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Lean Banking Can Transform Your Institution. Don’t ignore it.

Let’s start with the great news – financial institutions that are leveraging Lean banking operations achieve up to 30% cost reduction within 2 years, and are maintaining cost-efficient operations better than the average in the industry.
Lean processes are being adopted globally by organizations prone to inefficiency that are negatively affecting their earnings.

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How to Streamline Your Sourcing Process So You Can Have More Time for Things You Love – Golf, Tennis, Travelling Perhaps?

We do not imply that you don’t love the sourcing process when selecting Consultants, but we like to talk about a few methods that can make it way more effective.
Ready? Here is how you build a perfect sourcing process with little margin for error.
Our top 8 tips you can easily apply are listed below:
 
1. Get the NDA Assurance –
This simple agreement with your Consulting providers can go a long way in protecting you and your business, by keeping the information you share, confidential. Request and offer NDA to be signed at the start of your conversations. It’s really surprising that only 66% of Companies use NDAs systematically when buying Consulting Services. Even the preliminary discussion with a Consulting Firm can contain confidential information that you don’t want to end up in your direct competitor’s lap. We can argue that the people you choose to work with, have business ethics but don’t forget that they sell their knowledge of the industry and the benchmark.
2. Leverage Your Bargaining Power –
Procurement is about bargaining power, and with that said you want it to be on the buyer’s side. You own the budget, the consultants want to work for you, now it is up to you to clearly define the rules and show that you are in control of the process. Use your conditions and your legal materials.

Grow your Consultancy

Since the dawn of the Industrial revolution, Consultants have helped in creating some of the most ambitious and innovative projects around the world.
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3. Use Competition When Relevant – when not – Save Your Time-
There are many advantages to work with familiar consultants. But sometimes the savings are not worth the time and energy spent in organizing the competition among your prospective consultants
There is no need for competition in the following scenarios:

With small projects –

A very small project, when both the cost and the risks are low, does not necessarily require to launch a competition unless you want to shake your existing consulting supplier and reduce the fees. In that case, also work on the reference checking to make sure that they perform well. For small projects, an effective approach can also be to ask your consultants to design their proposal to your target budget.

With unique skills –

On certain projects, where the skills required are very niche and unique, you might not be able to find more than one or two potential suppliers. There is no point in opening a large competition with multiple consultants without proper expertise. Like for a small project, make sure your provider has worked on the matter and has been successful on similar projects.
 

When it’s a sequel project –

Some projects are sequels of previous projects. If you are satisfied with the performance of your Consulting Provider, and you are sure that they have the right skills for the sequel, then it might save you time and energy to work with them. This does not prevent from being very attentive to the fees and to ask for the same competitive rates as during phase 1. In case of continued resistance, just set-up a reduced competition, it should be enough to bring back fees in the realm of reason.

With urgent jobs –

This is a tricky situation. When you are in a rush, you might not have the time to organize a competition. Be mindful of the risks you are taking. If they are too high, maybe you should compare them to the risks you would take in postponing the project to prepare a decent competition. If that is not the case, and you already have in the radar a decent Consulting Provider with the right skills, then you should go for it with a max budget in mind.
4. Improve Proposals’ Evaluation –
Evaluating Consulting Proposals is not easy. It’s really important to decide who will be the main person involved, and the criteria you will be using. There are three key elements to review proposals:

Apply the right criteria

First of all, if your teams have followed the best practices to write an RFP for Consulting Services, they should have defined the first list of criteria. Besides, there are some other criteria that could be integrated into decisions such as ethics, transparency, etc.
Build a list of mandatory criteria. And suggest the list of additional criteria, that can also be used when writing RFPs.

Gather the right team

One of the key success factors for a Consulting Project is to get the buy-in of the main stakeholders. Involving them since the inception of the project is a smart move to get both the best Consulting Firm and your teams on-board.
Define guidelines for building the right team, depending on the type of project. Large projects might need to be examined by Finance, Procurement, Strategy and Business Lines. When working on smaller projects you might need the business lines and a local procurement team.

Score/weight/rank with a common process

You have tried to make the decision-making process as objective as possible. You have defined criteria to evaluate the proposals, and now you need to rank your proposals on these criteria.
If you have mandatory criteria, you might want to associate with mandatory weights (to avoid the workarounds). Then define how the total score will be calculated and the ranking made.
Don’t forget that the exercise is about compromising, and finding the best option for the Company and the different stakeholders.
5. Review References –
Finally, check references. We said it was important when you don’t organize a competition. But to be honest, it is important in any case.

The project has to be relevant to your project

If you have launched a Supply Chain project, you don’t really care if the Consulting Firm has done a Marketing project, even within your industry or a large well-known Company. The reference from your-brother-in law will not be sufficient. You want them to show they have done similar projects successfully.

The references need to be fresh

If you look at some proposals, the Consultants have worked with the most renown Companies. But when you dig a little bit, that was ten to fifteen years ago. What does that say of their current performance? Not much. You want references from projects that took place in the last five years at most.

They need to be about the team in your proposal

The Consulting Firm might have worked on a similar project last year, but with another partner, not one in the proposal. Is it important? Yes. What you want is the best team possible for your project. The partner, or project manager, in charge, needs to have led or at least participated in the projects given as references.
Don’t forget that the success of Consulting Projects is very dependent on the personality and knowledge of the consultant in charge.

You need some help to streamline your sourcing process?Or you just want to discuss about how you source consultants?Don't hesitate to reach out.

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How to Successfully Manage a Consulting Project in 6 Essential Steps

“I get just as excited about building a birdhouse as when providing a strategic counsel to a client.” – Robert L.Peters

Since the dawn of the Industrial revolution, Consultants have helped in creating some of the most ambitious and innovative projects around the world. Have you heard of the Marmaray Tunnel in Turkey? An underwater railway tunnel that connects the European and the Asian parts of Istanbul? The project costs $4.5B and took 9 years to complete. What about the Hong Kong-Zhuhai-Macau Bridge, in China? This impressive 16-mile bridge and tunnel structure, includes two small artificial islands too, in order to provide support to the construction.
Regardless of how big your Consulting project is, it’s necessary to use the best methods and approach in managing it.

How to Successfully Manage a Consulting Project in 6 Essential Steps:

When you are buying services, and in particular intangible services like consulting, the bulk of the work comes after the procurement process has ended. You have to monitor and manage the outcomes of the project, but also the project itself. Indeed, consulting projects very rarely play out as planned

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1. Get organized to manage your project
Managing a consulting project is first and foremost managing a project. The same principles apply. To maximize the chances of success of your project, you will need to manage these three elements:

Stakeholders – This is project management 101. Align the stakeholders to make sure they will support the project and collaborate with the project team and the consultants.
Project – You need to put in place the best practices for project management: define the work plan, clarify the roles and responsibilities, and put in place a clear governance.
Change – Always obvious, but more often overlooked, change management is a key success factor for consulting projects. Anticipate the resistance to change in the teams impacted by the project and define strategies to address each situation.

2. Monitor the performance
Don’t wait until the end of the project to evaluate the performance and share your results with the consultants. The reasons for low performance can be multiple and simultaneous. It could come from the Consulting Firm (capabilities, skills, experience, staffing, etc.) or your teams (low priority, staffing, etc).
In any case, it is best to sit down with the Consulting Firm to discuss and understand the issue and find solutions together.

