There is every chance that at some point in your career you will need to take on advice on where to take your business. Maybe you will get this from a peer, a previous colleague, or it might be your manager. Either way, it might turn out they do not have the answer you need.
This is ok, not everyone has every answer available at their fingertips at all times. Sometimes you need a little extra help, and that is where consulting firms come in. With so many businesses dedicated to consulting, however, what type of consultancy do you need?
This article will delve into both strategy consulting vs business consulting. By the time you have finished reading, you should have a good idea of what both directions can offer you and which you should be aiming to hire.
Why Might I Need a Consultant?
There are a large number of reasons why you might require a consultant, generally. It could be that you are losing money, or you might not be making the deals you wanted to make. You could have conceived of a strong concept for your company but when it came time to actually implement it you may have had problems.
In general, a consultant should be coming to your company with a strong sense of who you are and an intent to improve your business in a variety of ways. They may already know what the problem is, or they might need to spend time investigating your issues from the ground up.
Given enough time and freedom to make suggestions, a consultant can help your company plan for the future of your industry. They can also give both general and specific advice on how to improve your potential in your friend.
It may be that you are missing opportunities that come up due to putting out fires in your own workplace first. If that is the case they will suggest reorganizations you can do to make the most of the situation as it currently stands.
One of the best things about a consultant is they can give you an outsider’s view. This will likely be far more objective than any viewpoint currently espoused within the company itself.
Third-parties are much more likely to see problems and talk plainly about them. Whereas insiders often cannot see the woods for the trees or feel they must hide behind etiquette.
Generally, consultants can assist you where your own teams have failed and can be a boon for any company looking to be self-reflective. So long as the company has the follow-through to improve, they can take what they get told on board.
Strategy Consulting vs Business Consulting
Both the use of strategy consulting and business consulting can be a time to reflect. They are often used to improve your company’s processes one step at a time in a way that should improve your approach. Which one is best for your company depends on exactly the situation you are trying to resolve.
In a very broad sense, business consulting is generally focused on business processes. These are things like human resources, finance, building maintenance, and health and safety. A consultant would look at these and discuss methods by which money could be retainable in each area.
They would also search for areas of liability and determine where you may get in trouble in the future. This can be so the efforts by the consulting are not in vain at a later time.
Strategy consulting, on the other hand, will focus itself on a specific concern. It may be that your company is losing money to a competitor. If that is the case they may focus on what makes you and your competitor unique to find a unique selling point for your product.
Strategy consulting is often described as a niche in management consulting. It will often advise the highest echelons at a company.
Alternatively, it could be that one of your products underwent a market perception shift. If that is true, they may be able to inform you of how to remarket yourself towards a new vision for the product.
There is a lot more to both approaches, however, and you should be aware of exactly what each one entails before deciding on a path for your business.
The History of Strategy Consulting
Strategy consulting began as a part of the larger concept of management consulting. This started in 1886, formed by a group called Arthur D. Little Inc.
Their first major project was with General Motors’ initial research and development branch. In this area, they gained a fast reputation as being able to solve any problem.
In the 1930s, however, a boom in the economy led to huge growth in the demand for such services. Multiple companies opened their doors to assist other groups. Many new businesses needed advice, and such consultancies were champing at the bit to prove their worth.
By the 1980s, the industry had grown in leaps and bounds. In this decade, there were at least five consultancies with over one thousand employees. By the ’90s, this had exploded to over thirty firms.
One of the main reasons for this was the sudden surge in information technology needs. This meant a great many people needed advice on how to set up and maintain I.T. infrastructure.
This new technology pushed the strategy consulting business in new directions. They took advantage and expanded their ability to promote themselves.
These days, even governments hire strategy consultants. They do not take part in decision-making. Instead, they evaluate government entities.
Government strategy consultants evaluate existing industries or publicly-owned groups. and provide reports on their success. This entitles the governments they work with additional insight into these areas. Areas where the government may not have personal experience or good business acumen.
Strategy consultants are also often seen these days as people who focus on trying to change company culture from within. Directives such as the FISH! Philosophy or diversity groups present themselves as this kind of consultancy in action.
