Hello and welcome back to Smart Consulting Sourcing, the only podcast about consulting procurement.
I am Hélène, and today we will be talking about the different types of Consultancies. However, before that, let me give a recap of last week’s podcast.
One of the first and most critical steps in project management is determining the project’s scope. It is even more critical when buying consulting services since the scope will be your basis for identifying the potential suppliers, negotiating the proposals, and steering your project.
The main objective here is to provide a high-level overview of the problem. And adjust the scope that is best suited to the purpose of the entire project.
Listen to the complete podcast about why a project’s scope is essential in consulting?
However, this week, I’ll talk about the different types of consultancies.
The world of consulting is characterized by the presence of a wide spectrum of consultants. There are industry-accepted definitions that tend to categorize consultants based on their capabilities.
However, there are several other aspects by which you can segregate consultants and the types of services they offer. Since capabilities happen to be the fundamental differentiator for consultancy types, let’s start with the basic, and then move to specialization and a few other factors that
What is Consultancy?
The term consultancy is Latin. It’s also known as “Consultare,” which means “to seek counsel from someone.”
The priests of the Oracles of Delphi coined this word in Ancient Greece. These priests were the ‘s advisers for the society at the time, highly sought after for their expertise inresolving a wide variety of ambiguous matters.
Over the course of time, the term, ‘Consultancy’ has become a synonym for consulting firms, primarily in British English.
In modern parlance, ‘consulting’ is a service that helps you discover a solution to a problem that requires specialist knowledge in a particular field. A consultant is an expert with specific expertise and experience in the process or subject you are interested in.
How do we Categorize consultancies?
The services provided by consultants are known as capabilities. They frequently reflect the business functions that client companies should ideally perform to operate profitably. This component is critical in describing consultancy work. Most consultancies’ corporate presentations will include at least this information.
The Consulting Capabilities are organized into seven High-Level Categories, similar to a process map. The difference in size and budgets of the connected client services and the associated value that may be produced determine the market size for such capabilities.
I have discussed these seven High-Level Categories, in my 52nd Podcast. You can find the link in today’s podcast transcript which is at ConsultingQuest.com under our Podcast section.
After these high-level capabilities, specialization is the most important criteria to define the type of consultancy.
What is specialization in consultancies?
As you are surely aware, the consulting industry began with a focus on industrial efficiency and subsequently had a period of expansion in strategy work. The capability dimension was the primary driver, with the industry serving as a supporting role.
Several consulting gurus, like Bill Bain and Dominique Mars, have advocated for servicing only one client per industry to minimize conflicts of interest.
Companies, on the other hand, are becoming increasingly specialized. And for many clients, industry expertise is becoming a requirement, as well as a commercial and productivity lever for many businesses.
Types of consultancies like generalists, specialists and niche players. What does that mean exactly?
Generalist consultancies provide a wide range of services. They generally cover the majority of the Industry vs. Capabilities matrix.
Oliver Wyman is a generalist consulting firm that works with clients from practically every industry on issues such as strategy, sales and marketing, operations, organization, and finance. Mercer HR, a sibling firm in the MMC Group, provides Human Capital Consulting.
Specialist consultancies specialize in a certain area of consulting. They concentrate their energies and abilities on a single capability or industry.
For example, Camelot Management Consultants is a specialist consulting firm that solely works with four industries: chemicals, life sciences, consumer packaged goods, and industrial manufacturing.
Consulting firms that specialize in a certain field are known as niche players. They are the places where a matrix of services and sectors intersect.
Contax Partners is a Middle East and African niche consultancy concentrating on strategy in the energy vertical. Before moving out into other sectors, ZS Associate was primarily focused on sales and marketing in the pharmaceutical industry.
Pure Players and Hybrids. Another way to look at the market.
Companies that simply and only provide consulting services are known as pure players. The majority of big consulting companies, such as McKinsey, BCG, Bain & Company, and Oliver Wyman, are pure players.
