago involving the application of Human Resource Accounting, and my contact there (named Todd Lundy, now deceased) decided to leave the firm and joined a real estate firm. Todd was an acquisition specialist; that is, he bought firms. His role at his new employer was to “build a residential and commercial real estate business” through acquisitions.

We decided to meet for dinner just to continue our personal relationship the next time he visited Los Angeles. During a lengthy dinner, Todd asked quite simply: “what are you doing that is interesting”? I told him about the coaching with the Medical doctor. He said: “that is interesting. We just purchased a residential real estate firm in San Francisco; do you want to do the same thing with our CEO there"?  I replied: “sure.” Then in rapid succession he purchased other companies in Denver, Houston, and Chicago. I said to him: “Todd, stop buying companies! I can do any more of this and continue my academic career!” He laughed and said: “build a company. We like what you are doing, and we will be your ‘anchor client.’” And so, I founded my firm in August, 1978.

As others learned about what I was doing, I began to get some other clients from referrals. The new clients included firms in a variety of industries, ranging from industrial abrasives distribution and ship repair to Women’s garment manufacturing (blouses). The economy was reasonably good and most of the firms were experiencing rapid growth. Working with this set of firms, I began to see patterns in the issues they were facing.

Initially, as I needed help, I began to training some other faculty to do what I was doing part time, and later hired my first “MBA” in 1983. That same year I moved the consulting practice from my home to our first real office. Now I had a “nut” and a payroll. It was a micro business, but a business nonetheless.

Defining a Market Focus

Most of my clients were relatively small firms that were led by entrepreneurs like the medical doctor. Working with these firms and some others, the academic perspective kicked in, and I began to see patterns of issues facing different firms in different industries. Very different firms seemed to be suffering from the same problems. Similarly, the CEO of the firms also seemed to be suffering from the same issues. This was the genesis of the Eureka moment. I realized that there was an un-served market segment: rapidly growing entrepreneurial firms that needed what I was doing to help them make the transition to a more professionally managed organization with MBA-like competencies and systems.

Developing Your Core Capability to Satisfy Market Needs

The second step or challenge in developing the foundation of a consulting business is to develop your capabilities to satisfy the market needs. This involves answering the following questions:

·       What is your value proposition?

·       How will you reach them to market (advertise) your “products” or services?

·       How will you deliver your “products” or services?

These issues and the process of developing a consulting business will be illustrated below by continuing the case example of how we developed our own firm. 

After we found and defined the market, the next step was to develop our capabilities to satisfy the market needs. Using my academic training and perspective, I began first to formulate conceptual models to help me make sense out of what I was seeing, and later to help me use that as a tool to explain the issues to the CEOs I was coaching. Although the details of this is beyond the scope of this article, specifically, this, involved four related steps[16]:

1)    Systematize what I was doing and develop service-type “products,” including methodologies for strategic planning, structure design, leadership development, performance management, and more recently culture management,

2)    The development of some models of organizational success, “growing pains,” and stages of growth,

3)    Writing a few articles and later a book describing both the theory and methods and cases examples of companies dealing with these issues, and, finally,

4)   Making the strategic decision to specialize in working with rapidly growing entrepreneurial firms that needed help to make the transition to a more professionally managed organization.

Eureka! I now had the foundation of a consulting business. It was a micro business; but it was a business. There were clients, employees and contractors, and there was a “nut.” I had become an academic entrepreneur, and had successfully met the challenges or key strategic tasks of "Stage I" to develop a business: finding a market and developing a product or service for that market segment.[17]  

Applying the Template for Strategic Development of a Consulting Business

Now let’s step back from the details of this case example, and see what needs to be done to develop your own consulting business. Taken together, the six questions discussed above comprise a “Template for Strategic Development of a Consulting Business.”  The template consists of two parts: 1) the Assessment of Client (Customer) Needs and 2) the Development of Your Core Capabilities for providing services to meet those needs.

This section will draw upon the previous case example of discussion of finding a market and developing the capability to service it to illustrate how the Template for “Strategic Development of a Consulting Business” can be applied as a general model to develop your own business. 

Template for “Strategic Assessment of Client Needs

As noted above, the Template for a “Strategic Assessment of Client Needs involves answering the several core questions. These will be addressed below:

Who are your potential Clients (Customers)?