The History of Business Consultancy
During the history of management consulting, a specific set of niches developed. These were for when companies needed to focus on their internal processes, such as finances, law, marketing, or human resources.
Many of the same players as in the strategy consulting world got involved with business consulting from an earlier stage. It was only when different forms of consulting began to take shape, however, that business consulting became a form in its own right.
These days, business consultants get brought in earlier and earlier in a company’s timeline. They are often focused on companies in a period of growth and upheaval. Therefore, they tend to assist when a human resource division needs to be set up.
Alternatively, they get involved when companies install various legal frameworks. They enter at this stage to ensure the company follows appropriate guidelines to ensure its legal position.
Over the history of business consulting, they have grown more and more focused on specific areas. At the start of the consultancy industry, you might have one consultant for your whole business. These days, you would tend to require one for each area where you are having difficulty.
As the Internet has become more ubiquitous, business consultants have been able to stay more and more in contact. This has allowed niche consultants to remain off-site and get called on for specific tasks more often and not always be on call.
Despite the disparate nature of such consultants in this day and age, the market for business consultants has now grown. It now stands at over one hundred and thirty billion dollars. This has made it a very healthy place to work and thrive.
Who Are the Big Players in Business and Strategy Consulting?
Business consulting, or management consulting, is a very large part of the consulting industry. Because of this, most consultancy firms have dipped a toe in its waters.
Due to this lack of focus, the business consultancy industry has split itself into multiple spheres of interest. These include information technology, recruitment, or employment agencies. Each of these spheres has skewed into the consultancy business to take advantage of the profession’s needs.
Regardless, some companies hold onto these branched firms. They continue to consolidate themselves into corporations with significant reach. This allows them to reach dizzying heights in the industry and beyond.
The four primary consulting firms, known as “the big four”, include:
- PricewaterhouseCoopers, an English and American conglomeration that operates in over 150 countries
- KPMG International, focusing on tax, audit, and advisory services in over one hundred and fifty countries
- Deloitte Touche Tohmatsu Limited, a private company in the United Kingdom consisting of multiple firms
- Ernest & Young Global Limited, a British-based service with nearly three-hundred thousand employees.
The above four consultancy firms make up over thirty-nine percent of the consultancy market in terms of business share. This makes them a significant player in the area.
With the rest of the top two hundred entries, they add up to around eighty percent of the market. This shows that these four hold a significant amount of clout.
As time goes on, both the market as a whole, as well as these four’s shares, continues to grow. There are huge gains still available even for those who are not currently in the top four.
Booz Allen Hamilton, for example, recently won a contract with the US Department of Transportation. They are showing that even the big players are beatable in the open market.
What is Unique About Strategy Consulting?
This method of consulting focuses only on the proverbial levers it can pull to deliver the intents of the business. It is externally-focused. While it may change things within the company, its goal is wholly the grand success of those it grants consultancy for.
Changes it may choose to make could be from a wide set of areas, examples include:
Challenging organizational structures: This is to ensure employees are well-managed. They will ensure members of staff follow processes appropriately. Older companies are prone to stagnation, meaning a shakeup can help discover areas of issue.
Encouraging transparency: Ensuring the top level of the organization has eyes on all of those underneath them. This is so that management can make decisions with the highest level of scrutiny and knowledge available.
Preventing micromanagement: This is often done by retraining management and executive teams. After this, they will have greater trust in those underneath them. If necessary, hiring and firing of others must occur so that the executive team can have faith in those they are overseeing.
Investigating the current strategy: To ensure management aim the company in the correct direction. If money is being wasted on superfluous tasks, the consultant will discover it. Those in charge can then ensure things are moving forward wisely.
Checking human capital: The consultant can ensure the business’ human resources are well-assigned. This is to make sure the correct amount of human resources are available to reach the company’s strategic goal. They will be able to inform a business of exactly how much they need to upscale or downsize in each area.
Discovering specific concerns: A strategy consultant will interview individual team members. This will occur to find weak links in the chain. They will then make recommendations on retraining or reassignment as needed.