3. Manage the Consulting contract
When you are working with external consultants, you also have to manage the relationship. First, you will have to track the changes in the project that can touch scope, staffing, timeline or unforeseen events. When these changes are substantial, you should consider amending the contract. In any case, keep a trace of the changes in the minutes of the Steering Committees.
For very large projects, you should consider organizing a formal mid-project review. You can cover both the changes to the statement of work and the quality of the outcome. It should not prevent you from checking-in regularly with the Consulting Firm to anticipate potential slips in the project scope and timeline, and allow your provider to fix the problem.
Consider the consulting firm as your partner with a common objective: the success of your project. Be unbending on the quality of the outcomes. Give them feedback on their performance and visibility on payments.
4. Wrapping up – Anticipate and prepare for when the Consultant departs
Maybe you have prepared the transition from the start (in other words, in your RFP), and included the transition plan and regular check-ins in the deliverables. If that’s not the case, make sure to prepare for when the consultant leaves.
Once you have decided what recommendations you will act on, you have to organize for how you will act. You should also consider the transfer of knowledge in particular if the project implemented a new organization or technology. And you should define this plan with the consultant at hand.
Prepare the performance assessment for the Consulting Firm by gathering the information collected along with the project.
5. Don’t hesitate to end the contract earlier
Sometimes Consulting Projects have to be closed earlier than expected. Many changes can happen between the moment you decide to work with consultants and the end of the consulting projects.
The context can change or the management team. If that’s the case, continuing the project as it is might just be a loss of energy and money. Always find ways to adapt the scope to your needs. And terminate the contract if you must, and if the consequences will be acceptable.
6. Close the project neatly
Whatever the reason for terminating the project early, don’t rush into it. Take the time to analyze the impact of the termination and the probability of success of another consulting project. Prepare also what to communicate with your teams involved in the project.
At that point, you should have paid the consulting provider based on the delivery, and accrued the budget until the end of the project.
Keep the last invoices on your desk until you are sure that the project is delivered in full. That will give you enough leverage to get back to finish the project.
When you think the project is closed, and the invoices are approved for payment, you can take the time to debrief the consultants on their performance on the project.

Ready to launch a Consulting project?
Need a fresh perspective?
We will be happy to help. Please give us a call today, at no obligation to you.

Book your call

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Challenges of Open Innovation and How Consulting Can be a Catalyst for Open Innovation

“For good ideas and true innovation, you need human interaction, conflict, argument, debate.” – Margaret Heffernan

 
Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.
Beyond the extended role given to R&D, the concept also requires a contribution for all stakeholders in the company. Rendering the innovation process much more collaborative and guess what … open.
As we discussed in a previous blog post, the main sources of Open Innovation are:

Academia – universities, labs, and research centers
Customers, Suppliers and Business partners – their unmet needs, issues, and suggestions for product improvements
Industry Groups and Professional Associations where sharing of thought leadership and newest developments, is happening.

Optimize your Consulting Spend

Consultants are selling their time, or more precisely, the access to expert knowledge and execution workforce during a certain period. The potential of production of a Consulting firm is the amount of time available for billing. Every day not billed is lost, just like an empty airplane seat.

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And now here are some of the new challenges:
 
– Implementation of Open Innovation –
Recent reports revealed that about 80% of organizations are engaged in some kind of open innovation. But only a few would qualify those efforts as successful
 
– Balancing Act –
Cooperation of large companies & small start-ups. It’s a known fact that many small companies have reservations about Open Innovation collaboration with large corporations. It’s a matter of building trust and identifying common interests and mutual benefits.
The Virtual Technology Cluster (VTC) Group program provides a complementary platform for all existing accelerators, incubators, Academic programs, etc. as we focus primarily on connecting the innovation within each VTC to revenue.
 
– The Benefits of Curated Innovation –
The VTC Group attempt to take a much more curated approach to innovation. They aim to provide companies with a customized ecosystem of startups, academics, and government agencies to help bring the latest innovations that are happening in their field.
This curation process is crucial as there are considerable, and often unforeseen costs involved with open innovation.
 

How Can Consultants Become a Catalyst of Open Innovation for Your Organization? 
The outside world offers a plethora of opportunities in using Consultants as your “agent” in successful Implementation of Open innovation.
– Facilitating collaboration between large and small companies – Here is a challenge that both large and small companies face –  Large companies are often struggling to explore disruptive ideas as they focus on their core business. Small companies can be fast and agile in developing new ideas, but often struggle bringing these to the market as they lack the means and capability to do do, but if you find ways to combine their resources, the results can be quite interesting!
– Act as your sparring partners –
It can be beneficial to keep the line of communication open with a limited set of partners and bounce ideas as sparring partners. Besides, in those conversations, you manage what you want to disclose or not.
Last, when it comes to getting ideas, don’t underestimate the power of your procurement processes. Leveraging RFIs (Requests For Information) is a way to gather some elements before launching a full-fledged project.
Obviously, some RFIs have to turn into projects at some point. Otherwise, consultants could see it as brain picking, and the source and quality of what you gather will dry.
– Being a source of ideas –
As one of the senior partners from a large consultancy puts it: “We were developing the big idea and selling it.” Consultants were pitching strategy ideas and helping to bring them to fruition.
Today projects have evolved in sizes and shapes, but the scheme where consultants are pitching their ideas remain.
Consultants are also screening and processing a huge amount of information to stay current in their industry of specialization. With the emergence of dynamic start-up ecosystems, consultants have also started to maintain a mapping of the most recent and relevant ones. Oliver Wyman produces on a regular basis an interesting mapping of the start-ups in the procurement field.
– Facilitating innovation task forces –
If you are re-inventing your business or a business unit, the first step will be to help you determine what you expect from your innovation but also what are the limits that you are placing for the exercise.
Facilitation can be very useful to create the conditions to spur innovation. You can find in the market all kind of facilitation services. It ranges from the innovation consulting firms to futurists, that can help you project yourself a few years down the road, taking into account megatrends and technological progress to look at what the future holds. 
– Connecting you with third parties –
New technologies have made it possible to leverage the power of crowdsourcing. Companies like Innocentive and Nine Sigma, for instance, are pioneers in crowdsourced innovation. They help companies to define the problem they are trying to solve. They then organize challenges that can be internal to the company or leveraging their huge network of experts. They can also create specific galleries where clients are exposing their main challenges for experts to solve.
Beyond Crowdsourcing, consulting firms have experience with multiple customers on the same subjects but through different angles. They can also help establish connections when discussions between their clients would prove valuable and beneficial.

If your organization aspires to grow, you need to incorporate open innovation, build an innovation machine or innovate in your operations. The right consultants can be the catalysts you need to spur your innovation. To find out how we can help you, please connect with us today to discuss further.

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Understanding consulting fees to make smarter decisions

You might be nonchalantly asking yourself, why do companies hire Consultants?
Great question!
To improve a process, to save money, or to get a fresh perspective, but most of all, to get access to very specialized skills that great Consultants can bring in.
And as the business environment constantly evolves, it’s safe to say companies need to evolve as well.

“The biggest risk is not taking any risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” Mark Zuckerberg

Now let’s have a look at Consulting Economics – 
Consultants are selling their time, or more precisely, the access to expert knowledge and execution workforce during a certain period. The potential of production of a Consulting firm is the amount of time available for billing. Every day not billed is lost, just like an empty airplane seat.
They charge per time spend.
So the fee structure is usually geared to optimize the utilization rates. As for products or services you might be more familiar with, this ranges from Cost Plus to Value Based.