Our potential customers were rapidly growing entrepreneurial firms that needed what I was doing to help them make the transition to a more professionally managed organization with MBA-like competencies and systems. This was, in the late 1970s and early 1980s, an under-served market segment. Neither the large consulting firms nor the MBA program were focused on this market segment.

What Are Their Needs?

There primary needs of this market can be viewed in two ways: First, they needed guidance and tools to help them “scale-up” or develop the managerial capabilities and system required to manager their “growing pains” and transition from an early stage entrepreneurship to an entrepreneurially oriented professionally managed firm.[18] Secondly they required a specific set of managerial methodologies, including organizational assessment, strategic planning, organizational design, leadership development, performance managemental, and culture management. These methodologies are described in Flamholtz and Randle (2016).[19]

What Will They Be Willing to Purchase?

Needs are one thing. What a business will be willing to purchase or buy is something quite different. Unfortunately, the nominal market for these managerial methodologies large, but the actual market is relatively smaller. All organizations require these managerial methodologies; but the number that is willing to purchase them is much smaller—perhaps 5 to 10 % of the nominal market. Still it is sufficiently large to enable development of a consulting practice. Specifically, there are many firms with entrepreneurs who are willing to purchase the individual methodologies (organizational assessment, strategic planning, organizational design, leadership development, performance managemental, and culture management) and some (about 5 to 10%) who will purchase the entire set as a management system.

Template for “Development of Your Core Capabilities for Providing Services”

What is Your Value Proposition?

The next issue or challenge in setting up a consulting practice is to define your “value proposition.” Specifically, what value to you bring the client and, in turn, why should client select you?  This, after defining a target market segment, is the next greatest challenge for a startup consulting practice.

In our own case, since we were on of the first, if not the first, to find this market segment, we had a strategic advantage from the start. Our focus on entrepreneurial firms came before the “great insight” of Management Schools that a focus on entrepreneurship was required. Yet even today the focus is on start-ups rather than on scale-ups, while scale-up was and continues to be our core focus! 

Our value proposition was then and continues today that we have a deeper understanding of entrepreneurs and their firms than anyone else. Although we have worked with many firms in the Fortune 100 and their subsidiaries, our specialty has been entrepreneurial firms where the founder is still in place. Classic entrepreneurs are different from most of the people who rise to leadership in the giant firms. Large complex firms are highly political. Entrepreneurial firms are much less political. Why? Because, for good or ill, in an entrepreneurship, everyone knows who the “600 lb. (Alpha) Gorilla” is! At Amazon it is Jeff Bezos; at Tesla it is Elon Musk; at Theranos, it was Elizabeth Holmes; and at Apple, for decades, it was Steve Jobs.  Accordingly, there is not the classic competition for leadership.

How will you reach them to market (advertise) your “products” or services?

You can reach entrepreneurs in several ways, including your presentations, books and articles, and referrals from current or previous clients. Many times, they will reach out to you. For example, the senior leaders of Starbucks reached out to me after the then CFO, Orin Smith, read our book, Growing Pains.[20] While working with Starbucks in its early years (1994 to 1997). Similarly, Yerkin Tatashev, CEO of The Kusto Group, then headquartered in Kazakhstan, referred us to a friend in Vietnam, who was CEO of Techcombank, based on our work for The Kusto Group. Also after Howard Schultz, CEO of Starbucks, cited my work at Starbucks in his book, several CEOs have reached out to us to become “the next Starbucks” in their own space.[21]

How Will You Deliver Your “Products” or Services?

Again, there are various ways to “deliver” your products and services. The traditional way is face to face, but more recently there is also delivery via “Trainer the trainer” and Electronic media such as Skype or Microsoft’s Teams.

The next article in this series will address the issue of how to develop your capabilities to deliver services to you target market. But first there is one more issue to consider.

An Alternative Approach to Market Identification: Affiliation

 What I have described above is the way you need to approach the identification of a consulting market and develop your capabilities to serve that market. It is neither a simple nor an easy process. It takes time to develop.

What if you want “short-cut” that process? The only reasonable way to short-cut the identification of a consulting market is to affiliate with someone that has already done the hard work for you.

