An introduction to the consulting industry
The consulting industry isn't just made up of strategy consulting. It covers a wide variety of expertise across multiple industries. Clients hire consultants to improve their performance, adn demand concrete results at every stage of a project. It's a tough industry to work in. It's even tougher to make it your lifelong career.
By John Yip
What is a consultant? This is not as idle a question as it might at first seem, because everyone seems to be a consultant these days. We have financial consultants, public relations consultants, human resource consultants, and so on.
Consultancy is a blanket term that can refer to any form of professional advice-giving. Pretty much anyone who is in a position to give specialised advice on a particular business process can claim to be a consultant. He could be a distinguished professor from your local university, or the hardworking employee of a global consulting firm.
Different kinds of consultancy
To keep things specific, we’d be focusing on what we’ll term as business consultancy. More specifically, we’d be examining the firms that make up this wide-ranging industry. The employees of business consulting firms all aim to improve their clients’ performance – they are not hired to maintain the status quo, but to change it. The success of a consulting project is measured by the extent to which a consulting firm is able to achieve concrete results, through the changes it not just recommends, but carries out as well.
The top consulting firms in the world include well-known names like McKinsey & Company, Boston Consulting Group, Bain & Company, IBM Global Services, Accenture, Braxton, Gartner, A.T. Kearney, KPMG Consulting and Cap Gemini Ernst & Young. There are three possible ways to segment the job scope of the consulting industry:
• Specialist consultancy
Specialist consultancy focuses on a particular industry, or a particular business domain. For example, there are consulting firms that have expertise in giving advice to the public sector or the energy industry. And then, there are other firms that specialise in public relations, supply chain management, accountancy, and so on.
• Strategy consultancy
This is the segment we usually think about whenever we talk about consulting. Strategy consultants (also known as management consultants) offer advice that is typically targeted at the client’s senior management. Strategy consultancy is regarded as a lucrative and prestigious profession, the career of choice of many business school graduates all over the world, so it’s no wonder that it gets a great deal of attention.
• Integrated solutions consultancy
Drawing expertise from a variety of domains, these consultants implement customised solutions for their clients, such as building and installing new technology. Clients typically outsource entire processes to these consulting firms, for them to directly manage the improvements needed.
Note that these segments are far from being clearly defined. By and large, the smaller the consulting firm, the likelier it is for it to be a specialist consultancy. Large consulting firms on the other hand, especially those whose practices span the globe, are very likely to operate in all three segments at the same time. They may even have more ways to segment their own industry!
Why do companies use consultants?
Companies go to consulting firms to get fresh perspectives on intractable problems. It is often the case that when you’re in the thick of a problem, you’d lose sight of the forest for the trees. Hearing ideas from an independent source is a good way to get new ideas for improving business performance. Consultants work with a large number of clients, and are necessarily familiar with a wide variety of business models within their field of specialisation. They are therefore in an excellent position to judge the viability of a client’s business, and subsequently recommend changes that would help the client catch up to, or even surpass, its competitors.
Consulting starts when a client wants to improve performance in some part of its business, but recognises that it does not have the expertise to do it. It becomes particularly challenging when the client needs to resolve the issue within a short frame of time. It is prohibitively expensive, maybe even impossible, for the client to train its own staff to solve the problem. This is where consulting firms come in. They provide external pools of expertise that clients can immediately use on a short-term basis. Consulting firms thus provide economic access to specialised expertise. The cost of training and developing these teams of external experts are borne by the consulting firms, who spread the cost over multiple clients.
There’s also the advantage of using consultants to circumvent an organisation’s internal politics. Change management is often a gut-wrenching process for a client’s company. Each ‘faction’ in the company has its own vested interests to protect, which can lead to stubborn resistance against change. Consultants work outside of their client’s hierarchy, and are therefore in a better position to overcome such resistance.
And finally, there’s the fact that consultants are smart people. The consulting industry regularly draws the top minds in business into its ranks and has an aggressive campus recruitment porgramme to hire to best fresh graduates. Whether you’re looking for an innovative solution, or a thorough analysis, chances are that you’ll find the expert you’d need from a consulting firm.
Consultants are particularly good at applying a systematic approach to identifying and solving a wide range of business problems. Each consulting firm uses its own, more or less unique, methodology for analysis, and its consultants are trained to apply the methodology on all projects. Consultancy is an intangible service, so the formulation of such methodologies is the industry’s way of presenting its expertise in a tangible format. Essentially, a methodology is a formal process by which all the issues behind a poorly defined problem is surfaced and documented. It is a way of ensuring accountability throughout a project’s life cycle.
Consultancy in recent years
The consulting industry has its ups and downs like any other industry. Globally, consulting firms are beginning to recover from economic downturn the early 2000s. Recruitment has been picking up, but not yet at same scale as the booming 1990s.
The mass hysteria of the dotcom era gave rise to a glut of poorly conceived consulting projects. Naïve companies hired consultants willy-nilly to deploy the latest technologies in their businesses. The failure of such projects to deliver promised results has led to a backlash against the consulting industry, and consultants have come to be as vilified as insurance agents.
The industry remains lucrative, but getting into business consulting is now harder than before, as both consulting firms and their clients have learnt their lessons in the wake of the dotcom bust. Consulting firms are now expected to help clients squeeze maximum benefit out of all the massively expensive investments that they’ve made in the previous decade. This calls for specialised knowledge, which leads to a corresponding rise in demand for consultants who are sufficiently experienced to understand the nuances of a client’s business model. Experienced and knowledgeable enough to spot the elusive formula that would lead to long-term competitive advantage for the client.
The sword cuts both ways. If you’re a fresh graduate, good luck to you if you’re hoping to join consulting. Be prepared to face much fiercer competition for fewer openings. Sterling academic results may not even garner you an interview with any of the major consulting firms. It’s no longer enough to be smart – you’ve also got to have the professional track record to prove it.
You better have passion
The general consensus within the consulting industry is that the shake-up of recent years has been a good thing – it has removed those who joined consulting simply for the money. There are now a higher proportion of consultants who are passionate about their work, and are not just motivated by a fat paycheck.
Between a candidate who is looking at the consulting industry as a stepping stone into other careers, and another candidate who enjoys the intellectual challenge of analysing complex business issues, as well as the thrill of knowing that his hard work helps his clients perform better, it doesn’t take much to guess which candidate will get hired by a consulting firm. Once you consider the amount of resources that a firm will invest on turning their consultants into bona fide experts, you’ll begin to appreciate why they’d prefer to hire someone who is committed to consulting as a long-term career.
Aspiring candidates who perceive consultants to be ‘business generalists’ will also do themselves a great favour by getting rid of that stereotypical view. The industry has undergone a great deal of restructuring in recent years. Some consulting firms have even hived off entire departments in the effort to focus their resources on their competitive strengths, and are generally more specialised than they were before. Each consulting firm has its own specific areas of expertise. Their clients know it. You should too, if you don’t want to look stupid in front of your interviewer.
So take the time to do your homework. You need to think about whether you’re truly interested in helping other people, and whether you have the stamina to develop the intellectual calibre required for this line of work. This can be a harsh industry for you to stumble into blindly, so be sure that you’re fully aware of what you’d be getting yourself into.