One can regularly read about consulting projects that fail. Varied studies show that the percentage of consulting project failures is surprisingly stable - over the last decades this percentage levels off and remains stable at 30%. A recent survey of executives from large and medium-sized companies conducted by Cardea, asking participants to rate their satisfaction with consulting engagements, reveals that 42% of these executives say that the consultants have met their expecations, 47% say that the consultants have met their expectations to a certain degree, and 5% claim that the consultants failed to meet their exepctations.
Experienced consulting clients know that there are many causes of project failure and every failed project will have its own set of issues. It's not always solely the consultant's fault that projects fail. Sometimes it is a single trigger event that leads to failure, but more often than not, it is a complex entwined set of problems that combine and cumulatively result in failure. Generally these issues fall into two categories. Things the (client or consulting) team did do (but did poorly) or things the (client or consulting) team failed to do. One of the most important factor which influences a consulting project's success is at the same time a factor which is commonly underestimated: selecting the right consulting firm.
Did you know that only about 7% of buyers of management consulting services feel that they already know all the alternatives that they need to consider or rely on resources that approach them? This is the result of a study conducted by Hinge Research (How Buyers buy Management Consulting Services, 2013). This is quite a small number of buyers if one takes into account the eminent role that selecting the right consulting companies plays for a consulting project's success. But which approaches are there to find the right consultant? There are possibly more than you would anticipate - and possibly more than those which client organizations commonly use. That's why we will present an overview of different approaches to choose the consultants which are right for a client's specific business and challenges.
The process of finding a new management consulting services provider starts with looking for alternatives. According to the previously cited study 91% of buyers of consulting services turn first to friends or colleagues. Why is this approach to search for alternatives so important for client organizations?
Recommendations have this important function of reducing complexity which makes any decision comprehensible for everyone. Finding the right consultant is a task which may bear major risks, but also uncertainty. In this kind of situations few clues on what to do and on what may be the right choice will help client organizations succeed. This follows the "proof of concept" mechanisms to facilitate appropriate decisions in a complex and uncertain context such as it is also the case in investment decisions: Decision makers benefit from the recommender's previous experience with a consulting company and rely that the recommended consultant will deliver high quality work.
This explains the way how recommendations work when client organizations are looking for the right consultant. Recommandations are used as a proof-of-concept. One follows the opinion of a person one knows or one relies on. It does not matter whether one turns to business colleagues or friends, private or business recommendations have the same impact.
Relying on a recommendation is the most proven and oldest selection method. This is true not only in the consulting sedtor. All relevant decision information is aggregated in one single factor: the client satisfaction of the recommender with the recommended consulting company.
In times of increasing complexity, of increasing variety of tasks and of major changes in the consulting sector word-of-mouth recommendations are not sufficient anymore. Due to major turmoils in the consulting industry and varying challenges of clients it becomes more difficult and risky to infer the quality of a consultant from its past performance in previous projects, since project tasks, goals and results may completely differ.
Various consulting directories and rankings exist since a long time in the consulting market and help client organizations seek out new management consulting providers. Such lists are regularly issued by consulting market experts or media and Publishing companies.
Rankings of consulting firms use various criteria such as revenues (e.g. the top 10 management consultants in the German consulting market by Luenendonk), brand recognition and potential to add value (e.g. Best of Consulting award by Höselbarth/Wellejus in collaboration with Wirtschaftswoche) or are based on surveys of client executives (e.g. Top Consultant award of Prof. Fink).
You can find a more detailed description of the various consulting directories, rankings and awards on the following site: https://www.consultingsearcher.com/eng/Cardea-Kompetenzcenter/Der-Beratungsmarkt/Top-Unternehmens-beratungen. Since the underlying methods and criteria of such rankings differ widely, it is difficult to tell which of these are the most useful and effective, but generally one can think of the following advantages and disadvantages:
Consulting directories and rankings provide a rough overview of consulting companies in aggregate form, allow comparison of consulting firms and come from credible sources (the publishing expert). Depending on the nature and extent of the threats to independence and objectivity, rankings can be a valuable source for client organizations seeking out consulting companies.
Aggregation has its shortcomings. Although aggregate information may be able to provide a quick overview of consulting companies, the information must remain superficial. That's why one can not solely rely on rankings when it comes to the question which consulting company might have the relevant skills and expertise to solve or to advise on a specific challenge or topic.