During the past forty plus years that we have been developing our capabilities to deliver services to our target market and writing about our framework and methods, we have been approached by many people about the possibility of affiliation with us. Finally, at the specific behest of a professor and consultant in Russia in 2010, we created what we call our “Global Affiliates Program” to license, train and certify affiliates to deliver our empirically validated and application-proven frameworks, methodologies and tools.[22]

A description of the Global Affiliate Program is beyond the scope of this article. Interested readers can find information about the program on our web site: www.Mgtsystems.com.[23] In brief, the program is for a select group of affiliates who are operate either as independent consultants or have their own firms in various countries, including Argentina, Bulgaria, China, India, Kazakhstan, Poland, Russia, Singapore, and Vietnam.

Affiliates are trained in our frameworks, methodologies and tools, and are licensed and certified to do deliver them in their own territories. Sometimes we jointly service client with our affiliates. The Global Affiliate program will be described in more detail in a future article.

The Bottom Line

As we have explained, “Consultingland” is truly is both a land of significant opportunity and a possible danger zone for the inexperienced and unwary as well as for the experienced and presumably savvy. It can be, as Kathy Kristof indicated, “lucrative”; however, it is not a simple land to find or thrive in.[24]  

I wish you well on your voyage of discovery to “Consultingland,” and hope that this initial article can serve as a guide to help you navigate the oceans safely to this promised land. More articles will come later.

About the Author_________________________

Eric Flamholtz is Professor Emeritus, Anderson School of Management, UCLA. He is the founder and President of Management Systems Consulting Corporation, 10940 Wilshire Boulevard, Suite 600, Los Angeles California, 90024. His latest book (co-authored with Yvonne Randle, is The Crisis Leadership Playbook, Vandeplas Publishing.  He can be reached at: [email protected]. See Also: WWW.Mgtsystems.com.

[1] Just as Iceland, Greenland, and Newfoundland are the names of places of discovery by the Vikings, “Consultingland” is the name of a distant territory where consultants live. 

[2] In Greek mythology, a Siren is a creature (half bird and half woman) who lured sailors to destruction by the sweetness of her song.

[3] In ancient Roman religion and mythology, Janus was the god of gates and doors. See, the ancient Romans had a specific god who held the key, so to speak, to the metaphorical doors or gateways between what was and what is to come—the liminal space of transitioning out of one period of time and into something new.

[4] Kathy Kristof, “Navigating the GIG Economy: A Lucrative way to leverage your niche expertise,” Los Angeles Times, Sunday July 26, 202092, p. A 12.

[5] Ibid.

[6] Steve Denning, “What Killed Michael Porter’s Group,” Forbes OnLine, Nov 20, 2012. 

[7] It was based on Porter's well known “Five Forces” model of strategy.

[8] An average of 25 clients per year for 40 years + is approximately 1000. For a listing: see: www.Mgtsystems.com.

[9] Some clients work with us for a period and then return after they grow to a new stage.

[10] We have detailed client developmental cases in our books and articles. Eric Flamholtz and Yvonne Randle, Growing Pains, Building Sustainably Successful Organizations, fifth Edition, Wiley, 2016

[11] See Ibid.

[12] Currently being rewritten and updated for Vandeplas Publishing.

[13] For information about our affiliate program, see www.Mgtsystems.com.

[14] Kathy Kristof, “Navigating the GIG Economy: A Lucrative way to leverage your niche expertise,” Los Angeles Times, Sunday July 26, 202092, p. A 12.

[15] Eureka! Means “I found it!”

[16] Further discussion can be found in Eric Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, fifth Edition, Wiley, 2016

[17] See Ibid, Chapter 3.

[18] See Eric Flamholtz and Yvonne Randle, Growing Pains, Buildings Sustainably Successful Organizations, fifth Edition, Wiley, 2016

[19] Ibid. See also: www.Mgtsystems.com.

[20] Smith actually read an earlier version (edition) of the book. See Eric Flamholtz and Yvonne Randle, Growing Pains: Transitioning from an Entrepreneurship to a Professionally managed Firm, second Edition, Jossey-Bass publishers, 1990.

[21] Howard Schultz with Dori Jones Yang, Pour Your Heart inti it: How Starbucks Built a Company once Cup at a Time, Hyperion, 1997, pp. 161, 201-202.

[22] I am indebted to my valued colleague and friend, Vladimir Kuryakov, then Associate Professor at Moscow State University, and President of York Strategies Consulting, who was the catalyst for this program and who became our first Affiliate in Russia.

[23] Interested readers can also contact me at: [email protected].

[24] Kathy Kristof, “Navigating the GIG Economy: A Lucrative way to leverage your niche expertise,” Los Angeles Times, Sunday July 26, 202092, p. A 12.