Leeds University Business School

Management Consultancies, Business

Models, and Competitive Strategies

Part 1: Overview + Strategic Choices

LUBS3850M Management Consulting

Adrian Murton
Learning Objectives
• Distinguish the strategic decisions the managers of consultancy
1 firms may take about the firm’s business model.

• Identify the main elements of a management consultancy business

2 model and its interdependencies.

• Understand differences in competitive strategies of firms in the

3 management consultancy industry.

• Relate knowledge exploitation and exploration to competitive

4 strategy

• Understand the structure of a consultancy project team.

5

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Contents

Strategic Choices

Project Types and Leverage

Client Value Propositions

Strategic Choices and Competitive Scope

New Developments in Business Models

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What was the state of play
for MC firms in 2020?
• MCA members(inc 3 out of the big 4 accountancy
firms) reported £11bn fee income cf. £5.28bn in fee
income in 2018
• A 2.5% increase in ‘consulting growth’ in 2020
despite the pandemic
• Largest areas of consulting digital and technology
(predicted growth 54% in 2021/22): financial services
& govt/public sector
• Growth areas – digital and technology, government
and public sector, health and life sciences
Note only 50% of the industry is represented by the MCA

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Headline statistics

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Leeds University Business School
MC: Strategic Choices

How should we position the firm in the market?

Howclients
• Which should we position the firm in the market?
should we target?
• • Which
What clients
value should we
propositions target?
should we offer prospective clients?
• • What value propositions should we offer prospective clients?
What types of projects should we undertake?
• What types of projects should we undertake?

How should we develop and deploy the competencies to

create the client value proposition?
• What value-adding activities do we need to undertake to deliver the client
proposition?
• What skills and competencies do we need to conduct the value-adding activities?
• What organization is required to develop and deploy the required competencies?

How should we position the firm in the labour market?

• Which employees should we target for the required competencies?
• What value propositions should we offer target employees?

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Elements of a MC business model:
which is most important?
KNOWLEDGE
PROJECTS

PEOPLE

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Developing a Business Model

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Developing a Business Model
• This distinction mirrors the traditional strategic
management issue as between

• Market-based strategy (Porter in particular)

• Resource-Based Strategy (emphasis on capabilities

– see Barney 1991, Hamel and Prahalad 1996)

• Evidence of mix – some consultancies specialise in

specific sectors – Finance, IT – because of historic
expertise (can leverage capabilities)

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 PART 2: PROJECT TYPES

Work of Maister (2004)

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Importance of Project Types

The choice that the firm makes in its

mix of project types is one of the
most important variables it has
available to balance the firm. The
choice of project types influences
significantly … the economic and
organizational structures of the firm
(Maister 2003: 5-6 ).  

Maister distinguishes three Project Types – described on the next slide

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Project Types

• Complex problems.
• Complex
Brains • Bespokeproblems.
(customized), innovative
Brains • Bespoke (customized),
solutions. innovative
solutions.

• Familiar problems.
• Familiar problems.
GreyHair
Grey Hair • Solutions based on past experience –
• Solutions based on past experience –
customization limited.
customization limited.

• Conventional, familiar problems.

• Conventional,
• Standardizedfamiliar problems.
solutions based on
Procedure
Procedure
• Standardized solutions based on
application of ready made methods and
application
tools. of ready made methods and
tools.

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Consultancy Types: 2 Examples
What’s the difference between them?

• https://www.youtube.com/watch?v=cBbQlfEYteo

• https://www.youtube.com/watch?v=Akk2hA4rpM0
• https://www.youtube.com/watch?v=DFO8dAv-cLg

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Consultancy Types: And a Third example

https://www.youtube.com/watch?v=NVJKxt92iTc

https://www.youtube.com/watch?v=liU3oo8jokE

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Maister’s Finders, Minders + Grinders

• Maister’s Three Types/Levels of Staff

Finders Minders Grinders

[Senior Staff + The project Often new

Partners] managers – graduates
Seek out work ensure work Technically
for the firm gets done skilled staff
internal who get the
processes work done

Proportions of each vary with Project Type – see next slide

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Project Type and People Mix:
general trends

‘Procedure’

‘Brains’

‘Grey Hairs’

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The Issue of Leverage

Leverage = No. of people (grinders/minders)

No. of partners (finders)

High leverage: Low leverage

High leverage: Low leverage

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The importance of leverage to
firm profitability

Wrong
Wrong
project
project
type
type
Damages
productivity
and
profitability
Wrong
people
mix

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 PART 3:
CLIENT VALUE PROPOSITIONS

Mapping Business Models to Consultancy Types

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Client Value Propositions:
ways to differentiate our offering

Product • “Hire us because we’ve got the

most talented and brainiest people
leadership to work on your problems.”

