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Strategic Characteristics of the Management Consulting Industry

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Strategic Characteristics of the Management Consulting Industry

Types of Consultancies

Strategic Consulting – Recommend and implement solution to complex business problems. Diverse client base with a broad scope of work.
Informational Technology Consulting – Firms are building around specialization of IT infrastructure planning, design, and procurement. These firms often work with the same clients as strategic consulting, but in different areas.
Specific Situational Consulting – The broadest and least quantifiable segment. Includes firms specializing in specific industries (ex. Banking, HR, environmental). Also, includes “one man band” consultants and small partnerships.
Hybrid/Accounting Consulting – Consist of consulting arms of major accounting firms. Very broad scope of consulting services. Includes financial, tax regulatory, benefits advice, IT work.

Industry Trends

Growth – 1995: The world market for management consulting grew to 18%, more than $40 billion. Overall, the growth rate was not expected to continue, but would average a compound annual rate of 12% into the 21st century, to $65 billion by 2000.
Integration – Integration of services and expertise through mergers, acquisitions, and alliances.
Globalization – Asia/Pacific and Latin American regions expected to grow significantly due to relatively small client base and desire to become competitive globally. As clients went multinational, consulting firms had to follow the trend and go global. Integration is used to expand for some firms. Others open new offices in other countries.

Competitive Forces

Strategic Consulting Market Leaders

Bain & Company
Boston Consulting Group
McKinsey & Company

Marketing Practices

Self-Promotion – Initially, the industry was extremely averse to self-promotion, but the 90s forced them to change. Brand identity and differentiation is key.

Narrowcasting vs Broadcasting – Narrowcasting includes identifying and communicating with a small set of clients, resulting in a low key, but mysterious company with a network of strong relationships. Broadcasting includes more traditional advertising such as sports sponsorships and television and print advertising.

Word of Mouth – Competition (McKinsey & BCG) utilized word of mouth methods about their services. Each firm focused on publications from employees and attending high level, CEO oriented management conferences to network.

Strategy Consultancy Success Factors

  1. General Strategies – Strategy consultancy requires a more general approach to consulting services, rather than the specific nature of the other segments.
  2. Broad Scope – Strategy consultancy also requires a broad scope of work, including but not limited to general corporate strategy, mergers and acquisition, and privatization advice.
  3. Global Focus – The consulting industry has been growing significantly, both nationally and abroad. With the larger pool of international and multinational companies seeking consulting services, consultancy firms need to have some sort of global presence.

Bain’s Key Success Factors

  1. Relationship Consulting – A high level of trust built between the client and Bain. Strong relationships built to have a long-lasting partnership.
  2. Data Driven Analysis – A strong emphasis on market research and the presentation of data to provide recommendations.
  3. Results Focused – Lack of emphasis on write-ups and reports. A focus on the specific recommendations and a presentation on an imperative for change.
  4. Performance Measurement – Create and track a theoretical portfolio of their clients and compare with performance of the S&P 500 index.
  5. Company Culture – Unique and strong cultural identity within the company. Revolving around drive, teamwork, and creativity

Bain’s Competitive Opportunities and Issues

Competitive Opportunities

Competitive Issues

  • High level of top executive integration = high level of client retention and referral
  • Emphasis on data to support results and recommendations to clients
  • Bain’s perception for generating financial results and breakthrough strategies

  • High level of repeat business which results in Bain’s capacity often being sold out for months in advance
  • Aversion to self-promotion (KGB of consulting)
  • Need to increase awareness in new markets
  • 1990 change in management caused confusion over positioning

Essential Marketing Challenges

  1. Company Culture – Marketing was a discouraged activity at Bain historically. Bill Bain’s philosophy was if they did good, clients would notice. The company’s refusal to use business cards continued for over five years. And a strict policy of forbidding integration with the press. Overcoming this culture can be challenging internally.
  2. Positioning – Bain currently has no differentiation or brand awareness. Changes in the industry, such as a desire for upsell strategy work and the democratization on the industry confused clients about Bain’s positioning.
  3. Brand Awareness – Bain, who prides itself on the “one-firm” image does nothing to use it to differentiate themselves from their competition.

Marketing Alternatives

  1. Do nothing
  2. Word of Mouth (narrowcasting) marketing
  3. Standard advertisement (broadcasting) marketing

Evaluation Criteria Of Alternatives

Evaluation Criteria

Consistent

Sustainable

Expertise

Finances

Time

Support

Alternatives

Nothing

Word of Mouth

Broadcasting


Green / Yellow / Red color system:
Green – Immediately within reach. Yellow – Can be acquired with some effort. Red – Difficult or impossible to achieve.

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