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Introduction to Management Consulting

Dr. Joe OMahoney 2007

Todays Learning Objectives


1. To give an overview of the course 2. To know the definition, history and purpose of management consulting 3. To understand the consultancy market: the main players, industry segmentation, clients and trends 4. To gain an overview of the consulting life-cycle 5. To understand the basics of approaching cases, guestimating and analysing.

The Agenda
1. The Course 2. What is Management Consulting? 3. Who are Management Consultants? 4. Clients 5. Analysing Cases

Management Consulting

The Course
Practical, Practical, Practical

Case-based (Harvard)
Develops skills Get jobs Highest retention rates

To
Understand Consultancy Analyse businesses Develop solutions

No...
Books Theories Bullshit

The Course Pt. I


Introduction to Consulting
Overview of Consulting Designing your own firm

Proposals and Planning


Planning, Costing and Proposing Assignment: Speaker from StayMobile Ltd.

Strategy Consulting & Market Analysis


Analysing Trends Making Recommendations

IT & e-Commerce
Requirements Management E-business

The Course Pt. II


Dark Sides of Consulting
Stress, manipulation and exploitation Illegal trades: Enron, Parmalat, WorldCom

Speaker Day 1: Consulting Work


EDS & Deloitte Managing Delivery

Speaker Day 2: Analysis with SSM


Jeremy Hilton: Private Consultant Methodologies & Modelling

Speaker Day 3: Consulting Careers and CVs


IBM Getting a job & getting on

What is Management Consulting?

Historical & Future Trends


Dates 1890 1940
1940 1970 1970 1990 1990 2000

Focus Technical Analysis


Strategic Management Technical & Financial Specialisms Niche: outsourcing, ebusiness, BPR

Hires Academics
MBAs & Academics Graduates, MBAs Experienced hires

Typical Firms AD Little, Booz, Allen, Hamilton, AT Kearney.


McKinseys, Bain & Co., Boston Consulting Group Arthur Anderson, KPMG, IBM, Deloitte, E&Y Razorfish, Sapient, Viant, iXL

Big player recovery from 2000 - 2003 (DotCom bust) Accountability (Chinese Walls, Enron, Sarbanes-Oxley, Basel II) Diversification (M&A, Internationalisation, Sectors) Image (MBAs, Up selling, Over-charging, Facsimile Consulting) Projects (outsourcing, e-business, protection vs. emergent markets) Competition (numbers, approved lists, proven track record, sceptical clients)

The Biggest Consulting Firms



Accenture Cap Gemini CSC IBM BCS PWC KPMG / Bearing Point Deloitte
BAH Anderson

(IT, Operations, HRM) (IT, Operations) (IT, Operations) (IT) (IT, Operations, HRM) (IT, Operations) (IT, Operations)

McKinsey & Co. Mercer A. T Kearney Monitor BCG A.D. Little Bain & Co.

(Strategy, Operations)
(Strategy, Operations)

(Strategy, HRM)
(Operations)

(Strategy, HRM) (Strategy) (Strategy) (Strategy) (Strategy)

Segmentation
Industry
Telcos Digital Media Finance & Banking Utilities - Health - Manufacturing - FMCG& Retail - Transportation

Function
Strategy Operations - HRM - IT (incl. e-business)

Sector
Non-profit Public Private

A Consulting Typology
Strategy Consultants
McKinsey Oliver Wyman A.T. Kearney Sapient Scient
/ Utilities

Diamond

Service providers
Deloitte PwC Accenture EDS

Software Providers

CSC

IBM

Technology Providers

Sector Analysis Pt. I


Strategy
Direction, Long-term plans & High-level goals Lever to implementation Bain & Co. - BCG McKinseys - Monitor

Operations
Day-to day running of firm, Reaching, strategic goals Re-engineering, outsourcing, supply-chains Accenture - Deloitte Cap Gemini - CSC

Sector Analysis Pt. II


IT
Systems development, implementation Business focused requirements IBM - AMS (American Management Systems) Accenture - CSC

HRM
Strategic alignment of people function ERP, training, culture change, competence management Accenture - PWC Mercer - AT Kearney

Consulting Products
Dates 1976
1980 1985

Product Portfolio Analysis


Five Forces Value Chain Analysis

Consultant Henderson
Porter Hamel & Prahalad

Organisation BCG
Monitor / Harvard Strategos / Harvard

1998 1990 1993


1993

TQM Core Competencies BPR


Economic Added Value

Peters & Waterman Reichheld

MIT Bain & Co.

