| | By Mick James
A friend of mine once
advised me there were
three things you should
never attempt to do
yourself. One was move a
piano, the second was
repoint a chimney. I
forget what the third
was but I suspect it may
have had something to do
with coming up with a
structural analysis of
the management
consulting industry.
Fortunately – and
this is the point my
friend was making –
there are people out
there prepared to
venture up those
ladders. For the last
few years we have seen a
steady improvement in
the quality and nature
of the information
gleaned from its members
by the Management
Consultancies
Association.
Unfortunately, this has
come at a price, as we
have to live with media
who consider any
expenditure on
consultancy to be folly.
So the year-on-year
increases posted by the
Association have not
been interpreted as
welcome signs of health
in a British knowledge
industry, but as
evidence of a collective
descent into madness.
The abuse of public
sector consulting
figures has been
particularly atrocious,
with any quoted figure
immediately divided by
the cost of a hospital
or a police car and
portrayed as robbery
from the needy.
The problem for the
MCA is that in stating
aggregate figures for | |
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"It's the stamp of
approval," says Peter
Hill, the MCA's chief
executive. "We want to
ensure that people are
not selling a
non-consultant as
MCA-approved."
In the longer term
the plan is for the MCA
to use this core figure
as a platform for a much
more robust and
quantitative discussion
about the value clients
derive from consultants.
At the moment the
current report is
bolstered by an in-depth
client survey that shows
that most clients are
satisfied with their
consultants, most
projects come in within
or only slightly over
budget and timescale and
that they have a very
clear-cut view of what
they want from
consultants.
"It's a first step, a
very qualitative
approach to get
something on the value
of consultancy from the
end-buyer," says Hill.
What is interesting
here is that the key
priority is neither
cutting costs nor
increasing revenue, but
getting things done more
quickly. The only thing
the survey is missing is
a counterbalancing
survey of consultants
about what they think
clients want from them
or value about them,
which could offer some
highly instructive
contrasts.
On the back of this
work, the MCA – which
accounts for around 70%
of the industry – has
taken the bold step of | |
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| | dividing its membership
into six categories,
envisaged as an
interlocking Venn
diagram. At the centre
are what it calls Type M
firms, who offer "pure"
management consulting.
Impinging on this centre
are the Type As,
accountancy firms
including, but not
limited to, the Big
Four. Once the lynchpin
of the industry and now
in revival mode, this
sector still accounts
for a healthy fifth of
total revenues. A
smaller category, Type
E, represents the
engineering and project
management strand, again
at one time a central
plank of the industry,
but now only 1% of the
total. The rest of the
industry is defined by
its involvement with the
wider world of IT: Type
I which also does IT
consulting, and Type O
which also do
outsourcing. Together
these two make up 9% of
the market, but
unsurprisingly the
lion's share is taken by
the Type Cs, the IBMs
and the Accentures who
do everything and take a
whopping 61% of the pie.
Two things occur
here: one is that a neat
Venn diagram has the
same appeal to the
consultancy industry as
a nice smooth patch of
wet concrete has to a
stray dog and that this
picture is bound to
become a bit messier.
Consolidations and
opportunism are bound to
mess up what is at the
moment a relatively
focused industry. My
favourite scenario would | |
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to tackle the lack of
competition in the audit
industry and set up a
Big Five audit firm.
Stranger things have
happened.
The other is how much
genuine overlap there is
between the firms, and
how much of it is in the
"pure" consulting
sector, where the Type M
firms are prospering and
account for 13% of fee
income. This, I think,
answers those doubts
that some people have
about the ability of the
MCA to represent such a
diverse bunch of firms.
It’s possible that in
the future the
consultancy industry
will go through another
phase of demerger. At
the moment the mixed
business models hold
good because clients are
happy with them: if I'm
enjoying my lunchtime
ciabbata I'm relatively
unconcerned about
whether I bought from
Boots, M&S or the local
sandwich maker.
It's always easy to
forget that consultancy
can only ever define a
negative space defined
by client problems, and
clients will always be a
destabilising force in
consultancy. A lethal
combination of pester
power with purchasing
clout can always
undermine the most
rational business model.
In the final analysis,
the structure of the
consultancy industry
will always resemble
nothing so much as a
chair, which bears the
imprint of the last
person who sat on it.
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| | its membership you end
up adding a lot of
apples to pears. So a
member of the
commentariat can pick up
on, say, some apparently
daft communication
exercise undertaken by a
redevelopment authority
in the Midlands and then
conclude "...and you
realise as a nation we
spend billions a year on
this sort of stuff".
The MCA's response
this year has been to
undertake a careful, if
potentially
controversial,
segmentation of its
client base, which
raises fascinating
questions for the future
shape of the industry as
well as for the MCA
itself.
The first bold move
is to restate total fee
income in terms of
different service lines,
and restate a figure for
"pure" management
consultancy for 2006.
This is, of course, a
lower figure than the
headline figures stated
in previous years, but
still it shows an
increase of around 16%
over the previous year –
a lower rate of growth
than 2005 but still
healthy. In the future
the MCA will focus very
much on this area,
partly to ensure that
clients understand that
this is the area of its
members' activities that | |
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