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Consulting Project Fees Framework –
Daily Rate: For smaller projects or exploratory phases, the Consultant can propose a negotiated daily rate. The total fee is then calculated based on the real number of days spent on the project.
Flat Fee: The most common fee structure for large projects. The Consultant will evaluate the work to be done and the deliverables to be prepared, and define the expertise and time needed to deliver the project. Afterward, two approaches are possible. Taking the workload based approach using daily rates or use this as a reference but price based on the value to the end client.
While the following breakdown is standard, remember to focus on the benefits and the value, as that’s the most important!
Performance-Based Fees: This fees structure, also called success fees, is linked to the achievements of pre-defined objectives. It is particularly effective for projects when the results can be easily measured, such as cost reduction, or top-line improvement. This often takes place as a bonus on top of a flat fee structure.
There are also other occasional fee structures:
Retainer: A retainer is a monthly fee negotiated with a client, based on a certain number of hours of support per month. This fee structure is mainly used by coaches or trusted advisors. It is often combined with spot projects since a retainer is usually the best way to be the first one aware of projects to come.
Equity-based Fees: This fee structure is often used with fast-growing start-ups that have little cash upfront or in case of turnaround situations. It is then up to the Consulting Firms to adjust the resources to balance risk and value creation.

Percentage-based Fees: The fees here are calculated as a percentage of a project or transaction amount and often used for M&A projects, for instance, where the consulting firms play a facilitation and brokerage role too.
Hybrid Type Fees: And finally, some project fees structure can be a hybrid of various fee structures such as a retainer with a negotiated daily rate when the amount of monthly hours is reached, a flat fee with an additional success fee, etc.
The best parameters to define a project price –
Since Consultants are primarily selling their time, the time spent on a project is the main cost driver. Usually, the price is calculated as the product of the daily rate per the number of days spent on the project.
But another essential parameter is the team composition. The experience can make a huge difference. You can expect a multiplication factor of 5 or more between an experienced partner and a newly-graduated analyst.
Another element is the share of time spent on the project. A full-time assignment is pretty straightforward: the consultant is supposed to be on site most of the days. Any part-time assignment can be vague, and very difficult to verify.
Pyramid structure to explain fees –
Part-time assignments of very experienced consultants can have a significant impact on the bill and can be extremely hard to track. Many of you have probably experienced the team of experts in the proposal at 10% of their time that you have actually never used. In the same fashion, ramp-up and ramp-down of team members should be linked to clear phases.
The specific industry where clients operate is an overlooked driver of the price for Consulting Projects. You will have the high-end of the spectrum – the Financial Services or Energy, where Consultants apply a premium, and at the low-end the Public Sector or Non-Profit Sector.
Finally, don’t forget the expenses when you are evaluating your budget. On certain projects, clients have agreed to up to 30% of expenses. Some Consulting Firms prefer a flat fee, expenses included, to avoid such discussions with clients.
Understanding the Consulting Industry is a pre-requisite to optimizing your Consulting Spend. Knowing your options can allow you to reach for innovative solutions, and to get more for your budget.

Ready to get started on your next project?
Need a fresh point of view?
We will be happy to help.
Please give us a call today, at no obligation.
Let’s get the conversation started.

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The Perfect Consulting RFP or the Fun of Creating a Blueprint for the Right Consultant

A script to a movie, is what the RFP to the Consulting project is. And the Master of Film suspense can provide us with sound advice on how important that document is. The Consulting RFP holds the same weight when it comes to setting your project on the path to success, and in creating the value you expect besides the general scope.

“To make a great film, you need three things – the script, the script, and the script.” – Alfred Hitchcock

How to craft the best and most effective Consulting RFP?
The single biggest objective of the RFP is to provide your prospective consultants with a clear picture of your needs and issues, and the desired outcomes.
To ensure the success of the project, we comprised a List of the Top 10 Secrets of the Perfect RFP.
The goal, of course, is to find the right and the best provider uniquely suited to you.
1. Don’t rush it, and include all the elements in your RFP –
Many RFPs for Consulting are rushed in their development. Sometimes the details or the context are insufficient to understand the business problem you are facing.
Maybe some key requirements are missing, or the language is ambiguous. You also might have omitted the common pricing framework to be followed, or given too little time for the candidate consultants to respond RFI/RFP. However, the result is always the same: it is difficult for Consulting Firms to send a solid proposal, in particular, if they are newcomers.

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In this post, we would like to talk about two extremely important elements that determine the project’s success. Passion and value created.The type of Consultant you decide to hire should not only be based on the right expertise and experience, but their passion and commitment to deliver the best value.

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2. The most important elements in the Consulting RFP  –
The RFP will be the reference document for the consulting providers you invite to the competition. Don’t forget to include elements on the RFP process such as timeline, criteria of choice and requirements. It will help the candidates to be laser-focused on your needs.
3. Looking for the right Consultants –
With your RFP in hand, you can start identifying the potential candidates. You might be impressed by some Consultants expertise or interesting projects they have been part of, but the most relevant question, remains to find out if they are right for you and best fit for your project?
4. Adapt your short-list to the project’s Budget and Timeline  –
Look closely at the scope of the project, the budget, and the internal procurement policies to define your criteria of selection for the short-list. Be mindful of your time and adapt the length of your short-list to the level of priority and the budget of your project.
Small and Large projects –
When you have a very tight timeline or for small projects with limited impact on your business, prefer a small short-list too so you can spend enough time on the proposal and the references checking. We recommend to not go beyond three prospective providers.
For larger projects-
you can broaden the first round (briefing/proposal phase) to up to ten consulting firms (depending on the project and the stakes) but keep at most four-five companies for the final round (pitching phase).
When your short-list is ready, contact your suppliers and check their interest by sending your Consulting RFP

5. Secure Confidentiality –
It is important always to protect your confidential information. Don’t hesitate to make your candidates sign a confidentiality agreement at the beginning (even at RFI or RFP stage) to protect proprietary information and make sure the consulting firms will not be sharing your project’s details with your competitors.
If the proposal includes collaboration and sub-contracting, make sure that an NDA legally binds all the contributors on the project.
If your project is particularly confidential, you should even consider working with a third-party sourcing company, like Consulting Quest, that will handle the process anonymously. They will keep your company and your project confidential until the short-list stage.
6. Simplicity Always Wins –
And it’s best to make things simple. Unless you are handling a multi-million dollar project, don’t organize extravagant tenders. Looking through proposals and listening to consultants’ pitches can be extremely time-consuming. It will also considerably slow down your project. Make sure that your RFP process is adapted to the scope and the budget for your project.
If you only have a small number of consulting firms, or if the project is specifically complex, you might want to organize briefings to discuss the details of the project and make sure the consultants have well-understood what is at stake.
If you have a large number of candidates, a clear Consulting RFP, and little time on your hands, you can just send the RFP and assess the written proposals to identify the most promising one for the next step.
7. Assessing the written proposals –
Once you have received the proposals, take the time to review them with the other stakeholders. Always keep your objective in mind: maximizing the chances of success of your project. You need the candidates to submit their best proposals, and for that, they need to understand the problem very well.
Level the ground, so all companies have a fair chance in the competition. It is in your best interest to do so too. Don’t hesitate to explain in length the background of your company, and the context of the assignment, and to take some time to polish the Q&A documents.
8. Evaluate the fit with your RFP –
Make sure the candidates have responded to the most important elements in your RFP. Their proposals should help you answer the following questions:

Has the consultant understood our objectives?
Do the deliverables answer our questions?
Do we trust the approach the consulting provider proposes?
Does the team have the required experience?
Is this consultant the right fit for you?
Does the budget fit the value we expect?