Hammer & Champy CSC


Stewart Stern Stewart

Products have a name, a methodology, an application and great PR Consultants are charged with introducing fashions

Who are Management Consultants?

What is a Management Consultant?


1. Not the brightest and the best 2. Not all Harvard MBAs or even business students 3. Not Magicians, Preachers or Witch-Doctors

Skill Profile

Broad set of general consulting competencies

Depth of expertise: skill or knowledge based

Skills:
Outstanding interpersonal skills Great Presenter Excellent at writing reports

Knowledge:
Generalist business knowledge Methods & Frameworks In-depth specific skill

Basic Salaries (UK)


Graduate Junior Project Lead Team Leader Senior Consultant Principle Consultant Partner 20 26k 30 35k 40 60k 60 80k 70 100k 100k +

+ 10 20% bonus + car + health care, share options Highest salaries earned at niche consultancies

Design your own Consultancy


In pairs: you and 20 consultants wish to start your own medium-sized consultancy. You will consult on general strategic management issues such as mergers and acquisitions, outsourcing and new product development.
Write 10 scenarios (5 each) that you think might be likely to occur whilst running this consultancy. What functions, departments and skills will you need in the consultancy. Sketch a brief organisational design and strategy outlining: Skills Required Structure & Function Major Costs Key problems

Clients

Marketing Consultancy Work


1. Finding a problem
External threats Mimicking others Falling behind: benchmarks New opportunities

2. Marketing Consultancy
Links with top academics / Business Schools (HBS, MIT, Sloan) Links to conferences, institutions, Publications: books, journals, the press

3. Getting in
Free surveys / research Solution stories Referrals Jumpers

Why Employ Consultants?


1. Expertise 2. Objectivity 3. Someone to blame 4. To save money 5. External knowledge (e.g. best practice, benchmarking)

Types of project
1. Providing Advice: should I launch this product? 2. Project Design: how should I launch this product? 3. Implementation: install a system that will pay suppliers 4. Functional Management: run our department for us

Working With Clients


Defining the project
Open Closed questions: Predicament > Definition > Solution Key Decision Makers

Enticing the Client


Free analysis Free juniors Corporate entertainment

Successful Projects
Contract, contract, contract Clear goals, roles & procedures Boilerplating & reuse Quick measurable wins Solid Conclusions The person not the project

The Consulting Life-cycle

Initial Contact
Initial Contact Definition Proposal & Contract Data Collection

Project Definition Initial Analysis

Formal Proposal
Contract Project Implementation
Data Collection Data Analysis Decisions / Plan Intervention
Disengaging

Review

Data Analysis

Intervention

Decision-making, Planning

Review

The Consulting Life-cycle


Initial Contact Definition Proposal & Contract Data Collection

Review

Data Analysis

Disengaging

Intervention

Decision-making, Planning

Analysing Cases

Case 1: LightBox Inc.


I am the CEO of a light-bulb manufacturer. I have developed an ever-lasting light-bulb.
How much should I sell it for? What will the increase in our share-price be?

Additional Information
It cost 20 million to develop the product.
It costs 5 to make the product

Normal Lightbulbs
Cost 0.5 to manufacture Are sold to distributers for 0.25 Who sell to retailers for 0.50 Who sell to the customer for 0.75

What about the markets?


Cannibalisation? Government?

Case 2: Three
The Company
Hutchison Whampoa Owned by Li KaShing ($20bn) Family interests of $630bn Owns ports, telecoms, property (Hong Kong)

The Context
3G Telecoms: video & music over the phone 1999: UK first gov. to sell 3G licences 2000 2005: Followed by most others

Case 2: Three
The Decision
Should Hutchison buy a 3G licence in the UK? How much should they pay for it? What strategic issues should they look out for?

Links
http://www.vault.co.uk http://www.mca.org.uk http://www.mbajungle.com http://www.consultingcentral.com http://www.feaco.org http://www.mca.org.uk http://www.amcf.org

Questions?