Introduction to Management

Consulting

Dr. Joe O’Mahoney 2007

1. To give an overview of the course

2. To know the definition, history and purpose of management consulting

3. To understand the consultancy market: the main players, industry segmentation, clients and trends

4. To gain an overview of the consulting life-cycle

5. To understand the basics of approaching cases, guestimating and analysing.

Today’s Learning Objectives

Management Consulting

1. The Course

2. What is Management Consulting?

3. Who are Management Consultants?

4. Clients

5. Analysing Cases

The Agenda

The Course

• Practical, Practical, Practical……

• Case-based (Harvard)– Develops skills

– Get jobs

– Highest retention rates

• To…– Understand Consultancy

– Analyse businesses

– Develop solutions

• No...– Books

– Theories

– Bullshit

The Course Pt. I

• Introduction to Consulting– Overview of Consulting

– Designing your own firm

• Proposals and Planning– Planning, Costing and Proposing

– Assignment: Speaker from StayMobile Ltd.

• Strategy Consulting & Market Analysis– Analysing Trends

– Making Recommendations

• IT & e-Commerce– Requirements Management

– E-business

The Course Pt. II

• Dark Sides of Consulting– Stress, manipulation and exploitation– Illegal trades: Enron, Parmalat, WorldCom

• Speaker Day 1: Consulting Work– EDS & Deloitte– Managing Delivery

• Speaker Day 2: Analysis with SSM– Jeremy Hilton: Private Consultant– Methodologies & Modelling

• Speaker Day 3: Consulting Careers and CVs– IBM– Getting a job & getting on

What is Management Consulting?

Historical & Future Trends

Dates Focus Hires Typical Firms

1890 – 1940

Technical Analysis Academics AD Little, Booz, Allen, Hamilton, AT Kearney.

1940 – 1970

Strategic Management MBAs & Academics

McKinseys, Bain & Co., Boston Consulting Group

1970 – 1990

Technical & Financial Specialisms

Graduates, MBAs

Arthur Anderson, KPMG, IBM, Deloitte, E&Y

1990 - 2000

Niche: outsourcing, e-business, BPR

Experienced hires

Razorfish, Sapient, Viant, iXL

• Big player recovery from 2000 - 2003 (DotCom bust)• Accountability (Chinese Walls, Enron, Sarbanes-Oxley, Basel II)• Diversification (M&A, Internationalisation, Sectors)• Image (MBAs, Up selling, Over-charging, Facsimile Consulting)• Projects (outsourcing, e-business, protection vs. emergent markets)• Competition (numbers, approved lists, proven track record, sceptical clients)

The Biggest Consulting Firms

• Accenture (IT, Operations, HRM)• Cap Gemini (IT, Operations)• CSC (IT, Operations)• IBM BCS (IT)• PWC (IT, Operations, HRM)• KPMG / Bearing Point (IT, Operations) • Deloitte (IT, Operations)

• McKinsey & Co.McKinsey & Co. (Strategy, Operations)(Strategy, Operations)• BAH (Strategy, Operations)

• MercerMercer (Strategy, HRM)(Strategy, HRM)• Anderson (Operations)

• A. T KearneyA. T Kearney (Strategy, HRM)(Strategy, HRM)• MonitorMonitor (Strategy)(Strategy)• BCGBCG (Strategy)(Strategy)• A.D. LittleA.D. Little (Strategy)(Strategy)• Bain & Co.Bain & Co. (Strategy)(Strategy)

Segmentation

• Industry– Telcos - Health

– Digital Media - Manufacturing

– Finance & Banking - FMCG& Retail

– Utilities - Transportation

• Function– Strategy - HRM

– Operations - IT (incl. e-business)

• Sector– Non-profit

– Public

– Private

/ Utilities

Technology Providers

Software Providers

Service providers

McKinsey

IBM

A.T. Kearney

Oliver Wyman

Deloitte

Accenture

PwC

CSC

EDS

Scient

Sapient Diamond

Strategy Consultants

A Consulting Typology

Sector Analysis Pt. I

• Strategy– Direction, Long-term plans & High-level goals– Lever to implementation– Bain & Co. - BCG– McKinseys - Monitor

• Operations– Day-to day running of firm, Reaching, strategic goals– Re-engineering, outsourcing, supply-chains– Accenture - Deloitte– Cap Gemini - CSC

Sector Analysis Pt. II

• IT– Systems development, implementation– Business focused requirements– IBM - AMS (American Management Systems)– Accenture - CSC

• HRM– Strategic alignment of people function– ERP, training, culture change, competence management– Accenture - PWC– Mercer - AT Kearney

Consulting Products

Dates Product Consultant Organisation

1976 Portfolio Analysis Henderson BCG

1980 Five Forces Porter Monitor / Harvard

1985 Value Chain Analysis Hamel & Prahalad Strategos / Harvard

1998 TQM Peters & Waterman  MIT

1990 Core Competencies Reichheld Bain & Co.

1993 BPR Hammer & Champy CSC

1993 Economic Added Value Stewart Stern Stewart

Products have a name, a methodology, an application and great PR

Consultants are charged with introducing ‘fashions’

Who are Management Consultants?

