Management consultants have learned to sell all sorts of weird projects to their clients. Some of them were born out of the need of the customer. Others were developed internally by the consulting firms. Consulting projects differ drastically and I will try to shed some light on the main types of projects you can come across. There will be also plenty of examples. Btw, we have also prepared a video version of this post. You can find embedded at the end of the post.
The first thing that comes to your mind when you think about consulting is probably the development of strategy. Not surprisingly Strategic Projects are an important source of revenue for consulting firms. However, hardly any firm needs a full strategy for the whole company. Nowadays, you would rather develop partial strategies, address certain specific areas. Below are a few examples of such projects:
- Develop the strategy for supply chain/production/sourcing/sales in this type of project you have the general strategy of the firm already defined, you have some goals, capabilities and you have to suggest to the customer what would be the best way to organize the certain area. Should he do it on his own or delegate it to 3rd party? Should there be one model for everything or he should rather use a mixed model? How many facilities (warehouses, production sites, stores, etc.) he should have and where? As you can see those projects require a lot of detailed answers and they are data-driven.
- Entering a new market/category of products/customer segment. In those projects, you use as the starting point what your clients already do (so there is a lot of legacy issues) and you try to adjust his strategy to a new market/category. In some cases you may have to advise him to do something totally new as adjustments will not suffice. Quite often you also have to start even earlier and help him select which markets, categories of products, and customer segments he should consider. You also have to estimate in such projects what is the potential benefit as well as connected costs. Your end-product here is a thick slide deck (100-300 slides) and plenty of models, rankings in Excel. Have a look at an example of a firm considering entering a new category of products
- The strategy of transformation. In some cases the company is deep in shit, lagging behind the best practices on the market. In those cases, they call management consultants to help them decide what they should do to catch up with the main players. A great example of such projects in recent years was: building online presence especially e-commerce, digitalization, AI. Previously we had: outsourcing, centralization, decentralization, shared service centers, etc. As you can see this is always a great source of new ideas because constantly something is changing
If you want to learn more about such projects have a look at Strategy for Management Consultants and my post on how to define a strategy
Performance Improvement Projects
Management Consultants may have started with Strategic Projects but more money is actually generated by Performance Improvements Projects. In this sort of projects you don’t have to come up with new ideas, enter new markets. You simply have to make life easier. You help the customer save money, generate higher profits, generate more cash or reduce his need for assets. Below are some examples of such projects:
- Operations improvement. The main idea is to reduce costs, increase the speed & quality of the operations and reduce the inventory used by operations. Those projects require you to identify potential savings in Operations. You do that usually using lean manufacturing techniques, theory of constraints. Great project to see how the business really works and to solve real problems. In those projects, you do fewer slides, a bit more calculation, and Excels. On top of that, you create a lot of tools in Excel that should support Operations: a production planning tool, a tool for estimating the purchases, a tool for finding the best spots for locating the factory, warehouses, stores, etc. Check some examples: Where you can find savings in distribution, How to optimize processes – example, Process optimization methodology, How to decide which customer you should remove?
- Cost Reduction Projects. In those projects, you concentrate on finding savings by cutting costs. You go here beyond the improvements and savings and operations and you analyze every cost position to find more money. In many cases you do the headcount reduction – in other words, you lay off plenty of people (10-30% of the overall headcount). Those projects tend to be brutal and a lot of tears are involved. The funny thing is that after some time the costs tend to go up again. So a new cut is imminent.
- Pricing Projects. A lot of attention is also devoted to playing with the prices and discount policy. You try here to find the optimal prices for specific products (prices that will bring you higher gross margin, profit). You also optimize the discount policy. As a part of the projects, you may also change the price structure (add or remove new price points). This area is so big and lucrative that a lot of companies concentrate only on this area (i.e. Simone & Kucher). Check my presentation on Innovative Revenue Streams
- Value Chain Improvements Projects. In the case of complicated big firms with intricate value chains, you may also go beyond the firm and look for improvements in their overall supply chain (their customers and suppliers). The main rationale for such projects is to help your partners be more efficient and share the savings
- Team Efficiency Increase Projects. In many cases, you will have to increase the efficiency of a specific team. It may be Sales Team, R&D Team, Technical Support Team, etc. Those projects make sense to be done for groups of people that are expensive, big, or are bottlenecks for future growth. Here you want to make more with the same people or create a space for headcount reduction. You do it mainly using lean manufacturing techniques, theory of constraints, management consulting tools, techniques, frameworks, OLE, and other techniques. Have a look at an example of Improving Sales Force Efficiency
- Automation Projects. In the western world, you have fewer working people and on top of that, there are expensive. That is why Automation Projects became so popular. The aim is very simple – get rid of people. In other words, you have to help your client find ways to replace the people with machines, tools, and software.