An increasing number of professional procurement departments of usually larger client corporations use their internal preferred supplier lists. These preferred suppliers can cover up to 80% of the overall consulting demand of client organizations. These clients organizations therefore hardly ever perform any additional, project-based market screening to seek out alternative management consulting service providers. Research will only take place when specific demand for consulting services cannot be covered by preferred suppliers.
Preferred suppliers are in most cases consulting firms with an existing and long-lasting client relationship, so clients have experiences in working with them, know their quality and have built trust. In this way preferred suppliers are pre-qualified based on the past work they have done for a client. In addition, preferred suppliers are usually larger consutlting companies which are able to provide a variety of skills, expertise and services.
A client's ability to engage the right preferred supplier on the right projects is largely dependent on the quality of information about the preferred supplier. This information revolves around the knoweldge of the current service and skills portfolio of the consulting Company and the knowledge of the past performance of the consultant. If this information is vague and inaccurate choosing and engaging the right preferred suppliers becomes a "game of hazard". In addition, if client organizations rather not perform any market screening activities they forgo having their preferred suppliers compared to competitors. Potentially attractive alternative consulting companies are not taken into account.
Due to the complexity and importance of finding the right consultant buyers of management consulting services more often turn to professional external experts. There are only a few service providers which specialize in assisting client with searching and finding the right consultants for their businesses. A renowned and professional provider of such services is Cardea AG, located in Switzerland. By providing transparency in the consulting market, Cardea supports clients in making the right decisions when retaining external consulting services. Cardea has established itself as a recognized expert in all matters relating to the consulting market and the use of external consultants – across all industries and from large, international corporations to small and medium sized enterprises.
Professional search usually encompasses the following steps:
The professional and methodologically founded approach for screening, evaluating and finding the right consultants is a proven way to enhance the chances of success. This is reflected in the high percentage of clients which are satisfied with the project results and the management consultants which have been selected using the screening and evaluation capabilities of Cardea.
Systematically screening and assessing potentially suitable management consulting service providers is a time-consuming task. Although clients "outsource" the major steps of this process to Cardea, there is still some client involvement necessary. Clients have to be involved with the definition of the project requirements and required external skills and expertise and, obviously, with the final decision on the consultant of choice.
Talking about searching and finding things in times of the internet, Google comes immediately to mind. What role do internet search engines play when in comes to searching and finding management consulting firms?
Consulting firms recently have done a lot to improve the design of their websites and to gain the trust of their clients through them. Additionally they have invested in search engine optimization (SEO) and search engine advertising (SEA) in order that their websites are easily found by clients. The times of opacity and conservatism which have for a long time shaped the world of consulting are gone. With their websites, blogs and microsites consulting firms try today to gain advantage over competitors.
More and more it's worth to use the internet to seek out prospective management consulting firms. Because consulting firms do a lot to make their brand and services visible in the internet. Most people are familiar with using Google for searching things and information. And since the internet provides massive amounts of data one can easily and quickly find relevant and interesting information on consulting services available in the consulting market.
Although Google's search algorithm is one of the company's best kept secret and is steadily improved, Google is not the best way to search for and find management consulting firms. There are various reasons for this: For clients to be able to look for the consulting firm which best matches their requirements the information about the services and expertise of prospective management consulting firms would have to be logically structured and aligned to how clients search for consulting companies. This is not always the case.
||In addition the information on a consulting firm's website must be structured in a way so that Google algorithms recognize them as relevant keywords, meaning that the best links relating to a search query are theoretically the first ones Google lists. This is seldom the case. Consulting firms have begun to invest a lot in search engine optimization (SEO) but not since a long time. SEO for consulting websites, therefore, is still a relatively new concept, effective mechanisms and benchmarks are still emerging. In addition, search engines do not evaluate the quality and accuracy of information provided by the consulting companies' websites. The information is presented in the way a consulting firm wants to show it. Comparing consulting firms therefore is difficult because each consulting company presents its services and expertise in a different way.|
Social media is an increasingly important tactic in (consulting) companies' marketing. That's why large social networks such as LinkedIn and Xing are also becoming more relevant for clients which seek out management consulting service providers.