Note if there are any gray areas and potential for misunderstanding.
9. Identify the most promising proposals –
When you are working on a large cohort of Consulting Providers, you should focus at first on the most promising proposals to save time and energy. You can always go down your list if you are not satisfied with your first batch.
Start ranking your proposals based on your assessment of the proposals. You can use these five dimensions: objectives, deliverables, approach, experience, fit and budget.
10. Discover and resolve any uncertainties –
You should also be able to put your finger on the uncertainties in the proposals and articulate them into questions. The list of questions will be the basis for the pitch session with the most promising Consultants: an excellent opportunity to clarify the Consulting RFP if necessary and assess the fit with your teams.

Ready to get started on your next project? Need a fresh point of view?
We will be happy to help. Please give us a call today, at no obligation.
Let’s get the conversation started.

Book your call

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7 Effective Steps to successfully launch your Consulting Project

The importance of information in planning and managing your Consulting projects cannot be overstated. Information is essential for the success of any endeavor. And naturally, whoever has the upper hand in the game, has the best chance of winning. However, at the center of successful Consulting lies mutual respect and mutually beneficial business. It has always been our credo at Consulting Quest that it is the most productive approach to all types of projects.
With that said, let’s discuss this topic in more detail.

As a general rule, the most successful man in life is the man who has the best information. – Benjamin Disraeli

There are some important points for consideration here.
Before you launch your next Consulting project, you need to review some critical aspects, such as:
1. The downside of asymmetrical information –
And why should you care as a client?
Asymmetrical information, otherwise known as information failure, refers to a situation when one party in a transaction has more information, than the other party. Almost all economic transactions involve some information asymmetries.

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2. How does asymmetrical information distort the Client-Consultant relationship? –
Asymmetrical information is particularly present when it is difficult for the client to judge the quality of the product or service. In Consulting, partners and consultants know their industry and their trade inside out, while the clients and their buyers have limited information.
3. Quality of Consulting services – Market Insights –
You might be familiar with the work of George Akerlof “The Market for Lemons”, where he explained that in certain markets, it’s difficult to distinguish the good product (“pears”) from the bad product (“lemons”). To mitigate the risk, the Buyer will use the average statistics of the market while the Seller has detailed information for each product. The Seller will tend to sell the product of lower quality to minimize their losses, and the best product won’t be sold. As a result, the market will shrink, and the average product quality will decrease. The case for Consulting is very relevant, as well. And as a Client, you need to be aware of these insights.
4. How to overcome the disadvantages when buying Consulting services? –
Unless they are handling several consulting projects a month in each capability, buyers of consulting services are at a disadvantage when negotiating with consulting providers.As a result, they might become risk-averse in their choice of consulting providers and choose consulting firms based on mostly their reputation or their existing relationship. The winners then are the large consulting firms that provide constant high-quality work and are excellent at building relationships.

How to get started? – 
The 7 Most Effective Steps in Launching Your Next Consulting Project-
If you are confident that you like to start a Consulting project, these are the most effective steps to follow:
1. Define your needs.
The definition of the scope of your project is a compulsory step in the RFP (Request for Proposal) process. You need to gather a team made of the major stakeholders and agree on the expected results, timeline, and budget for the project. Even though you are thinking of bringing in external resources to lead the project, the sound principles of project management still apply. Determine the real problem to solve and the project objectives. Many consulting projects fail because the scope is too vague and too broad.
2. Organize a competition among the prospective providers.
Organizing a healthy competition is not that complex. You have to keep in mind that the goal of the process goes beyond the sourcing and focus on the success of the project. Organizing a competition without putting all the candidates in the right conditions to give their best answer is meaningless. You need to bring in relevant potential consulting suppliers and give them a fair chance to get the project.
3. As a client, you are the boss.
Don’t let the Consulting firm dictate the pace or the content of the conversation. Explain your process beforehand. They need to give you one contact person, and to comply with your rules.The same applies to Terms & Conditions. Work with your documents based on your internal policies. Define, for instance, your rule for Travel expenses: Expenses capped at 15%, pre-approved by your teams, and based on your Company policy. Be fair to all consulting firms and apply the same to rules to everyone.

4. Be the “Early Bird” or start the process early.
Most of the time, you are not in such a hurry. When projects are complex, integrate Q&A sessions in the process. In all cases, give the consulting firms enough time to prepare their proposal. They will only be more detailed.
Generally, response turnaround times should be in the range of one week for a small project, two weeks for a standard consulting project and three to four weeks for a very large project (PMI, company-wide transformation, …).
Anticipate also spending some extra time for back-and-forth communication with the consulting providers to adjust the proposals
5. Sharing the roles.
As a general rule, business lines should focus on the Business Expertise, and Procurement should bring their Consulting and Procurement perspective to the table.

6. Create excitement.
If you decide to work with Consultants, you are interested in their analytical skills, their expertise or their outstanding communication competencies. Don’t waste their talent (and your money) on menial tasks. They are better employed at complex projects where they can do their magic. Besides, they might not be interested in working on small projects, and your project could go down on their priority list. And it might not be ‘good news’ in regards to quality and expertise.
If you are looking more for another pair of arms, or data crunching, you might prefer freelance platforms such as Catalent, TalMix, even networks like 2PS or Eden McCallum. You will find bright individuals ready to take on very small projects or interim work.
7. Time management and timing.
If you can afford it, take your time. It is sometimes difficult to translate the business challenges and the needs into a project. You might not be sure even if the project will happen, or have a clear scope in mind. The RFI (Request for Information) can be a good way to collect and leverage information. It will help you refine your approach to solving the problem and develop consensus within your organization. It can also be a smart way to narrow the number of contestants on your list before engaging in the RFP process.
Be careful to give a fair chance to all the consulting firms you engaged in your RFI, so your company is not seen just as a brain picker.
When the scope is clear, you can take an educated guess at how many consultants you need for the project. You can also think about the value expected from the project. That should help you define ballpark how much you are ready to pay for that project.

Ready to get started on your next project? Need a fresh point of view? We will be happy to help. Please give us a call today, at no obligation. Let’s get the conversation started.

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The African Consulting Market is focused on Strategy and Human Capital

Welcome to the fourth issue of our New Blog Series – “Exploring the African Consulting Industry”. In this series, you will learn “everything-you-need-to-know” about the African Consulting market through a set of fun infographics.
In the previous issue, we discussed that Large Consulting Firms (with 1000+ employees) make up one-third of the consulting firms in Africa. Despite the strong presence of foreign companies in the region, 57% of the consulting firms are in fact only based in Africa, and almost half of the companies have less than 50 employees.
In this issue, we will take a look at the top capabilities of the Consulting Firms in the region and how the figure compares to that on a global scale.

The Capabilities
According to Consulting Quest’s research and data from the Global Directory, the Top Three Capabilities in the African consulting market are Strategy, Human Capital and Operations. Technology, being the most common capability among large companies (with 1000+ Employees), is the #4 biggest capability in the region, while it is only ranked #6 globally.
The total number of capabilities covered on average is 2.5. Interestingly, however, almost a quarter of the consulting firms in Africa is specialized in only one capability. Niche, local and small consulting firms are on the rise.
In the next issue we will dive into the Industries of the consulting offering and explain how the overall consulting offering is not reflecting yet the local needs.
 

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Consulting Quest Global Directory
Consulting Quest Global Directory is the World’s Largest Professionally-Managed Directory in the Consulting Industry. Searchable by consultancy name or by region, capability or industry, it lists and describes more than 6000 consultancies worldwide, with links to their websites and social media channels. With such a powerful database, we decided to dig deeper into the directory and analyzed the consulting offering in each of the following regions of the world: North America, Europe, Middle East and Africa, Asia-Pacifics and LATAM.

