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Why Many Consulting Firms Fail!

Creative Disruption Hits The

Consulting Industry

Presentation to IMC April 14, 2017

Phil Andrews

1

First Of All, It Is NOT A Unique

Phenomenon To The Consulting Industry

• From the early ‘70s to today, 70% of the F-500

have either went out of business or were

absorbed by their competition

– PanAm, TWA, Eastern …

– Pen Central …

– US Steel, LTV, Bethlehem Steel …

– RCA, NCR …

– DuPont …

– American Motors …

– Citgo, Getty Oil, Mobil, Texaco, SOHIO …

Phil Andrews - Copyright 2

Here Is More Scary News

3 Phil Andrews - Copyright

The News Is Even Worse For

SMEs

• "About half (50%) of all new establishments

survive five years or more and about one third

(33%) survive 10 years or more. As one would

expect, the probability of survival increases with

a firm’s age. Survival rates have changed little

over time.”

Source: U.S. Bureau of Labor Statistics


What Do You Think Is The Failure

Rate For Consulting Firms?

• 50%?

• 60%?

• 70%?

• 80%?

• 90%?


The Answer: (Over the last 20 years)


Over

To Be Fair …

• The country has witnessed an explosion of

consultants the last decade (or so) because

many people that were laid off and could not

reenter the workforce have become consultants

– USA has become the land of the consultants

• ≈600K registered, well over 1M unregistered

• However, most of them are subject matter

experts, and not real consultants!


Some Notable Consulting

Failures and Flubs

• Bearing Point (KPMG) European Firm

• Booz & Company PwC

• Monitor Group (Michael Porter’s firm) Deloitte

• Thomas Group

• Ollie Wight

• EDS/AT Kearney Consulting (split)

• George S. May (GSM) and 100+ of their clones (i.e.: IPA

and Strategic Business Partners)

• ABC (still around because they have gov. institution support)

• XYZ (2 projects in 3 years --- all 1099 employees)


Why Do So Many Subject Matter

Experts Fail?

1. Narrow breadth of industry knowledge

2. They still behave and think as employees

3. Their tools, techniques, methodologies … and

communications are not the best

4. They are not exactly client-focused (although they

think they are). They are project focused

5. They are too sensitive (when challenged)

6. They don’t develop their own brand

7. They don’t network effectively


Business Fads Come And Go … and

So Do Thousands of “Experts”

The key to survival is to

keep reinventing one’s self!

10

Consulting is in a constant

state of Evolution!

Note: NOT a complete chart

And This Trend Will Continue …

Actually Accelerate


The gap is

getting bigger

1995

This is the typical

problem – most experts

become stuck on one

body of knowledge, like

LSS, for 20+ years LSS today is

NOT a strategic

enabler --- just

the ante to stay

in the game

This is both the

opportunity and the

trapdoor for

consulting firms

Why Do “Average” Consulting

Firms Fail?

• Most of them are stuck in old this old consulting

business model (popularized by George S. May)

1

2

3

1. Telemarketing, Cold

Calls and Sales

2. Analysis

3. Consulting

So, what is wrong with

this model?

12

Desperation

“Have hit wall”

Foresight

“See the wall”

Ambition

“Build a wall

behind them”

Them You

Panic

“Trying to Stop”

80%

2%

8%

10%

The “average” consulting firms target

these types of companies

A KEY FACT WHERE COMPANIES STAND


The premier consulting

firms like McKinsey,

and Bain target these

types of companies

In Other Words, Most Of The Consulting

Clients Are “Oxcart In The Ditch”

The Outsourcing Industry also went after them as well

because selling one’s services is easy to one that is in trouble!

It is easy pickings!

But the big question is: “Is it worth it”?

EDS found out the hard way that it is NOT worth it!

… and so did GSM and thousands of others! 14

WHY? Here Is An Old Nugget Of Wisdom

• When one chases the maimed and wounded

(like the Ambulance Chasers), eventually she

or he will only end up competing on price,

NOT on VALUE!

But in the consulting world, one CANNOT afford to

become the Wal-Mart of the industry because that

perception is deadly. Consultants are supposed to be

thought leaders, intellectuals and scholars,

demanding/deserving a premium price!


Be Aware

• Consultants who focus on the "oxcart in the ditch"

tarnish the reputation of the consulting profession

because their clients who fail blame the

consultants

• Consulting profession gets a black eye

– Primarily due the fiascos of GSM and their clones

• This is why the big consulting firms embrace the

term Trusted Advisor, and avoid the word

"Consultant”. (However, most SMEs do NOT know the difference

between Subject Matter Experts, Consultants and Trusted Advisors)


This Is How GSM Ended Up:

• Average Duration of Analysis*: 2.5 Days

• Average Cost of Analysis*: $400

• Maximum Cost of Analysis*: $1,000

• Lowest Cost of Analysis*: $0

• Avg. Length Of Engagement: 7- 8 Days

• Avg. Satisfaction Rating: 5 (out of 10)

• Avg. Customer Revenues: under $5M/yr

* GSM found it very difficult to sell Analyses to SMEs

and this is the main reason for the low duration and fees


Let's Get Back to How the Consulting

Industry Has Changed

• Is there a new business model that represents

“creative disruption” in the industry?