Hybrid enterprises, on top of their main business, provide advisory services. They may specialize in auditing, legal, accounting, or systems. Deloitte, EY, and PwC which have Audit and Tax as their Principle business, Accenture, and Huron Consulting both of which provide systems, are some examples of well-known hybrid firms.
Now that Digital has become a must-have component of any business plan,. most consulting companies are establishing digital ecosystems or incorporating digital capabilities. On this front, Accenture is particularly active.
Similarly, former pure-play IT companies are increasingly purchasing consulting businesses to boost their IT activity. EDS had pioneered this technique by acquiring AT Kearney in the 1990s.
However, the collaboration failed to deliver as per expectation, and ATK executives agreed to a management buyout ten years later. The string of purchases made by IBM in recent years is an excellent illustration of this phenomenon. Huron’s acquisition of Innosight is yet another good example.
However, Other elements, in addition to a company’s specialized area, can assist you to grasp what you may expect from it.
What about other dimensions in types of consultancies?
First we have, Size & Geographic Footprint
A company’s footprint is vital, just as it is in other sectors. It can affect Consulting Services’ capacity to comprehend local company practices. The consulting firm’s original location can have an impact on the travel expenditure. Consider a six-month commuting crew from Germany to Singapore.
In most cases, size and footprint are closely connected. Individuals matter in the consulting industry. Consequently, ambitious firms scale and keep setting up offices in other locations.
The Second Dimension is the Ownership Structure
The majority of consulting organizations, like law firms, are organized as partnerships. The business is built on a small number of equity partners who act as “rain-makers,” bringing in customers and projects.
However, as they mature (and are frequently purchased), an increasing number of consulting businesses become public, are acquired by bigger traditional organizations, or are developed into a consulting division by other service companies.
The administration of a firm is often comparable to that of a partnership. The pressure on outcomes and revenue expectations, on the other hand, is different. Companies like Accenture, Oliver Wyman (owned by MMC), FTI Consulting, and Huron Consulting fall within this area.
Next, we have Profile of Partners
When you look at the profiles of the partners, you can see if they are a varied, entrepreneurial, technical, or clone army. It will also enable you to swiftly determine if the consulting organization is claiming experience without demonstrating it.
With today’s technology, you may now quickly access practically any consulting partner’s web information. You should be able to find their profile on both the corporate website and LinkedIn. If you request a proposal, you will almost certainly have included a third version of their résumé that highlights their relevant experience.
Now, we have the Delivery Model as our Fourth Dimension
The primary success indicators for a project are tied to how delivery models are seen. Hard or soft aspects might be linked to those essential success variables. Use advisers with a high sensitivity to soft factors to roll out your freshly produced strategy and gain buy-in.
To design this plan in a fact-based approach, you may wish to hire experts who are more focused on the hard aspects. Finding advisers who can work on both aspects is rather tough.
What you wish to achieve and how consultants typically function must be compatible. Some consulting businesses are better suited to detecting problems or developing strategies. Others will be highly useful throughout the execution phase.
There are a number of different types of consultancies, each providing valuable services to businesses in a variety of industries.
Consultants are hired when the client lacks specific expertise required to solve a complex business problem.
In order to know what their capabilities are? What value can they provide for your consulting project? You need to look into various dimensions of the firm like Size & Geographic footprint of the firm, ownership structure, Partner’s profile and Delivery model.
Now you have a better understanding of the types of consultancies and consultants based on their respective skill sets and their areas of specialization. You also know about the partners’ backgrounds and where they are located in the world.
As a result, you begin to have a clear concept of “what” they might accomplish for you, or at the very least “what initiatives” they could contribute value to. And that’s a prerequisite to better buy consulting services.
And that marks the end of our podcast, folks. Next week, I want to discuss the difference between Direct and Indirect Procurement. So, stay tuned.
Till then, stay safe and happy sourcing!
If you have other questions about the types of Consultancies, remember you can contact me directly on LinkedIn or by email because I am always game for a chat!
Bye and see you next week! Au revoir!