A Foolproof Guide to be sure to Ruin Your Proposals

The many common mistakes performed by consultants while preparing their proposals are not just inside their head. Mistakes often enter into proposals and presentations in the most awkward time and manner.
The following is a list of many of the possible ways we have seen consultants ruin their proposals. Examine the following list with care (and humor) because the proposal is often the first impression you make on the client and you know the saying: “The first impression is always right, especially if it’s a bad one.”

Call your client by another name. They like that; it’s like role playing! Even better, if you forget the name of their entire company, that will really impress them. They’ll think, “Wow, they can’t remember our name? Their business must be booming!”
Forget the name of a previous client on your document. Who cares about confidentiality? I mean, isn’t a name on a document just like a referral?
Present a generic presentation. Like people, all businesses are the same, so you don’t need to put too much effort into building your presentation. Right?
Don’t insert the company’s logo, or if you do, use the wrong one. What’s in a logo, anyway? Chances are, the client won’t even notice.
Don’t customize the resumes of the project team. No one cares about who the guys are on your consulting team. Their seniority and expertise don’t actually have much bearing on the project. Besides, the client should trust your judgement in personnel. That’s why they’re hiring you, isn’t it?
Don’t answer the questions of the clients. If you’re not careful, you could learn a thing or two about the context of the project and better tailor your proposal. Yikes!
Forget the criteria of choice included in the RFP. The client included that just for kicks. It’s really not that important and definitely not worth your time to include.
Present a bland presentation. Graphics and images are much too distracting. Keep your documents black and white with 12-point Times New Roman font and no formatting, except for paragraphs. That will catch their attention and show them that you mean business.
Don’t explicitly state your pricing. When it comes to pricing, it’s better to keep your client in the dark. He should just trust you on this one. After all, trust is rarely earned through clear communication.
Hide some fees here and there. It is just like an egg hunt. Clients love it, and it keeps them on their toes.
Forgo details about your approach or the deliverables. If the client has done their research, they should already know how your services will fit with their business needs.

Don’t explain the governance of the project. You might give the client a good understanding of the roles and responsibilities of the different parties involved. This would give the client the elements to estimate their internal cost for the project; see point 9 above.
When you change the pricing, don’t say so. Especially when it goes up! Clients love hidden surprises, almost as much as they love egg hunts.
Don’t talk about timelines or milestones. It is very often a minor subject for your client. Focus on how this is going to be a long-term relationship with no clear results or predictable costs. That will reassure your clients that you have everything under control.
Send the proposal by email, and wait for the client’s answer. Don’t give them the chance to ask questions. You could end up having to rework the proposal. What a waste of time!
Ignore the timeline explained in the RFP. The client will not include that element in the evaluation, unless you actually think they need your services in a timely fashion.
Use psychedelic color schemes. The tie-dye theme was a great hit at your seventies party. Your clients will love it too!
Don’t ask questions. You already know their business. Why would you waste all that time and energy? You are the consultant, and they’re here to learn from you, right?

Grow your Consultancy

Unfortunately, just sending a proposal doesn’t guarantee that it’ll be read.
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Provide solutions to issues not found in the RFP. After all, you know their industry/product/market better than they do. Why not “wow” them with your prescient ability to create solutions in areas without any problems?
Don’t listen to the client. Listening to the client talk about their needs is a pain. You might have to collect more information or even have to rework your proposal to better meet their expectations.
Base your price upon a client’s ability to pay. Larger companies can pay more. It’s not like they picked you because they thought you would offer a better price, right?
The longer, the better. Need we say more?
Give them a long, comprehensive overview of your company. The client really needs to understand who you are, as a company, before anything else. You’ll get extra points if they fall asleep.
Don’t demonstrate an understanding of the scope and goals. Go directly to the pricing section. That’s what really matters to the client. 
Offer them the moon. Sure, you know that you can’t actually deliver the customer a 500% return on their investment in the first 6 months, but hey, the customer is really excited about that guarantee.

Okay. So, you get the idea. This list could go on and on, but these points are starting to sound like variations on a theme. (Speaking of variations, if you have never listened to the Paul Simon song this post is parodying, enjoy.)
In truth, these points are guaranteed ways to start a bad consulting relationship and probable ways to never start one. Some of them are even possible causes for litigation. The best way to avoid them is to do these 5 simple things: ­

Customize ­your presentation for each client. Every time.
Work on the form ­of your presentation. People are visual, visuals do matter.
Be clear on how you will do the work. Definitions and roles give everyone guidelines on how to move forward.
Be transparent about the pricing. Customers really don’t like hidden prices, and it’s not like an easter egg hunt.
Start working the relationship with the client. Communicate, listen, ask questions, and understand that this is their business. Your job is to help their business succeed.

Do these five simple tasks and you can avoid any number of ways people ruin their proposals.

Consulting Playbook: Startup Capital Secured in Partnership with Chinese Party

The Consulting Playbook, Edition #30 
The context of this project comprised of assisting the CEO in developing a funding and marketing plan for his new business as well as the implementation of the plan. The assignment also included a trip to China, accompanying the CEO, to develop the supply chain and present his business case to potential funding sources.
The main goals were to create a viable business plan and to obtain funding in addition to coaching the CEO on leadership, strategy, and marketing.
The Consultant’s Approach
The consultant first needed to develop a deeper understanding of the business case and make an assessment on the CEO’s native skill set. After the initial analysis, the CEO was advised on the critical skills needed for the company’s growth identifying which capabilities were already in-house and what needed to be outsourced.
It was important for the Executive to gain a firmer understanding of the investor’s perspective on the company prior to engaging in funding conversations. After further review, the consultant connected with local finance experts tailoring the case to Shanghainese norms and expectations. The business case was presented and thereafter began to facilitate the negotiations. After the project was completed, the CEO maintained the relationship utilizing the consultant as a mentor.
The Successful Outcome
The sourcing aspect of the assignment went exceedingly well as several suppliers signed preferential term sheets with the client. The funding was secured, and accomplished in two phases, VC’s from connections with CEIBs and the CEO’s personal connections. The company as per VC market was still underdeveloped. The investors were interested in 50% or less ownership, additional funding on behalf of the CEO had to be secured through a Small business loan.

Additional Information

Doing Business in China – Tips for Entrepreneurs
China is an interesting destination, and by now, is no secret that is one of the most important developing countries to do business in. However it is well-known to foreigners that cultural difference can present a serious obstacle for successful completion or even start of any business initiative.
Therefore for anyone planning to travel there and engage in business, it is absolutely necessary to learn cultural models and adjust their expectations and behavior accordingly.
Here are a few valuable insights:

All Proposals and Agreements Must be In Writing –

Regardless of phone conversations, meetings, and email communication, all business related issues must be put in writing, in detailed and clear form. Also if translations need to be made of the documents, they must be done too, in order to ensure all content is understood by all parties. Copies to be provided too…

Business Card Exchange –

In Chinese culture, this is still an important part of meeting a new prospective partner. So make sure you have plenty of cards when heading to a meeting.

Importance of Relationships –

If you are just a stranger, and haven’t met Chinese people and done your networking, this is where you need to start before any actual business takes place. People feel more comfortable doing business with people that they know and are comfortable with. Keep in mind that it takes time to establish and nurture relationships, so the sooner you start, the sooner you will be able to conduct business too. As they say in China, it can take a year or two, for Chinese people to start trusting a new partner. So plan in advance and adjust your timeframe.