What is Unique About Business Consulting?
Business consulting is usually aimed at senior management. It aims to focus on the business’s processes to find areas of concern in how they organize themselves.
Executives hire business consultants for one specific purpose. For example, a company may wish to focus on ensuring their team does not limit customer growth. Or will encourage the company to innovate in a particular area above everything else.
Business consultants will investigate that one concern above all others. They will then iterate on methods to boost the company’s ability in that regard.
Some of the consultant’s roles may overlap with those of a strategy consultant. A business consultant, however, also attends to organizational matters. While their role may involve discussing a new strategic plan for the company, it will not come down to them to put it in place.
Example tasks for a business consultant may be to focus on:
Outsourcing: Determining what the company can remove from their docket by pushing it to an external agency. This will assist the organization by allowing them to focus on important and complex matters. This is in contrast with day-to-day problems which the company can move elsewhere.
New Technology: A business consultant may investigate a new IT system, especially if the old one is holding the company back. They will make use of the resources at their disposal to upgrade the company with minimal cost.
Optimization: Some companies have a definitive output. such as software iterations or discrete products. In these situations, a business consultant can look at the internal processes by which the company produces its product. They may make recommendations on new flow, systems such as Agile development or lean architecture.
Is Either Of These the same as Management Coaching?
Management coaching has often been mistaken for business and strategy consulting. This is due to such consulting sometimes needing to improve management’s outlook.
Management coaching is a process by which those in an organization’s decision-making tier improve their methods. There are many methods by which this can happen. Examples include direct teaching and training, or by allowing managers to shadow other members of the company.
Business consultants may encourage the upper echelons of a company to undergo management coaching, but it is not the same process. Similarly, strategy consultants might ask for managers to gain a better understanding of how to succeed. It is still not the same, however, as other things happen at the same time during a consultancy period.
When Might You Need a Strategy Consultant?
A strategy consultant is often required when you notice a company has lost its direction. This may be due to several reasons, but a common symptom will be that it tries multiple methods of changing its output in quick succession. This often suggests it is struggling to find its feet after a failure.
In this situation, the effectiveness of the company’s current strategies has been somewhat lacking. They may need an outside perspective.
Internally, their organization may be performing poorly and morale may be at an all-time low, leading to a failure to output products. Externally, the perception of the company may show confusion and it may be hard to ascertain what the company’s direction is.
If external impressions are that the company can travel in a straight line. If that continues, it will start to lose clients as they feel like the organization cannot match their needs.
As someone in charge of the organization, you should remain aware of this possibility at all times. Other symptoms may include increased defensiveness from senior staff. This will likely be due to them wishing to justify their position.
Alternatively, problematic behavior from non-management staff may suggest such problems. This will be as they feel aimless or pulled in multiple directions.
There is often not one reason for this to be the case, but you should investigate which it is. Different problems may lead to you requiring different forms of strategy consultant to react in unique manners.
There is a great diversity in the disciplines of strategy consultants. As this is the case, being able to communicate your needs well is a good first step.
Then again, you can always hire a strategy consultant to perform the diagnosis first.
When Might You Need a Business Consultant?
Sometimes you may find your output slowing down when there has been no need to pivot. This is often a good sign you should hire a business consultant. It will often be a symptom of an internal problem rather than a concern with the business’ direction in the wider world.
Another area might be if you find yourself falling behind technologically. Sometimes tech has simply been an area you have not ficus and therefore you do not have the internal expertise to diagnose how to improve. A business consultant can interface with your I.T. specialists and ensure you get the best upgrade possible.
Other areas of business consultancy include attempting to reassert an appropriate company culture. This can be very difficult, especially if you wish to pivot to a new line of thinking within an existing space. Business consultants are well-placed to assess your company and determine how to go about this.
They can investigate how your employees currently work, then determine how best to change that. Trying to enforce a new culture from the executive level down rarely works. Instead, they will foster a culture that fits your employees and gets the best work out of them.
If you find your company growing, remember that you do not always need to set up internal processes yourself. If you require a new HR department due to your company growing, business consultants can help get them off the ground.