Reminder https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption

19

https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption











Phil Andrews - Copyright 20 What other models are there?

Biz Smarter fits here,

but not exactly

The Key Consulting Migrations (Trends)

22 … and that’s NOT all!

Interesting Point

• Most of the problems are tied to faulty or Missing

Strategies … and yet most companies still

ignore STRATEGY(ies)


HR

Finance

SCM

IT Ops

Business Marketing

Product

Brand

Alliances

Customer

Service

Talent

Maint.

Funding

PLM

O/S

EH&S

Key Point

• Technology is one of the top two ways to cause

seismic changes and major disruptions. The

other one is Strategy (changing the Business

Model). The choices that companies have:


Plug every hole; “stop

the bleeding”

Get a new, bigger and

better bucket

Explaining The Difference

Phil Andrews - Copyright

• One can plug all the holes, stop the bleeding …

and still lose the whole company

– This is exactly why the Analytical and Diagnostic tools

are of limited value

– Fixing problems represents the Bottom-Up

Approach (= Tactical & Reactive Thinking)

(same mentality as Remedial Maintenance)

• Creative Disruption represents the Top-Down

Approach (= Strategic and Proactive

Thinking) (Same mentality as TPM)

26

Some Of The Best Disruptors

• Omniconvergence

• Omni-channel

• IoT / Industrial IoT

• AI / Smart Robots

• Big Data; Blockchain

• Smart Businesses / Smart Factories

• Smart Logistics / Smart SCM

• Business and Innovation Ecosystems

• Shared Economy Phil Andrews - Copyright 27

Another Interesting Trend https://www.marketplace.org/2015/12/09/business/startup-disrupting-consulting-industry


College grads going into consulting

now have a new type of firm to apply to

— it's a startup called HourlyNerd.

https://www.marketplace.org/2015/12/09/business/startup-disrupting-consulting-industry








Other Interesting Trends http://www.consultancy.uk/news/13111/trends-and-challenges-in-the-management-consulting-industry

http://www.infodesk.com/consulting-industry/key-trends-in-2017-for-the-consulting-industry

• Law Firms are now interested in starting consulting

divisions … and so are Innovation Centers and

Accelerators

• Online Consulting

• Freelance Consulting; crowdsourcing and multi-

sourcing consulting delivery (see: https://www.expertdb.com/ )

• Partnerships with firms outside consulting

• Performance-based pricing; multi-fee options and

flexible pricing

• Stake in the outcome or equity position in a client’s

company in lieu of fees


http://www.consultancy.uk/news/13111/trends-and-challenges-in-the-management-consulting-industry


































https://www.expertdb.com/

https://www.expertdb.com/

How Consulting Firms Respond

to Business Disruption


Omniconvergence Design

Thinking Holistic Thinking


Niche Player Limited Growth, Limited Power, Impact and Influence

Thought Provokers

To Be Used For Discussion Purposes


The Times and Paradigms Are

A-Changing

Traditional Consulting

• Going it alone

• Point solutions

• Knowledge and content

have value – Knowledge

is power

• Focus on fixing or solving

a particular problem, incl.:

– Improving and

reengineering

– Turning around and

transforming, etc.

Leading Edge Consulting

• Business ecosystem

• Holistic solution

• Knowledge and content

have low value and no

power (democratization of info)

• Focus on anticipating and

preparing, incl.:

– Strategic Planning

– Sustainability Planning

– Creative Disruption

Planning


Why Focus On:

• Because that’s where the real wealth is

– AirBNB

– Alibaba

– Amazon

– Dropbox

– Facebook

– Snap Inc.

– SpaceX

– Tesla

– Twitter

– Uber

– Many others


Customers want consultants that know how to achieve this

… Because We Reinventing Every

Industry and … Our Entire Civilization

• Ag/Farming: Vertical Farms/Gardens, AGVs …

• Manufacturing: 3-D Printing, AI, Smart Robots …

• Transportation: Driverless Vehicles, Drones …

• Retailing: Online 7X24 …

• Health Care: Telehealth, Telemedicine …

• Education: Online and Continuous Education …

• Defense: Cyberwars, Robotic Soldiers …

• Aerospace: Inter-planet Travel, Colonization …

• Mining: Exploiting Resources Of Other Planets


The Times and Paradigms Are

A-Changing (cont’d)

Traditional Consulting

• Approach: One-Size-Fits-

All

• One sales channel

• Few lead generation

engines

• Usually stuck on

implementing 1-2 bodies

of knowledge, like LSS

• Ignoring Change

Management

Leading Edge Consulting

• Approach: Customized

solutions

• Multiple sales channels

• Multiple lead generation

engines (there are 80+)

• Leveraging all BOKs ---

better yet integrating them (e.g.: LSS + Green + Sustainability

+ Conscious Capitalism)

• Always applying Change

Management Phil Andrews - Copyright 36

This Is An Important Megatrend

That Applies To All Industries, incl. Consulting


This Is Who or What XYZ Really Is

38

The problem is that they don’t

know how to leverage it.