• “Hire us because we’ve build up a

Operational wealth of knowledge and
Excellence experience.”

• “Hire us because we will be super

Customer close and responsive to your
Interaction needs.”

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Value Propositions

• What do these have in common if anything?

• Where does value lie in these businesses?

• What do they think they do well?

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 Client Value Propositions:
can we be all things to all clients?

Treacy, M. and Wiersema, F. (1993) ‘Customer Intimacy and Other Value

Disciplines’, Harvard Business Review, January-February, 84–93)

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 Knowledge exploration or
exploitation?

Exploitation Exploration

• http://www.ey.com/gl/en/About-
us/Our-global-approach/Knowledge- http://www.bain.com/about/what-we-do/
that-delivers-for-you history-of-innovation.aspx

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Summary
Summary
More on this next
More on this next
week! Consultancy
week! Consultancy
types
types

Knowledge
Knowledge
managemen People mix
managemen
t People mix
t

Exploitation
Value Exploitation
Value or
propositions or
propositions exploration
exploration

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Mapping business models to consultancy types:
2 discrete types of ‘brain’ problem!

The Brain surgeon The Psychotherapist

“Save me! I don’t want to know

“Save me!just I don’t I want to be intimately involved
the details, findwant to know
the right
the details, just find in Ithe
want to be intimately
problem-solving involved
process.
answer! If I wake up inthe
theright in the problem-solving process.
answer!I’ll
morning, If Ipay
wake yourup in the
morning, I’ll pay What I’m really trying to buy is
outrageous bill! I’myour
not What I’m really
someone who cantrying to buy
sit down withis
shopping on price, I’mnot
outrageous bill! I’m trying to someone
me, and mywho can sitteam
executive downand
with
find the most creative or trying to
shopping on price, I’m
me,usand my executive team and
find the most creative or I help understand our problem
technically superior provider help us understand our problem
technically superior provider I and our options.”
can.” and our options.”
can.”

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Mapping business models to consultancy
types: Nurses and Pharmacists

The Pharmacist The Nurse

I have a headache, and I know
I have
that you,aalongheadache, and I know
with many “Help me understand what’s
that you, “Helpon;meexplain
understand
to mewhat’s
others, are along
licensed withtomany going
going on; explain to me
what
what
others, are
dispense licensed
aspirin. Don’ttowaste you’re doing and why; involve
dispense aspirin. you’re
in thedoing and making;
why; involve
your time and mineDon’t
tryingwaste
to me
me in
decision
the decision making;
help
help
convince me that it’s brain to
your time and mine trying me understand my options. Be
meme understand my with
options.
convince
surgery thatme that it’s
I need. I’vebrain
done with and interact me Be
surgery that I need. I’ve done with me and
throughout theinteract
processwith
untilme
this
this before, and I can tell for
this before,
myself and I can
the difference tell for
between is all over. I need a front-room this
throughout the process until
myself is all over. I need a front-room
the needthe for difference
aspirin andbetween
for advisor, not a back-room
advisor, not a back-room
the need for aspirin
brain surgery. I want aspirin! and for technician.”
brain surgery. technician.”
What’s your bestI want price?”aspirin!
What’s your best price?”

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Summary
Brains Brains Grey Hair Procedure
Consultancy Consultancy Consultancy Consultancy
Brian Surgeon Psychotherapist Nurse Pharmacist

Competitive strategy:
Knowledge exploration or Exploration Exploration Exploitation Exploitation
exploitation

Client value proposition:

Operational Operational
Product leadership or Operational Product leadership Product leadership
excellence excellence
excellence

Client value proposition: High client High client

Low client intimacy Low client intimacy
High client intimacy and low intimacy intimacy intimacy

Knowledge management
Personalization Personalization Codification Codification
Codification or personalization

Low-moderate
Profit base Low leverage High leverage High leverage
leverage
Leverage and fees High fees High fees Low fees
High Fees

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 PART 4: STRATEGIC CHOICES
AND SCOPE

Competitive Advantage and Competitive Scope

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Competitive Advantage –
The Competitor Dimension

One strong
One strong
value proposition
value proposition
sufficient for low
sufficient for low
competition.
competition.