Never Make a Chinese Person Lose Face –

Western culture can be more tolerant toward cynical behavior, jokes, or critique, but to a Chinese business person, a sense of dignity is crucial. Whenever there is an issue or a conflict situation, it should be resolved with extra care in order to preserve other parties’ reputation. Once an offensive action has been taken, it will be very hard to overcome the damage it caused.

Respect Rank and Hierarchy –

China might be less strict in this way, compared to other Asian cultures, but still it is important to observe hierarchy of individuals you do business with. For example, meetings are conducted between individuals on the same level. The Chinese party can be greatly offended if this protocol is bypassed.

Friendliness and After-Work Socializing –

In Chinese culture business relationships extend into informal team dinners, lunches, even karaoke visits, and relaxing massages at spa centers. Do not be surprised by these invitations, and be willing to accommodate them in your schedule. It is just the opposite to the popular idea in the West that business and pleasure should not mix, Chinese people will disagree with that. It is a normal behavior to engage in fun activities as team after work, so just enjoy it!
For Further Reading:

Why Entrepreneurship Is So Different between US and China
China’s Startup Scene: Some Important Lessons Learned
Tips for Entrepreneurs that want to do business in China
American Vs. Chinese Business Culture

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About The Consulting Playbook
The Consulting Playbook is a collection of posts designed to offer insights into how businesses and their executives can utilize consulting as a strategic lever to boost performance. Each Consulting Playbook post is broken down into a few elements: Case Study, Additional Information regarding the technical application, and Additional Links related to the topic.

Consulting Playbook: Introducing Process Management as an Integration Accelerator Following a Merger

The Consulting Playbook, Edition #9
The COO of a Leading Aerospace company asked for an expert’s help as the organization was in the middle of a major transformation, following the merger of four national companies. Evaluating all the complexities of the merger, the expert planned to direct the process toward the top 3 goals:

Ensuring the Overall Company’s Integration
Improving Corporate Performance
Increase Efficiency and Collaboration on all levels

How the Transformation Unfolded
The Consultant’s early efforts focused on creating a buy-in of the concept and identifying how process owners could be empowered in their impact (creating accountabilities, budgets, and aligned incentive system). It was decided to start with a few pilot processes.
The next step aimed at building alignment for the process management with the senior leadership team, and driving awareness throughout the entire organization. A four-stage approach was designed to deliver on the objectives as following:

Robust Architecture created for all the processes from domains, to major processes and general processes
Well-defined roles and responsibilities for all the participants (process owners, process operators, process quality assurance…)
Detailed methodology of the process management including process maturity gates, and cost/effort planning
Pilot projects for some processes considered to be critical (configuration management, and design)
Communications/change platform that included branding, executive and general policies, awareness toolkits, training, change “boosters”, articles and newsletters, and a process management handbook distributed.
The Project Team supported by the Consultant leveraged by the hands-on support to the priority processes/owners identified, with detailed reporting to a subset of the Executive Committee
End-to-End Process management was introduced to efficiently manage the whole business and connect all the functions.

 Solid Cost Savings and Employee Satisfaction and Engagement
The integrated process management approach is a continuous effort given the complexities of the client’s merger efforts and their products, however the early outcomes and results can be summarized as following:
For the Organization

Accelerated integration as all parties are now using standardized definitions and a harmonized process building based on the best practices of all legacy companies with new digital practices added
Total estimated cost savings of €1 B total (efficiency gains, reduced development lead times with first time improvements, tools standardization) with €300 K total reached after one year.

For their Employees

Increased collaboration and visibility, multiple interfaces with others
More clarity within job activities and deliverables definition
Positive impact on Engagement Survey results

Additional Information

Top New Trends and Their Influence on the Aerospace Industry
The sky is the limit figuratively speaking for the growing Aerospace sector of the past few years. But along with the raising demand for air travel, huge backlog of new aircraft orders, and projected revenues for the major players, there is an increased focus on profitability too.
The latest trends that will influence the near-term results are:
1st. Technological Advance
The way aircrafts are designed, built and look like, is always evolving, and we are witnessing great improvements in cabin design, noise reduction, together with top notch avionics’ tools and components. The advanced manufacturing technology requirements and conversion to new electrical systems are also changing how aircrafts are manufactured, inducing change and bringing new challenges across the whole production cycle trying to keep up with the OEMs (original equipment manufacturer).
2nd. Increase in Replacement Demand
As airline fleets age, and aircrafts wear out, especially in mature markets, the need to update and modernize the fleet, is more pressing than ever.
With fuel efficiency and technologically advanced aircrafts, are being held as priority features, as many airlines are placing new orders. Over the next two decades the trend will continue.
3rd. Lower Oil Prices Affecting Growth and Demand
The lower oil prices have successfully influenced airlines’ profits, but aircraft manufacturers might be concerned with slowing replacement demand specifically short term too. Lower oil prices often can translate into lower fares and savings for the travelers resulting in higher air traffic, and at the same time the long term projections, are less concerned with current oil prices, and are considerably less optimistic.
For Further Reading:
– Which States are Attracting Aerospace Companies?
– 2016 Aerospace and Defense Industry Trends
– 2016 – World’s Top 10 Commercial Aerospace Companies
– The Top 10 Best Practices of Business Process Management
– Best Practices in Business Process Management

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About The Consulting Playbook
The Consulting Playbook is a collection of posts designed to offer insights into how businesses and their executives can utilize consulting as a strategic lever to boost performance. Each Consulting Playbook post is broken down into a few elements: Case Study, Additional Information regarding the technical application, and Additional Links related to the topic.

6 Reasons Why Analyzing Your Consulting Spend Will Make You a Pro at Buying Consulting

You have decided to grow your Consulting Procurement Capability, the first thing you need to look at is analyzing your Consulting Spend that will allow you to establish your baseline.
Working with consultants can bring in tremendous benefits, but if you don’t know how to manage the procurement process, the results might be far from satisfactory.
 “Consultants have credibility because they are not dumb enough to work at your company.” – Scott Adams.
Sounds amusing, right? But all jokes aside, the task here is to show you how to design and apply an effective framework that screens your Consulting Spend based on three dimensions:

How much you are spending, on what and who is spending
How decisions about Consulting are made from inception to selection of a provider
What benefits you are getting from your projects and providers

Know the Consulting Category

The diversity of the Consulting providers in terms of size, and offerings is quite complex, and this makes buying Consulting services so tricky.
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A first scan of your expenses, where the observation period will be the previous fiscal year, will give you a good basis for slicing and dicing the information. Having this structured data will allow you to understand the patterns of your Consulting Spend. You can capture quick gains, get the buy-in of your employees and embark on a self-funded journey.
6 Reasons why analyzing your Consulting Spend will help you buy better:

What is at stake –

Many Companies don’t have the overview of their consulting spend, and thus don’t see the interest of managing their Consulting Spend. Mapping all the expenses in Consulting will help you understand who is spending and how much. That will give a sense of the size of the prize, should you decide to change the way you manage the consulting category.

Why projects are launched –

Knowing who is buying the projects, and why did they buy it, will provide insights on the behaviors of your internal clients. How do they use Consulting? On what type of projects? What benefits were they expecting from working with external consultants?

Who are the internal stakeholders –

It’s essential to know who was involved, what department? Who was the point of contact? At what point in the process were they involved? Were there other stakeholders involved? They are your internal clients. The ones you will need to get on board when you start transforming your consulting procurement capability.