A Business Ecosystem

for Consulting

Banking, Capital Growth &

Wealth Management

Legal Strategies &

Advise

Risk Management,

Safety & Insurance

Product, Service &

Distribution Design

HRM, Human Capital

Consulting & Exec. Comp.

Information Technology Consulting

Leadership & Organizational Development (Coaching & Mentoring)

Operational: Quality Mgmt,

Supply Chain Mgmt,

Lean Six Sigma, Sustainability

XYZ’s Business Ecosystem

Financial, Accounting, &

Taxation

Business

Development Branding/

Marketing/Sales

Enterprise Strategic Planning

M&A

Manufacturing

39 Their 250+ members fit into those types of

“buckets”

This image was created

by their own Marketing

Committee

40

Banking, Capital Growth &

Wealth Management

Legal Strategies &

Advise

Risk Management,

Safety & Insurance

Product, Service &

Distribution Design

HRM, Human Capital

Consulting & Exec. Comp.

Information Technology Consulting

Leadership & Organizational Development (Coaching & Mentoring)

Operational: Quality Mgmt,

Supply Chain Mgmt,

Lean Six Sigma, Sustainability

… But they only promote & espouse these services:

Financial, Accounting, &

Taxation

Business

Development Branding/

Marketing/Sales

Enterprise Strategic Planning

M&A

Manufacturing

One cannot sell the services that are not

known to the clients

41

The Big 4

Consulting

Firms’ Approach

Leveraging The Ecosystem

• “I need a Business Strategy” We got it

• “I need HR Help” We got it

• “I need Leadership Development Help” We got it

• “I need a personal Executive Coach” We got it

• “I need a Fractional CFO” We got it

• “I need a Wealth Management Plan” We got it

• “I need a Risk Management Plan” We got it

• “I need IT Outsourcing” We got it

• “I need Payroll Outsourcing” We got it

42

This is part of the holistic

approach

Never-Never Say To A Prospect:

• “I am sorry, but we don’t do that!”

(unless the proposal is unethical)

43

This response does not cut it

and does not leave the door

open for future interactions

or

Phil Andrews - Copyright

What It Takes To Manage The

Business Ecosystem

• A solid and crisp Strategy

• A crisp offering (product and service portfolios)

• An organization (formal structure), similar to managing

a dynamic and High Performance Organization (HPO)

– Managers for Marketing, Sales, and Ops are NOT enough

– Relationships, interfaces and "handoffs" need managers, too

– HPOs need budgets

– Loyalty, stability and glue meld partners. 1099 employees lack

commitment

• HPOs need business / technical, knowledge and

innovation infrastructures (see next slide)


41

MIT’s Proven Model For

Transformational Success

45

Offering

Organizational Boundary Business

Infrastructure

Culture

External Technological

Environment

Social Political Economic

External

Socioeconomic

& Political Environment

C

u

s

t

o

m

e

r

s

Technical

Infrastructure

Structure

People, Skills

Strategy

Clarifications: a) Business and Innovation Infrastructures become one.

b) Technical and Business Infrastructures include the Knowledge Infrastructure.

https://centricdigital.com/blog/digital-trends/disruption-

in-consulting-how-consultants-are-adapting-to-help-

clients-succeed/


https://centricdigital.com/blog/digital-trends/disruption-in-consulting-how-consultants-are-adapting-to-help-clients-succeed/
























Additional Reading

• http://edenmccallum.com/pdfs/Consulting_Firm_of_the_

Future_2013.pdf

• http://www.roiinstitute.net/wp-

content/uploads/2014/12/Building-a-Successful-

Consulting-Practice.pdf

• http://aom.org/News/Press-Releases/Why-do-promising-

management-practices-so-often-fail-New-research-

blames-lack-of-expertise-among-consultants.aspx

• https://fail92fail.wordpress.com/2012/07/17/what-is-

traditional-consultancy-and-why-it-mostly-fails/


http://edenmccallum.com/pdfs/Consulting_Firm_of_the_Future_2013.pdf



http://www.roiinstitute.net/wp-content/uploads/2014/12/Building-a-Successful-Consulting-Practice.pdf












http://aom.org/News/Press-Releases/Why-do-promising-management-practices-so-often-fail-New-research-blames-lack-of-expertise-among-consultants.aspx


































https://fail92fail.wordpress.com/2012/07/17/what-is-traditional-consultancy-and-why-it-mostly-fails/


















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