While search engines do the work for users by searching out web pages that contain the keywords the user used to search and then assigning a rank to each page based several factors, social networks bring search and information together on one platform.
One of the big advantages of social networks is the comparability of profiles because there is a standardized framework of how to present relevant information at least with regard to the "look & feel": The navigation is the same and standards define where and how the information is presented. This makes it easier for users to compare profiles. Another advantage is that social networks show the social environment of a person/ consultant. For example LinkedIn provides a feature for users to endorse skills and make recommendations which is a way to build trust. Users of LinkedIn also can see which expert groups a member/ consultant participates in.
Because social networks basically are for everyone (i.e. no one is excluded) they use "universal language and rules" and therefore (have to) neglect all industry-specifics (e.g. relevant for the consulting market) which make profiles and their comparison useful for screening and finding specific management consulting services and skills. The profile information provided on social networks do not reveal the level of detail and depth necessary for this task. Additionally, social networks are based on individual members and profiles. For a lot of consulting engagements however client organizations are looking for consulting firms and whole teams of consultants. For users of social networks will it be hard to find relevant information on this level, since information on company profiles usually is kept on the most basic level.
Do you remember the times when internet services such as Scout24 have not yet been available? Although you could use the web to search for and inform yourself about cars no transactional services have been available. To actually buy things online through a internet website was merely impossible. This was unsatisfactory for the provider as well as the customer.
This example makes one thing clear: Aggregators, i.e. web-based services that connect customers (demand) and providers (supply) make the difference between pure information and real (online) business. In a lot of industries and application areas (such as buying used cars, booking flights & hotels or renting appartments) a world without such services would be unthinkable.
Also in the consulting industry aggregators emerge which close the gap between pure information and transactional business services. They are becoming more and more popular and are increasingly used by buyers of management consulting services. The number of providers is growing. They embark on different strategies, providing varied solutions and offering varied business models.
Aggregators are successful business models. They have established themselves in varied industries and disruptively reshaped whole industry sectors. The rise of the platform economy and online marketplaces has contributed to the digital revolution and is changing the face of business in many ways. Marketplaces are difficult businesses to run, though. As multi-sided platform businesses they have to combine three essentials factors that determine success for a marketplace business: First, users visit a marketplace with a highly transactional intent and want to find what they’re looking for at the earliest. Hence, the quality of the search algorithm and the intuitiveness of the navigation are critical to delivering value (search). Second, building trust is central to marketplaces where transactions carry risk (such as buying consulting services). AirBnB is an example of a player in a high-risk category, that succeeded because of its ability to curate its participants. AirBnB allows hosts and travelers to review each other and has one of the highest review rates among marketplaces (trust). Third, unlike social networks, marketplaces are transactional and users typically don’t have long visit lengths engaging with the product. Hence, on a marketplace, the ability to search and transact/interact should be as intuitive as possible (transaction).
These factors are also central for online consulting platforms. The efficiency of discovery and matching is critical to a marketplace’s success in the consulting industry. consultingsearcher® is an online platform for buyers of consulting services which succesfully has integrated search, trust and transaction:
Multi-sided platform businesses suffer from the classic chicken and egg problem: the technology has no value unless buyers and sellers are present and you can’t get the buyers on board unless you have sellers and you can’t bring in sellers without having buyers. The usefuleness and success of an online marketplace therefore is strongly dependent on its ability to reach critical mass: a minimum number of consulting service providers and buyers of consulting services on the marketplace and enough volume of supply and demand, for transactions to start sparking.
First, it has to be said that all the presented approaches and methods for searching and selecting the right consulting company are intertwined and the rise of digital technologies have blurred the boundaries of the different approaches. One can easily find Elements of one method or approach in another method or apporach. For example the element of "recommendation" can also be found on consultingsearcher®, the online marketplace for buyers of consulting services, allowing clients to review and rate the quality of consulting services of listed consulting companies.
Under these circumstances, probably all of the presented methods/ approaches for searching and selecting the right consulting company will play a role in the future. However, we would expect a tendency towards a wider use of professional search techniques such as professional market screening/ research, prequalification of consulting companies (preferred supply management) and/ or consulting market places and platforms. Compared to classic search methods online search through consulting platforms will gain importance. Classic search methods will be mainly deployed for highly specific consulting tasks and consulting skills.