High competition
High competition
necessitates
necessitates
combination of
combination of
value
value
propositions.
propositions.
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Competitive Scope

Services
Services

Client
Clientsectors
sectors

Geography
Geography

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 Service
ServiceScope
Scope: :Pure
Pureoror
Hybrid
HybridConsultancy?
Consultancy?
Management Business Business Hardware /
Example consultancy consultancy services software
of firm

Simon-
Kucher

Bain &
Company

Accenture

IBM

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Consultancy Scope

• Highlights the ways in which consultancies have grown

into different areas or consolidated existing areas

• Link to next session on knowledge management

• IT consultancies and financial consultancies have

traditionally worked from templates offering quite
prescriptive ‘branded’ advice.

• Also see with some strategy consultancies

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Client
Client c e
an ent u ity
* at
str ng
e gy
tio
n &
rs ns
m q r i a e
sectors
r t g
e gy erfo vem te e o me rke ani z er isitio
sectors
t o a t a g M
ra P pr riv us m Or qu
St im P C & a c

Client sectors
Airlines &
transportation
Financial services
Industrial goods & services
Metals & mining
Private equity
Social & public sector
Telecommunications
Consumer products
Healthcare
Media
Oil & gas
Retail
Technology
Social & public sector
Telecommunications

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Geography
Going international…
To follow clients.

Reasons To respond to demand of foreign clients

To find new markets for service offering.

Regional Centres of Excellence

Transplantation
Methods
Acquisition

Networks and alliances.

Ensuring standard of service

Challenges Balance between centralization and decentralization

Recruitment and retention of senior consultants

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Maximising value –
Maximising value –
strategic
strategicchoices
choicescome
comewith
withrisks!
risks!

Increase turnover

Undertake higher value work

Combine management consultancy with

other services

Undertake high-volume, procedural work

Acquisition ready

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 PART 5: NEW DEVELOPMENTS
IN NEW BUSINESS MODELS

Changing Priorities for Consulting Companies?

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Agile Working?
• Much of current discourse in consulting and amongst
clients is around

• ‘Agile’ and ‘agile working’

• Originally developed within IT sector but emphasises

- project/matrix working
- module development – work on separate modules or
pods and combine these in bespoke ways for clients
- flexibility
- sectoral dynamism – move staff to areas of need, new
projects in new sectors
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Agile Working?
• See this with established consulting firms moving into new
areas of work – seen issues with ‘big data’ already - see
Accenture into the ‘circular economy’ area to leverage what
it sees as some specialist expertise where a gap in the
market

• [Links to earlier discussions - consultants resisting having a

professional body as it might limit their creativity]

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New Business Models

• Ard-Pieter de Man and David Seiple research into over 100

consultancies in the Netherlands

• New Business Models

• Collaborative:
- Closed network; where established consultancies collaborate
repeatedly on client assignments – other companies only allowed in
after extensive selection process
- Open network;
- Virtual Consultancy

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New Business Models

• Continuous

- Centres around data analytics and subscriptions

- Consultancies offer online tools and data services that clients
can subscribe to
- Capitalise on the trend to greater use of IT in consulting
- Enables clients to engage on a continuous basis and build
relationships
- Fees via subscription or pay-per-use replace the hourly fee
model in consultancy

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New Business Models

• Instant

- Value of consulting seen from day one and can be seen with
work on implementation

The research found that classic consulting model is in decline as

demand from clients changes.

Traditional leverage model – leveraged model with junior consultants,

hourly fees and advice only, now accounts for only 15% of work

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New Business Models
• Issues for the Clients

- Legitimacy challenge; many clients prefer to use big brands

because easier to sell internally and makes it more difficult for new
start-ups to become established and grow

- New Business Models require knowledge on client side – online

require precise questions

- Procurement policies; often implicitly favour the traditional model

are often unaware of new business models and may face
difficulties with subscription services when don’t see beyond the hourly
fee model

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Reflections
• Christensen work on disruptive innovation, compelling and
influential but heavily derivative
• Evidence of changes are ‘patchy’
• Even Dutch studies acknowledge that strong evidence of
continuing use of traditional business model
• Much of the Dutch research is on very small consulting companies
but if Christensen argument holds we would expect to see change
in larger consultancies for it is they that would be most disrupted.
• There is a long history in markets/industries of small innovative
companies changing business models and the client value
proposition – see Schumpeter work. However often on the
margins and only rarely do they bring about a paradigm shift

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