What is the Decision-making process –

Who is deciding? Who is paying? What were the validations required? Is there a different decision-making process based on the type of projects? What size? And who was the Project Sponsor? Allocating your resources on the right projects is key to leverage consulting to accelerate your transformation.

Is there a specific buying process?

Organizing a competition between providers is the best way to find the right consultancy. Was the competition relevant? Is there a threshold under which there is no competition? Or a Unit that never organizes competition?

Who are your providers and how do they perform?

Knowing on whom you spend your money and how satisfactory was the work delivered, can get you closer to decide if this was a good investment. There are usually a few dimensions you want to evaluate your Consulting Providers on. Was the firm qualified to do the job? Have they understood the problem you were trying to solve? Have they worked well with your teams? And what was the impact, and the return on investment?
Use normalized data for a relevant analysis. And be aware that how you organize the data will have a great impact on the success of the project.
By giving you the insights based on our decades of experience, and case studies, we hope we’ve convinced you to apply efficiency and diligence in your next project, to rock Consulting buying like a pro!

Do you want to learn more on how to anlayze your Consulting Spend?
Would like to get a fresh perspective on your next Consulting sourcing? Do not hesitate to contact us today.
We are here to help, and make sure you get the best value from your Consulting.

Book your call

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Define the pricing for your Consulting Services using Perceived value

The power of perceived value is a fascinating thing. And how one uses perceived value can be significant.
Even recent scientific research agrees. In an essay for Forbes about behavioral economics, Mukul Patki asks the following question: “Are you more likely to admire a $5 bottle of wine, if I lied to you and told you that it costs $45?“
The answer, according to behavioral economic studies, is a resounding yes.
The reasons why this happens actually holds some fascinating lessons for business consultants. Besides having excellent analytical skills, as well as honed sales techniques for pitching ideas and proposals, a business consultant who has an understanding of perceived value and the science behind irrational value assessment can gain an edge.
We know this because we match up consultants with the companies who needs their particular skill sets. We know how hard it is for consultants to rely on networking to get by, and what it takes for a consultant to become a company’s preferred consultant. And we have the data and science to explain it.
The Power Of Perceived Value
Let’s look a little closer at the science behind perceived value. Although the following three examples—the wine-club experiment, the puzzle-solving experiment, and the growth-hacking example—lie outside of the business-consulting domain, they demonstrate powerful principles that consultants can use.
Researchers invited the Stanford Wine Club to taste a few bottles of wine. The bottles had no identifying labels on them other than price tags. One bottle was labeled with a $5 price tag. Another bottle was labeled with a $45 price tag. But this was the catch: the $45 price tag was a lie. The high-priced wine was no different from the $5 bottle.
The results were telling: the wine club rated the $45 bottle higher and the $5 bottle lower.
But the Stanford Wine Club were not being elitists. They really did enjoy the wine with the $45 label more, even though it was the same cheap wine in disguise. When the experiment was done again under an MRI machine, researchers found activity in the prefrontal cortex of the brain that showed that they really did experience greater pleasure when they drank the wine marked with a higher price.

The implications here are profound. Higher prices actually change the way our body experiences a product. The brain responds to a higher perceived value with a stronger release of dopamine.
But that’s just the beginning.
Can Higher Perceived Value Improve Problem-Solving Skills? Yes, It Can.
In another experiment that Patki references, researchers had students complete as many puzzles as they could in a set time. But beforehand, the researchers had the students purchase energy drinks with high levels of caffeine and sugar to improve their alertness during the puzzle test.
Here was the catch: half of the students had to pay full price, but the other half was given a huge discount. The results? The discount group solved fewer puzzles. In fact, their success rate was 30 percent lower than the group that paid full price.
The higher perceived value of the energy drink improved their alertness and focus.
Learning About Value Proposition From Growth Hackers
Behavioral economics and irrational value assessment can be, as Patki wrote, “the key to developing winning value propositions.”

Launch your Consultancy

Starting your consulting business will not be easy, but it will almost certainly be exciting and fulfilling.

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Startup companies, in this case, provide a useful example. In Ryan Holiday’s monumental book on growth hacking, he used DropBox as the classic example. DropBox created an invitation-only waiting list for early adopters. Rumors about the waiting list spread, and a sense of exclusivity swarmed around the new app. The waiting list exploded to 75,000 names, and when the app was released, it was a huge success.
Building perceived value, whether or not anyone knew anything about Dropbox, sent their value proposition sky-high. It strengthened their promise of value that they would deliver to their clients, and it created a strong belief within the clients that the promised value would be delivered.
What Business Consultants Can Learn From Perceived-Value Principles
Although the example above involves startup company tactics, the general principle is the same for consultants: use the power of social proof and exclusivity—while retaining courteous professionalism—to help companies see your value. The psychology behind it has been proven: when a person is asked to work a little extra or pay higher to get something, their belief in the value of that person or idea increases.
But the reverse is also true and by underpricing for the value you deliver you may impact negatively the way you are perceived and drive yourself out of the race you thought you would win through a large discount.
In the context of business consulting, it is a subtle art. You should always be easy to work with—as we explain in our blog post The 10 Commandments of a Great Consultant—but you should also be careful that you’re not diminishing your perceived value. Make conscious and strategic efforts to increase it when you can do it in a reasonable way.
Apply to yourself some simple principles to align your pricing and the value you deliver, keeping a detailed database filled with information from evaluation and feedback can be of priceless value and will help you to continuously improve.
And no matter what kind of strategy you employ on the ground level, the broader lesson here is simple: do not neglect the incredible power of irrational value assessment, and use it as a complement to your carefully honed analytical and sales skills.

Consulting Playbook: Establishing New Organization to Meet Globalization’s New Challenges

The Consulting Playbook, Edition #20
A major Automotive company aspired to become a global organization. Their ambitious goal required several trade-offs to expand internationally. The company needed to develop a new Program function covering strategic resources allocation and building a connection with all the other existing functions such as product development, engineering, manufacturing, purchasing and marketing/sales. Besides, a new organization had to be set up with business units – zones in the international markets. This was a drastic change for the company and they decided to get some external support.
The Consultant’s Approach Centered on Facilitation
A team of three main Executives developed the business principles of the new organization, progressively building the new organizational structure, operating model and appointing the new management.
The set-up of the newly defined program function was quite challenging as former program entity was mostly in charge of synchronizing milestones without clear levers. The new scheme, inspired from the aerospace industry was giving the accountability to the programs on product plan, development budgets, resources allocation, major trade-off decisions and off-course planning. Resources were distributed across programs and functions depending on their level of dedication to the programs.
The creation of the regional business units in charge of marketing, sales and services in their region was also a massive shift considering that all those activities were previously organized by function. The newly created structures would have P&L accountability for their region but also the necessary levers to deliver. The overall consistency on the brand, policies and practices would be ensured through the implementation of small but powerful corporate functions. Regions would express regional customization needs to the programs to make sure products would answer the regional specificities.
The consultant  facilitated the migration of budgets, headcounts, transfer of accountabilities with a specific focus on the continuation of major projects.
At the project’s completion, few major achievements were made:

The launch and start of the new organization was successfully completed.
Cost reduction (opex and capex) of 15% realized, by improving allocation of strategic resources carefully managing tradeoffs but also streamlining the organizational structure
Acceleration in development of customized regional products that addressed local markets needs

Additional Information

4 Major Trends in the Automotive Industry That Will Impact the Future
Despite that the Automotive Industry has enjoyed a solid rise in demand, there are few potential risks that can hinder the growth, and will have a cooling effect.
Among these risks factors are slowing global economy, fluctuations in interest rates, and changes in future demand.
Exciting new technologies are impacting the Automotive industry today, from electric cars, to self-driving vehicles, and a multiple mobile apps changing how drivers and passengers interact. But beside the exciting things, some serious concerns have emerged too.