Alternatively, you might all-of-a-sudden find your business not needing a portion of the company. This may be due to an internal redundancy or a market change. In these situations, business consultants will look at your company’s needs and perform a variety of roles to determine how best to move forward.
What Are the Signs of a Good Strategy Consultant?
When you bring a strategy consultant onboard, you will want to ensure they are up-to-speed on the company’s history. You will also want to make sure they are aware of existing strategies.
This requires they be a fast learner and able to pivot to working how your business currently operates. If they do not, they will fall behind. They will be unable to evaluate your position in the market and provide methods by which you can seek to improve.
A consultant must work with many external businesses. Because of this, they should be able to adapt to any situation no matter what they get thrown their way.
You do not want someone who uses the same methods again and again, because they worked with previous companies. You want someone who is highly adaptable and able to work with you to produce results despite not being in the same location they were before.
When working with a strategy consultant, you want to ensure they are self-motivated enough to get going without your oversight. They are the ones who should produce reports on how to improve your company, not you. You are, however, expected to follow their advice.
When working with a strategy consultant, you should also ensure they have a strong understanding of the market as it currently stands. There is no use in having someone focused on strategy when they do not know how to move. It would be like playing chess and not being able to see your opponent’s pieces despite knowing how they can move.
Finally, trust your gut. If you feel you do not trust a strategy consultant to have the best interest of your company at heart, you can always ask for a new one. Sometimes someone might simply not be a good fit.
What Are the Signs of a Good Business Consultant?
Similar to a strategy consultant, make sure any business consultant you bring on has your specific company in mind. If you get the feeling they are peddling out the same tried solutions to everyone, show them the door and hire someone bespoke. If they are not invested in making your company the best it can be, they are of no use to you.
A good business consultant will also not give you one solution. They should have a good range of knowledge and also allow your business to make its own decisions based on many options. Therefore, a consultant who knows their stuff will be able to offer a range of solutions.
You will then be able to pick one which matches your culture and budget. This will get much better buy-in from your staff than receiving a mandate about what they should do at every turn.
Good business consultants should also have a solid network of contacts. If you hire them to assist you in building an HR team or an IT infrastructure, they should have multiple people who they can draw on to assist. If they only know of one group who can help you with a particular problem, they are either accepting bribes or are terrible at networking.
Finally, you should know that the best choice for consultants is someone who cares about improving a company, not pushing methods. They may love Agile, lean processes, waterfall, or many other things. That does not matter, however, when it comes to the fact your company’s output should be the priority for them.
If the consultant is pushing a personal favorite methodology, maybe it does work. They should also be aware, however, that your company might not work with that process.
Making Sure a Strategy Consultant Can Do Their Job
Ensuring a clear line of communication between the management team and a strategy consultant will be the best way to empower them both. Without this, the consultant will not be able to ask questions when they need to and the managers will be unable to learn what to do next.
This often starts with focused meetings and interviews with those in charge but can go a lot further than that.
Ensure the managers know the reasons the consultant will have involvement in the company. There needs to be buy-in from all affected levels, so they need to understand and own up to their own failures. If they do not, the company will be unable to move forward even with the consultant’s assistance.
Regardless of what kind of consultant you have, you also need to make sure they get feedback. Consultants thrive on knowing how they are performing and how the team is responding to their suggestions.
One of the biggest problems a strategy consultant can come across is a team that does not trust them. The consultant’s credentials and attitude should speak for themselves. If this is not the case, however, work with them to improve the situation.
Sometimes the best thing a consultant can do is be honest about the reasons behind their purpose there. Even if there is a chance their feedback will have wide-reaching repercussions for the future of the company.
It is better for everyone that their interactions be from a position of transparency and honesty than finding out the worst later on. If that happens, it will taint any further interaction. You do not want to find yourself with a consultant whose expertise is no longer put to use as they are not trusted.
Making Sure a Business Consultant Can Do Their Job
Working with a business consultant to make changes in your company can have many benefits, but their hands need to be free to make those changes.
