Definition of consulting:
"The provision to businesses of objective advice and assistance relating to the strategy, structure, management and operations of an organisation in pursuit of its long-term purposes and objectives. Such assistance may include the identification of options with recommendations; the provision of additional resources; and/or the implementation of solutions." (On http://www.iconsulting.org.uk/membership/what_consulting as of 03/06/2016)
Introduction | by Dr. Martin Henery
Albert Einstein said, “If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.” With business consultancy, this means understanding who your client is, what they are trying to achieve, what strengths they can bring to bear, how they go about things (values) and the changing environment in which they find themselves. This environment will be a source of both opportunities and threats that they can apply the strengths to, leveraging the former and overcoming the latter. But as with every organisation, they will have weaknesses that could both detract from their ability to take advantage of the opportunities, but could also make them more susceptible to the threats. So, before any solutions are proposed, we need to understand the problem and the context (to be sure that it is the ‘real’ problem and to understand the rationale behind the client’s wish to solve it) and to analyse both the business and the eco-system. The internal and external analyses refer to the analysis of the business and the ecosystem, respectively. The latter is divided into macroenvironment (those trends and dynamics that we have no control over) and the microenvironment (factors over which we have some influence). The Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis provides a way to summarise the most critical points in order that you can then strategize and plan. A summary is presented in Figure 1.
Figure 1: Schematic representation of the strategic analysis process (credits to Martin Henery, Enterprise Academic / Lecturer & Social Enterprise Champion, Manchester Enterprise Centre).
The Situation Analysis
When providing a consulting service, it is often tempting to rush into the recommendations. An important step is to put that impulse on hold. The reason to do this is because each company has a particular way of functioning and, knowingly or not, is executing a strategy to implement their business model in a competitive landscape, whilst making use of their particular competencies. Thus, establishing a sound understanding of these elements is key to providing valuable information to the client, as the aim is to assist the client in creating value for their customers and themselves. A good place to start is by knowing and understanding the mission, vision, and values of the company that you will be providing advice to. Then, the situation analysis will allow you to understand what the most relevant external and internal elements to that company are. You then need to look into the business model of that company in order to analyse the strategy that the company has put in place so that your recommendations match the way the company functions and, more importantly, that your recommendations fit in the real world.
Once you have developed a clear understanding of the vision, mission, and values of your client, the next step is the situation analysis. This will allow you to investigate the internal and external environment of a given company. The latter being divided into the macroenvironment factors (Political/legal, Economic, Social, Technological, and Environmental/physical (PESTEL)) and the microenvironment factors (Suppliers, Customers, Distributors, and Competitors). This situation analysis gathers information that is of value to conduct the SWOT analysis. The SWOT analysis collates the information gathered in the situation analysis and is used to identify the weaknesses and strengths of the inner dynamics of the firm and the opportunities and threats originating from the external environment. A summary of some of the tools used to conduct a situation analysis is presented in Table I.
Table I: Toolkit for situation analysis.
With the knowledge gathered from the situation analysis and the SWOT analysis, you can start thinking about possible strategies and/or recommendations (TOWS analysis (see Figure 1)). But before jumping to conclusions, you need to look into your client’s business model (use the business model canvas to guide your effort). This will allow you to understand how your client is acting on its strengths and weaknesses to tackle opportunities, and how it is protecting its position in the marketplace from threats. Pay attention to how the information you gathered from the situation analysis can help improve the client’s performance.
Why the Internal Environment is Particularly Important to Understand
A company has resources, capabilities, and competencies that allow it to generate required outcomes. Resources are coordinated by capabilities, and competencies are generated by that act of coordinating capabilities, thus defining the character of a company. For example, resources are coordinated by marketing, research, and production capabilities; these together generate the New Product Development (NPD) competency. For a competency to be considered a core competency according to Gray et al. (2004 p.4), it needs to be, “valuable, rare, costly to imitate and non-substitutable.” This, in turn, creates the strategic assets that ultimately derive in a unique advantage (Brush et al. 2001).
