The New Business Consultancy
Consultancies of all sorts have been around for so long. When I mention consultancies, I mean organisations formed with specific purpose for providing services to businesses. Nowadays market is full of consultants and consultancies of all types and sorts, most of them probably with some solid expertise in their chosen activity.
For those that had a chance to hire services from a consultant, organisation or individual, no matter how trivial the request may have been, the claim of being able to sort a variety of problems including the ones you never knew you had, should sound very familiar. It is very possible that whatever the client would inquire about consultancy on the other end will have a corresponding expert available.
From the business model perspective, consultancy is there to help businesses to realize their objective faster than they would do it on their own. From acquirer’s perspective this kind of arrangement appears acceptable because it will consider the total cost in terms of money and time that it will take to reach that same objective if it wanted to achieve it organically; to grow and develop processes and people from within organisation and from own experience. In practice this organic approach will mean learning through trial and error. Therefore, consultancy services are exchanged freely and with full knowledge that services at the point of delivery will be priced higher than its actual costs. The acquirer on the other hand will be willing to pay a premium on the price taking into consideration the other option of obtaining the same serviceable capability, and having the means to pay as result of initial capital invested or high premiums earned from the past activities.
Consultancy activities seem to be one of the most popular among those with some proven experience in a given profession. Nevertheless, even consultancy services are undergoing a substantial transformation as result of technology. Communication development has enabled completion of a wide range of assignments remotely, which enabled consultancy houses to improve their profit margin. However, this same development in time has caused the market to become more competitive on a global scale.
Providing standard services, the so called off-the-shelf services, has become so competitive and caused drastic fall in prices that now very often these are provided as complementary to the more sophisticated requirements. It seems that in times of such massive changes the profession should go back once again at the beginning of its era and redesign the concept of services offered. If there is no more market for the standard service packages that were designed once and they kept reselling time and again, then the product offered has to be redesigned, this time in a way that will be specific to the client and its request.
With such successful run of activities for so long big consultancy houses should face no problem in designing such products. However, with its high operational and fixed costs these services will unlikely attract firms at the lower end, SMEs. There are countless research papers that came to a conclusion that smaller firms don’t have the means to spend on elaborate and long-term growth and development projects, not that its owners do not appreciate such products but simply cannot afford to pay up-front.
It is on this part that a new concept of consultancy business should start emerging; provision of services in a proactive manner with compensation on realization of its promises. Consulting should abandon “listening without assumptions” approach and trying to understand what the client requires, neither attempting to understand the problem. Away from assisting clients in implementing strategies and guiding the same towards exploitation of opportunities that a superior group of consultants have identified an developed for a specific client. Rather than providing presumed solutions on an identified problem and on request from the client, concept of New Business Consultancy should identify opportunities for a given client and offer solutions proactively. On such a product offering the bulk of the risk should be carried by consultancy house. In practice it will mean that the client will not have to pay anything up-front. Compensation will be realized in the form of shared benefits that will initially be gained by the client.
Arranging compensation on delivered results will benefit both sides. On the case of small business this possibility of arrangement will enable it to acquire services of individuals with proven expertise in the business activity that it is operating. Since there will be no outflow of funds in practice these services will come free of charge. Compensation at a later stage will be on a portion of benefits which the business otherwise would not have in the first place. In addition, this compensation will be limited in one form or another, for example limited to specific time frame, whereas benefits for the business are presumed to flow-in indefinitely.
Majority of SMEs are unable to shoulder consultancy services especially those aiming to wholly transform businesses in distress. For smaller businesses acquiring external services is almost always beneficial. Benefits primary come as result of spill over effect that, in such cases, will have on employees having the chance to work alongside others with superior experience and knowledge. Benefits are further enhanced with activities that will result in some form of knowledge transfer, no matter how small that may be. Above all, these benefits will be gained much faster than they would if the business would follow the organic approach to growth and development. For these firms is crucial to make the most of their key advantage; to be able to react quickly in changing market circumstances due to their flat hierarchy or single decision-making person. If an opportunity is presented and supported appropriately they should be able to react quickly and make the most of it.
Similarly, this approach is expected to be beneficial for Consulting Houses too. First, it will force them to specialise into few industries and maintain competitive advantage. It will save on costs by hiring consultants based on projects and compensate them in the same way that it gets payed, share of benefits. Above all, Solution as Product will enable Consulting Houses to develop projects pro-actively, which in turn will make selling these ideas more easily. It will enable, maybe force, them to take a long-term view on client relationship and business development. With time, selling more easily will result in more effective and efficient sales force. In the long run any arrangement in the business model that will cause the firm to plan well ahead and it operations more efficient will ultimately benefit to its shareholders as well as stakeholders.