To ensure this happens, make sure to get them up-and-running with whoever it is they need to be working with.
As they will be new to the company, introduce them to whoever their main point of contact will be and make sure they have an open line to them whenever needed. This will prevent them from finding bottlenecks as they start to work and allow them to get answers to questions fast.
It is very unlikely they will need as much onboarding as new employees, as they will not be actually working within the processes of the company. It is important, however, to ensure they get the same literature as the rest of the company. Handbooks and other documents may reveal issues with the internal policies which ripple into other areas.
You should also be aware that sometimes consultants try to move outside of their assigned field. If someone is there to set up a new HR department, then they attempt to look into hiring and firing processes, you should not be afraid to question it.
They may be acting with the best intentions and may even believe these are part of their role, but you want to focus them on their primary task.
What you should do is define a direction for the consultant, communicate expectations, and have them show they understand. It is not a problem to put limitations on someone if that is all they are there to do. On the other hand, be aware that you may do this when it is not required and you should be aware of your own motivations at all times.
When Might You Need Both Consultants?
Sometimes it is very important to get different outlooks on a particular issue. Some firms, therefore, choose to hire one consultant for advising on strategy. Then they adjusting the business based on the results of that consultation with another consultant.
This may be for a variety of reasons, but one of the most significant ones is that some firms are better at some tasks than others. One might be better at the analysis of a problem in a company, whereas the other might have a better network of people who can assist with a solution.
Be aware that you have formed your company out of disparate demographics. The consultants who work with the executives may have buy-in from your CEO, but that does not mean a shop floor or group of programmers will trust them. The reason the consultant works well with the CEO might be that they think alike, leading to a culture clash with other sections of your company.
Alternatively, the issue may come down to money. A consultant for your business may pitch a different estimate for costs for different kinds of consulting. Make sure to talk to multiple companies about what they can offer and for how much.
Also, be careful of hiring both in at the same time. The last thing you want is different firms vying for your attention at different times. Most will be too professional for such a thing to happen, but it is not outside the realms of possibility if two groups compete.
Which Consultant Will Cost You More?
According to popular comparison websites, consultancy rates can vary depending on several factors.
Unfortunately, most consulting is a well-kept trade secret. This is because companies wish to charge different rates for the same services based on the client. This means there is only limited advice available to work with.
Rates can go from $50 an hour for a business consultant all the way up to $350 per hour for someone working for a leading strategy consultancy firm, or more.
In general, however, most fees are not related to the types of consultancy which are occurring. They are instead more based on the firms which are providing the service.
As expected, the top four firms are those who will be charging you the most. In exchange for that, you can expect a level of professionalism. Many people, however, prefer a small independent outfit for the bespoke service they provide.
Also, you should be aware that a consultant may start to discuss “retainer agreements”. These are a flat fee for a service, rather than for hourly work. If you begin to trust an individual, this may be more beneficial to you as a business to save money.
Business consulting will often be likely to only take up one smaller project, rather than ongoing work. For this reason, a strategy consultant kept on over a longer period of time will likely ask for a retainer. This is up to you if you choose to go for it, but just be aware of how it may affect your annual or monthly budget.
How Might Consultants Affect Employees?
There are potential differences between how those in the workforce perceive different consultants. Most of these relate to who they interact with and produce very different results.
If a consultant is only working with the executive team, as strategy consultants often do, employees may perceive them as aloof. There may also be a lack of trust if they work with an adversarial exec group. This would be part of a larger problem, so you should be aware of it as a possibility.
The perception of business consultants is far less likely to be similar. This is due to them focusing on improving specific business areas. They are far more likely to make enemies if they tread on people’s proverbial toes. If they make sure to work with other employees and prove their worth, however, you should not have issues.
Those in your company may welcome a business consultant, but make sure to remind them that the individual is not a part of the company per se.
Not only will that improve morale once the contract is over and the consultant must leave your services, but there are legal reasons for this also. You do not want to confuse the matter of whether or not the consultant works for you as a full-time employee or not.
The post Strategy Consulting vs Business Consulting: What’s the Difference? first appeared on Kamyar Shah.