Understanding how a company operates and what its core competencies are, allows you to build a comprehensive and realistic list of strengths and weaknesses. This will allow you to provide a piece of advice that fits with the strategy of the company. Michael Porter’s view on strategy helps to explain why you need to know this in order to provide valuable advice. In his 1996 publication, What is Strategy?, Porter presents as a defining characteristic of strategy, the creation of fit. This refers to how a company’s operations have to be consistent with the positioning of the company’s value proposition, thus allowing the organization to build the capabilities required to sustain the strategy. The other two defining elements of strategy according to Porter are trade-offs in competence and the creation of a unique and valuable position. The trade-offs in competence are necessary, as it is confusing for operations to have two strategies in place at the same time. Hence, when adopting a strategic position, it is advisable to recognize a trade-off so that there are no misleading messages being transmitted internally or to the customer.
In order to present a sound consulting case, it is not just necessary to understand the theory behind the particular case that is being analysed, but rather to understand the particular characteristics of the company that you are providing advice to. In particular, you need to understand where the company is positioned in its competitive environment and how it is leveraging the external and internal factors related to its given position in the marketplace. Ultimately, the goal is to recognize the strategy that the company is deploying and what are the company’s core competencies that allow them to keep and protect its position in the marketplace. With this, you will be able to provide a set of possible approaches to a particular situation, to then drive the appropriate recommendations and conclusions that resonate within your customer strategy and competencies.
For more on the theory behind consultancy follow THIS link.
Dr. Martin Gisby’s Recommendations for the Upcoming Consulting Case Competition
Dr. Gisby is the European Portfolio Access Director at Otsuka Pharmaceutical Companies Europe and former Senior Consultant for Paraxel, Consultant for Heron and Associate Management Consultant for WG.
In Dr Gisby’s experience, a lot of consultancy work is much simpler than the steps outlined by the situation analysis, consultant teams must ensure that adequate focus is brought to a topic in a concentrated time span. Sure, career consultants may utilise methodologies and frameworks that have been well researched, but practical and common sense approaches to questions, challenges or opportunities are often better received by the companies who don’t utilise ‘consultancy’ language on a day to day basis.
The consultancy case will be centred on purchasing a start-up, so requires less process consultancy (i.e. teams are not tasked with assessing and redefining a company’s whole strategy and its internal goals and processes), but rather seeing if a purchase can complement or extend the capability or revenues of a company. So, teams will have the option of looking to assess the opportunity aligned with the company’s goals and the external environment.
Therefore, teams may wish to simplify and summarise how to approach the consultancy case – for example, by breaking it down to the Question, Context, and Objectives:
Get a clear question defined with the customer (i.e. which of these start-ups will provide greatest long-term value to the existing company?)
Ensure the context around that question is understood (e.g. key considerations from the existing company strategy or goals, and key challenges the company has already identified).
Determine a set of objectives to address as part of the project (validate again with the customer), which normally address a subset of questions (e.g. determine what capabilities the purchase will deliver to the company, determine what revenue potential the purchase can provide).
Then, the additional situational analysis and strategic options can be assessed from this point onwards. You can expend a lot of effort in consultancy cases, so ensuring that the case is focused from the start will help to keep on track and provide something that the client will value. This prevents accidental delivery of an assessment of the existing company’s capability or business plan, which may not have been asked for and may not be well received!
In fact, the goal of this particular case should be to assess how well a particular strategy (or in this case a purchase) may fit with the existing client company.
Brush, C., Greene, P. & Hart, M., 2001. From Initial Idea to Unique Advantage: The Entrepreneurial Challenge of Constructing a Resource Base. Academy of Management Executive, 15(1), pp.64–78.
Elias, A.A., Cavana, R.Y. & Jackson, L.S., 2002. Stakeholder analysis for R & D project management. R and D Management, 32(4), pp.301–310. Available at: http://www.scopus.com/inward/record.url?eid=2-s2.0-0035994938&partnerID=tZOtx3y1.
Gray, A., Boehlje, M. & Akridge, J., 2004. Strategic Positioning in Agribusiness. , (September), pp.1–17.
Isenberg, D.J., 2011. The Entrepreneurship Ecosystem Strategy as a New Paradigm for Economic Policy: Principles for Cultivating Entrepreneurships. The Babsos Entrepreneurship Ecosystem Project, 1(781), pp.1–13. Available at: http://www.wheda.com/uploadedFiles/Website/About_Wheda/Babson Entrepreneurship Ecosystem Project.pdf.
Javidan, M., 1998. Core Competence : What Does it Mean in Practice ? , 31(1).
Porter, M.E., 1996. What Is Strategy? Harvard Business Review, pp.1–21.