Production

After the recession and the subsequent growth in demand, manufacturers have expanded facilities to cope with higher demand, they invested in new facilities and ramped up production capacity. But all this can become problematic when the demand starts declining. And scheduling issues might become a serious problem for suppliers who are doing their best to optimize work schedules, delivery, and use flexible sourcing options, and selection of manufactures.

Consumer Demand Trends

Right now, older baby boomers represent the biggest segment of car sales, and this pattern likely won’t change. Millennials on the other hand, are less interested in car ownership and prefer other transportation options. The popular ride-sharing apps are changing consumers’ behavior. Auto suppliers are starting to worry how they are going to grow sales when the demand starts declining soon.

Global Expansion

Approximately a third of North American automotive parts are manufactured in Mexico, and many US suppliers have facilities there or a planning to establish ones. However with the new administration in Washington commencing early next year, we can’t be sure about  the future developments at the present moment.

Workforce Shortage

With the creation of many new jobs, and the ever-increasing sophistication in machinery, suppliers face difficulty in staffing. There is simply not enough skilled labor in the industry. Attracting and retaining skilled labor means offering enough incentive, effective salary and benefits packages to secure workforce commitment. Many manufacturers are also working on training and internship programs, in partnership with colleges, to facilitate new talent education and career choices.
For Further Reading –

THE TRANSFORMATION OF THE AUTOMOBILE 2016
2016 Auto Industry Trends
Eight disruptive trends shaping the auto industry of 2030
KPMG’s Global Automotive Executive Survey 2016

t

About The Consulting Playbook
The Consulting Playbook is a collection of posts designed to offer insights into how businesses and their executives can utilize consulting as a strategic lever to boost performance. Each Consulting Playbook post is broken down into a few elements: Case Study, Additional Information regarding the technical application, and Additional Links related to the topic.

Activate the right levers to meet your financial targets

You made your resolutions for 2018 on REBITDA and Cash, but here’s Q2 and your leadership team is starting to look at their mid-year commitments with furrowed brow. It might feel like déjà vu but the fact is they’re approaching the task with a limited set of tools. Sure, focus on innovation and increasing your customer base, and address short-term targets with new value sources that won’t compromise on the future. At the same time, you can use a few more levers in your tool belt, such as these ideas to get back on track to meet target:

Manage your Consulting Spend

Procuring consulting services is quite different from procuring goods. Consulting is a complex industry often described as a matrix of capabilities and industries.

Read More

Buy Better on Direct Costs
When you optimize procurement costs, you have a fast lever to impact your PNL and Cash lines. Evaluate supply and demand on each category and break down the spend by SKUs. Identify some quick wins and assess your bargaining power. Choose the negotiations you’re confident in winning. There must be a few that were not on your plate already

Renegotiate contracts based on the supply and demand balance and market volatility (when your supply is greater than the demand, you don’t necessarily want to lock yourself in with a long-term contract unless you get extremely competitive conditions).
Renegotiate the tail spend – those contracts you almost never renegotiate.
Bring in second-source suppliers to reduce your risk, increase your bargaining power, and keep your incumbent reasonable.

Example: In the chemical industry, even long-term contracts often include a “meet or release” clause that allows a company to use different suppliers if the offer isn’t competitive. Time to check and see how competitive that old contract is today.
Leverage Pricing
Pricing is usually your second-fastest lever. Simple math shows pricing is often the biggest profit driver in the Price-Cost-Volume equation. If you have to choose one of these three, go for pricing whenever you can as long as you’ve got low margins. With high margins, go for volume.

Differentiated Products: You’ve got the bargaining power – assess the willingness to pay to capture the value you bring to your customers without pushing them to find alternatives or alienating them.
Commodities: Depending on supply and demand, your bargaining power can evolve considerably – and pricing must follow. Devise a smart price-volume pricing strategy and you can maximize your profits while optimizing your assets at the same time.
Services: Are you pricing for the level of service you provide? Do you have advanced inventory? 24/7 reactivity and customer support? Auto-refill leveraging the internet of things? Teams on site supporting the operations? …. maybe there are services you could monetize by implementing a differentiated service offering.

For example, you can create a simple chart to analyze the level of unit margin and yearly volumes of each product-customer couple. This will help you identify outliers benefiting from much better conditions than other customers for historical reasons. Those customers are good candidates for a price or volume adjustment.
Buy Better on Indirect Costs
Optimizing indirect costs is an evergreen topic. Many companies have already regrouped their indirect procurement to better manage expenses. Typical levers are:

Regroup and manage decentralized expenses such as insurance, travel, consulting as a category
Freeze external expenses for items that can be delayed or produced in-house.
Implement more stringent validation rules for travel to ensure you leverage all of those conferencing and video conferencing tools you already own.
Bring in niche experts to optimize overlooked categories like office supplies, printer leases, car rentals, etc.

Here’s a great example: Recently while meeting with a large bank with almost $200M in consulting expenses per year, we learned that Procurement wasn’t involved in their purchasing process. Imagine for a moment what that would mean. How much difference would it make in terms of regrouping expenses, strategizing the procurement, and negotiating with the different providers in competition for key projects? Just a 20% savings could represent 0.2% directly on gross margin. That’s $40M to this company. Are you interested in saving $40M? Most companies would say yes.
Play on Cash
Is cash king? Of course it is. Cash is also fuel – without it your company can only go so far. Here are tips for handling your cash better:

Delay payments for big investments – CAPEX first.
Delay hiring for a few months. This can make a big difference in your year.
Play on payment terms with your supplies. This means renegotiating longer payment terms or supplier financing programs with banks.
Chase down customer payments. You might even pull in a company that specializes in recovering aged receivables.

A perfect example: Following the pressure from retailers, CPG Companies negotiate longer payment terms with their suppliers every year. One fragrance company saw its working capital shoot through the roof, increasing by more than 30% by doing this. The next logical step was to negotiate the same conditions with their own suppliers but it took them two years to react.
Optimize Assets
Traditionally, companies apply the principle of Economics of Scale (produce more for new markets and give discounts for additional marginal volumes), and Scope (diversify your assets’ production and markets) to optimize their assets and generate efficiencies. Take moment to look outside the box and beyond your own back door. Some strategic partnerships can prove to be extremely interesting:

Optimize your asset utilization by partnering with companies that are evolving in the same market. Propose more competitive costs than their own (economies of scale with a competitor).
Develop common platforms on non-strategic parts to reduce your engineering costs and those of your suppliers.
Optimize your asset utilization by partnering with companies that are evolving into different markets (economies of scope with another company)

For example, a defense company partnered with an automotive company to fill up their production pipeline during low-activity periods. By producing parts for the automotive company, the defense company covered their fixed costs. This helped the automotive company increase production without investing in new assets. They also benefited from higher-quality work since defense quality management is extremely rigorous. Nor did they have to share their opportunities and knowledge with potential competitors.
Get Back on Track
Whether you want to recover from a low first quarter or create a buffer for future headwinds, there are some excellent levers here for you to activate. Remember that time is of the essence – don’t hold off on action until Q3 rolls around. To maximize the impact on the current year, dedicate internal resources now and considering bringing in external resources or consultants.

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