These tendencies are also reflected in current changes of the buying behavior of consulting clients: higher professionalism of buying departments in client organizations, the need to increase efficiency and efficacy of consulting screening and selection processes, tighter compliance and regulatory restrictions, and increasing cost and quality awareness of client organizations when engaging consulting companies. It's also important that client demand for consulting services will change remarkably in the future: Instead of spending money for (general) strategy consulting services, which anyway are hardly eligible anymore to solve the complex business issues clients are facing nowadays, the rather engage consultants for concrete and practical support. This is more than a swift in the demand for consulting services: clients are forced to re-evaluate the consulting market and its providers of consulting services and to seek out alternative consulting companies which are able to solve complex problems and provide practical solutions and approaches.
In a globally interconnected world and in an age of increasing information overload, transparency among external service providers is becoming more and more important.This particularly applies to the process of selecting a consulting firm.
Why is selecting the right consultant such a difficult task?
Because management consulting is a broadly defined term and consulting an intangible service, it begins with the challenges associated with specifying the requirements and ends with the challenge of measuring project results and a consultant’s performance. Why it is particularly difficult with management consultants can be shown by comparing management consulting service providers with providers of tax advisory, legal counselling and advertising agencies.
Although all of them offer in a way consulting or advisory services and although, being all of them suppliers in a B2B relationships, trustworthiness is crucial and building long-term client-consultant relationships is common, they are different.
If one compares the task to find and select the right management consultant with finding and selecting the right tax advisory, clients can more easily determine what they want to do and which tax advisor is the right one. The challenges and issues client organizations want to to solve using management consultants are much more varied and often not clearly defined, whereas tax advisory services follow a certain predefined structure and are much more concrete. It's therefore easier for clients to specify the requirements towards a tax advisor than towards a management consultant. Although still complex, tax advisory revolves around a more clear, delineable group of tasks than management consulting. Also, goals and objectives are much easier to define (e.g. reduce taxes) than in the management consulting field. For buyers of management consulting services it's sometimes more difficult to define goals and expected results of consulting projects, and similarly to measure the performance of a management consulting company.
Comparing management consulting, law and agencies, clients may be able to define the problems to be solved, but the technical expertise of advertising agencies or management consulting companies is used to devise novel and varied techniques to problem solving, techniques which clients typically find difficult to fully specify and evaluate. Although also legal advisory involves complex and highly personal interactions between law firms and client firms, law firm capabilities and legal experience is most closely related to "pre-defined areas" by existing legal framworks, laws, rules and regulations.
Latest with the emergence of digital technologies, the number and variety of advertising and marketing agencies have remarkably risen. As outlined above, due to the variety and novelty of solutions available, clients find it probably equally difficult to choose the right management consulting company or advertising agency. The result of agency work is often visual content (designs, websites, brochures, image films, etc.) which can be used to get a first impression. The results of consulting projects, however, are much less concrete or manifest.
What steps are necessary to find and select the right management consultant can be shown taking the example of the professional research process of a consulting market expert Cardea AG in Zurich/ Switzerland:
a) Project Set Up
Structured process to define project content, goals and tasks, skills requirements and required expertise of prospective consulting firms as well as search and evaluation criteria.
Identification of an eligible set of pre-qualified management consulting services providers. The pre-qualification is based on the examination of service providers in order to identify a validated long list of eligible consulting companies for the clients’ project initiatives based on pre-defined requirements.
Request For Proposals are used as a way to increase visibility into both management consulting service provider capabilities and the economic details of their respective proposals. Insightful consulting firm RFPs include well-posed questions regarding a management consulting firms’ expertise and industry experience and allow fully understanding how a management consulting firms’ capabilities relate to a client’s situation.
The data collected through the proposals are used to gain a deep understanding of prospective consulting firms’ specific capabilities and industry experience as well as are examined to achieve apples-to-apples cost comparison.
By pinpointing and comparing proposals of different kinds of consulting companies and approaches for a project, Cardea helps clients to identify the consulting companies and offerings which best match their requirements, in terms of value, services, experiences and price.
Cardea has proven tools to measure the performance of consultants during and/ or and the completion of a consulting project in order to identify and manage underperformance and project risks in a timely way, determine return on consulting and/ or to assess and manage the portfolio of suppliers/ providers of consulting services.
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