- Liquidity Improvement Projects. In some cases, the problem is not profitability but a lack of cash. This may be due to too big an investment that has drained the company of cash, losing important customers, structural change of the market, etc. Here you want to simply find ways to generate more cash. Cost reduction helps but in most cases is not sufficient. You have to sell assets, renegotiate contracts with suppliers and customers, find new loans or renegotiate with the banks the current loans, get more equity, etc.
Below is a presentation that will help you understand Performance Improvement Projects:
For more on such projects check my online course Performance Improvement Projects for Management Consultants and Cost Reduction for Managers & Management Consultants
Turn Around Projects
At some point, consulting firms decide that the market of healthy companies that need their assistance is too small. They have decided that it would be a great idea to also help a customer that is (almost) bankrupt. This is how Turn Around Projects were born. In this type of project, your client has lost profitability and most likely the liquidity and you have to improve profitability as well as the cash position. In other words, you do exactly the same things you would do during performance improvement projects but 10x faster. There is no time for subtleties, looking for small tickets. You concentrate on delivering value fast. Btw your client has a big chance of going underwater and disappearing from the face of the Earth regardless of your efforts and your great ideas. Hopefully, he will manage to pay you first 😉
Consulting firms are a bit like tobacco. Once you start using them you get hooked. Consultants did simple math calculations and discovered that strategic and performance improvement projects are usually short 3-6 months. However, it takes their clients from 12-24 months to implement the suggested projects. This is an opportunity that they could have not missed and that is how Implementation Projects were born. In those sort of projects you help the customer deliver the ideas that you have defined on other, previous projects. Management Consulting Firms can do it in the following way:
- Supervision and Assistance. This is pretty easy – you give the client usually 2-3 consultants to supervise the implementation, teach others how to do the calculations, manage projects, and explain in detail the ideas identified during strategic or performance improvement projects.
- PMO. Some firms want you to provide them bigger support and ask you to create and run Project Management Office (PMO). In this situation, you have to provide both business analysts as well as project managers. This is usually done for big strategic projects – entering new big markets, turn around, moving production to a new country, etc.
- Interim Management. In some cases, the assistance and supervision are not enough. You have to take responsibility for the execution, you have to provide the CEO, COO, Strategy Director, or other senior people to make the difference. This solution is usually temporary. The Interim Manager stays for 6-24 months to change the way in which the firm is run. After that, the firm hires the person that will be responsible for running a specific area.
At the end of the 20th Century, we had a huge wave of mergers and acquisitions that created a lot of work for management consultants. If you are buying a company for $ 2 billion you have no problems with spending a few million to make sure that the company you buy is not worthless. Management Consultants managed to create a plethora of products to meet the needs of their customers:
- M&A Strategy. You start by helping the firm define what companies they will buy and why. You usually do it via rankings and case-by-case analyses, based on the criteria define by the customers. This means that you have to gather a lot of data on potential targets. Quite often you compare the M&A option with the greenfield / organic growth – what would make more sense, what would create more value?
- Due Diligence. Once you have the target identified you have to check whether it is a good enough company to be bought. The process of checking the value of the firm is called Due Diligence. Management Consulting usually performs Commercial Due Diligence (check whether the firm operates the winning model on an interesting market), Operational Due Diligence (you check how do they deliver value, run their facilities). The buyer also has to do Legal and Financial Due Diligence but this is usually done by an auditing firm (EY, PwC, KMPG, Deloitte). Check our playlist on Due Diligence
- Value Creation Plan. For some buyers, you also have to create a Value Creation Plan. In other words, define how the buyer will increase the value of the firm after the transaction is finished. This sort of project is a mix of strategic and performance improvement projects.
- Post-Merger Integration. Big fat corporations may also require your help after the transaction. If they want to somehow integrate the firm they have bought into their corporation they will have to do a lot of changes fast. Usually, they lack the team for that, especially if the M&A is not something that they do often. This sort of project resembles Strategic Projects at the beginning. Later you have to mainly supervise others and make sure that they deliver what they were supposed to do. Long and difficult. Afterward, take long holidays to rest from the constant pressure.
That’s in short about consulting projects. I hope you enjoyed the summary and as always I recommend trying out our online courses that will help you become Badass Management Consultants. They have been taken by more than +104 000 students, including people working in McKinsey, EY, Walmart, Booz Allen Hamilton, Alvarez & Marsal, PwC, Deloitte, Dell, Adidas, Naspers, Walgreens, Orange, Cisco, Citigroup, and many others
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