What is a Management Consultant?

1. Not the brightest and the best

2. Not all Harvard MBAs or even business students

3. Not Magicians, Preachers or Witch-Doctors

Depth of expertise: skill or knowledge based

Broad set of general consulting competenciesSkill Profile

Skills:• Outstanding interpersonal skills• Great Presenter• Excellent at writing reports

Knowledge:• Generalist business knowledge• Methods & Frameworks• In-depth specific skill

Basic Salaries (UK)

• Graduate £20 – 26k• Junior Project Lead £30 – 35k• Team Leader £40 – 60k• Senior Consultant £60 – 80k• Principle Consultant £70 – 100k• Partner £100k +

+ 10 – 20% bonus

+ car

+ health care, share options

• Highest salaries earned at niche consultancies

Design your own Consultancy

• In pairs: you and 20 consultants wish to start your own medium-sized consultancy. You will consult on general strategic management issues such as mergers and acquisitions, outsourcing and new product development.

• Write 10 scenarios (5 each) that you think might be likely to occur whilst running this consultancy. What functions, departments and skills will you need in the consultancy. Sketch a brief organisational design and strategy outlining:

• Skills Required• Structure & Function• Major Costs• Key problems

Clients

Marketing Consultancy Work

1. Finding a problem• External threats• Mimicking others• Falling behind: benchmarks• New opportunities

2. Marketing Consultancy• Links with top academics / Business Schools (HBS, MIT, Sloan)• Links to conferences, institutions, • Publications: books, journals, the press

3. Getting in• Free surveys / research• ‘Solution’ stories• Referrals• ‘Jumpers’

Why Employ Consultants?

1. Expertise

2. Objectivity

3. Someone to blame

4. To save money

5. External knowledge (e.g. best practice, benchmarking)

Types of project

1. Providing Advice: should I launch this product?

2. Project Design: how should I launch this product?

3. Implementation: install a system that will pay suppliers

4. Functional Management: run our department for us

Working With Clients

• Defining the project– Open Closed questions: Predicament > Definition > Solution– Key Decision Makers

• Enticing the Client– Free analysis– Free juniors– Corporate entertainment

• Successful Projects– Contract, contract, contract– Clear goals, roles & procedures– Boilerplating & reuse– Quick measurable wins– Solid Conclusions– The person not the project

The Consulting Life-cycle

• Initial Contact

• Project Definition

• Initial Analysis

• Formal Proposal

• Contract

• Project Implementation– Data Collection– Data Analysis– Decisions / Plan– Intervention

• Review

Initial Contact Definition Proposal & Contract Data Collection

Data Analysis

Decision-making,PlanningIntervention

Disengaging

Review

Initial Contact Definition Proposal & Contract Data Collection

Data Analysis

Decision-making,PlanningIntervention

Disengaging

Review

The Consulting Life-cycle

Analysing Cases

Case 1: LightBox Inc.

• I am the CEO of a light-bulb manufacturer. I have developed an ever-lasting light-bulb.

– How much should I sell it for? – What will the increase in our share-price be?

Additional Information

• It cost £20 million to develop the product.

• It costs £5 to make the product

• Normal Lightbulbs– Cost £0.5 to manufacture

– Are sold to distributers for £0.25

– Who sell to retailers for £0.50

– Who sell to the customer for £0.75

• What about the markets?– Cannibalisation?

– Government?

Case 2: Three

• The Company– Hutchison Whampoa

– Owned by Li KaShing ($20bn)

– Family interests of $630bn

– Owns ports, telecoms, property (Hong Kong)

• The Context– 3G Telecoms: video & music over the phone

– 1999: UK first gov. to sell 3G licences

– 2000 – 2005: Followed by most others

Case 2: Three

• The Decision– Should Hutchison buy a 3G licence in the UK?

– How much should they pay for it?

– What strategic issues should they look out for?

Links

• http://www.vault.co.uk• http://www.mca.org.uk• http://www.mbajungle.com• http://www.consultingcentral.com• http://www.feaco.org • http://www.mca.org.uk • http://www.amcf.org

Questions?