Caribbean Export Development Agency -

5th Management Consulting Business

Symposium

PANEL DISCUSSION:

Economies of Scale and Scope: the

formation of industry alliances as a

strategy for export

competitiveness

Canute S. Thompson, PhD; CMC

WHERE ARE WE – THE SIZE OF OUR FRIMS

AND OUR SHARE OF THE MARKET

Nathan Study (2010) •70% of firms have 1 – 4 employees • (In the global top 20 consulting firms the smallest has 200 employees but the average number is in the thousands)

•Most C‟bean firms too small to take advantage of consulting projects globally – EU etc

• Nathan: Number of yearly assignments •1 – 2 : 47% •2 – 5 : 24%

WHERE ARE WE CONT‟D

Nathan Study (2010)

• Importance of Factors in consulting selection (Perceptions) : •Track record – 75%

•Previous experience – 86%

•Personnel – 70%

•Cost – 40%

• Consider this: the median age of employees in the top consulting firms range between the late 20’s and mid 30’s.

• This means experience is institutional, not individual

CONSULTING SEGMENT SUPPLY

AND DEMAND SEGMENT MARKET

DEMAND

INDUSTRY

PRACTICE

DIFFERENCE

IT STRATEGY 42.4% 21.9% 20.5%

HR 54.1% 45.6% 8.5%

OD 42.4% 60.5% -18.1%

BUSINESS

PLANNING

28.2% 45.6% -17.4%

GLOBAL INDUSTRY MARKET SHARE OF

CONSULTING PROJECTS (2010)

SEGMENT MARKET

SHARE

IT 51%

HR 10 %

BUSINESS STRATEGY 18%

OPERATIONS

MANAGEMENT

21%

BASIC LESSONS FROM THE DATA

One in every two consulting assignments in 2010 was in the area of IT (picture remains largely the same)

Consulting Practices that will do well in today‟s market place must be IT competent

If Caribbean MCs are to do better they must acquire IT competencies. These competencies may be acquired by aligning with businesses that have IT competencies

There is an over-supply of OD and Business Planning consultants.

OD and BP consultants must diversity their capacities and offerings if they are to gain / hold market share

CHECK THIS!

Electronic components demand correlated to global GDP growth according to a July 2012 WS Journal Report (no surprises – Samsung, Apple, HP, IBM, Panasonic Dell etc)

South East Asia (SEA) economies are built around TVET education with 40% of Chinese workforce being TVET trained

The BRIC countries will dominate the IT space in the next decade

IMPLICATIONS

The growth in market share held by Caribbean MCs will depend on how well we can penetrate the BRIC space

Penetration of the BRIC space will require alliances with firms that already have a foothold in BRIC

Capacities in TVET (training needs analysis, programme and course development, training delivery, and evaluation) will be a major market opportunity in the next two decades in Africa and the Caribbean

Capacities in IT processes and applications for BPR represent a distinct opportunity

Capacities in helping businesses (tertiary institutions) reposition to provide TVET and strengthen IT constitute a vast consulting opportunity

TOP TEN CONSULTING

COMPANIES GLOBALLY McKinsey & Company

Boston Consulting Group

Bain & Co.

Booz & Co.

Deloitte Consulting LLP

Monitor Group

PricewaterhouseCoopers

Mercer

Ernst & Young

Accenture

Questions:

◦ What do these companies have in common?

◦ Where are their global locations?

◦ What do they have that we do not have?

◦ What can Caribbean firms learn from them?

ADVANTAGE THEORY

Global trade analysis has led to two economic theories

◦ Comparative Advantage Theory

◦ Absolute Advantage Theory

Fundamental questions Caribbean consultants must ask (as would any business) are:

◦ Do we have any CA or AA and if so what are they?

◦ How do create CA and / or AA?

Reality check: Our size as a region and the size of our firms dictate that if we are going to compete we must form conglomerates.

Possibility thinking: Our CA and AA could lie in our many small islands (market spaces) from which we can leverage local and regional knowledge to create CA and AA

Think market strategy: Being the market challenger or consultant of second choice is not a bad thing. Avis Rent-a-car aims to be # 2 globally

OVERCOMING BARRIERS TO GROWTH

OF CARIBBEAN CONSULTING

Beesley, Caran (2013), “How to break

through 5 common barriers to business

growth”

◦ Watch market growth indicators

◦ Keep eye on competition but always on the

bigger picture

◦ Always be recruiting talent

◦ Constantly assess risk

◦ Always have a plan

OVERCOMING BARRIERS

CONT‟D Molian, David (2008), “Barriers to growth in

owner-managed businesses and how to

overcome them”

◦ Planning in a vacuum

◦ Muddled activity

◦ Mismanaged change

◦ Meddling and misspent time

◦ Wrong objectives

◦ No financial strategy

CONCLUSION – RETURN TO

KEY QUESTIONS What strategies can be formulated to support

the increased competitiveness of industry practitioners and facilitate increased export of their service? ◦ Aggressively target fresh talent – young university

graduates (CICMC, CSIs etc)

◦ Establish conglomerates among small regional consultants

◦ Build formal alliances with large consulting firms

◦ Rethink the modalities of how consultants operate***

◦ Lobby Caribbean entities and governments to awarding selection points for proposals that show intent to use local talent beyond mere foot soldiering

◦ Develop programmes that support internships in large consulting firms (Carib Export)

KEY QUESTIONS CONT‟D

What are the barriers to implementation? ◦ Uncertainty of consulting income in the

context of fixed financial obligations

◦ Insular thinking and insufficient cooperation / collaboration intelligence – CI („all or nothing thinking‟ syndrome)

◦ Lack of fortitude in negotiating favourable terms of loans / grants with lenders / donors

◦ Lack of sufficient international experience and track record within the larger global space

KEY QUESTIONS CONT‟D

What are the opportunities for implementation? ◦ Push of the SEA economies into APC region

◦ Increased number of young entrepreneurs

◦ Multiple-skill requirements of projects and thus „forced‟ collaboration

◦ Increased awareness of Caribbean governments to regional consultants

◦ Increased use of fixed, short term contracts by many firms and thus the exposure for emerging consultants to acquire the appetite for the project-based nature of consulting

SEVEN WAYS FIRMS OVERCOME

BARRIERS ◦ Watch market growth indicators (dare not ignore IT)

◦ Keep eye on competition but always on the bigger picture (IT is 50% but several in the other 50%)

◦ Identify niche

◦ Define market strategy

◦ Always be recruiting talent ... Including to develop your own competence

◦ Constantly assess risk

◦ Always have a plan that is informed by market demand without losing focus on core competence

◦ STOP HERE

RE-THINKING THE MODALITES OF HOW

CONSULTANTS OPERATE

Two dominant models

◦ Large consulting firm – several projects, large

staff

◦ Solo consultant – few projects, admin staff

support

Occasional Models

◦ Large firm hires solo as foot soldier

◦ A group of solos form duet, trio or quartet to

bid for or execute a project

THE FORGOTTEN MODEL: IN-

HOUSE CONSULTANTS HR and IR Departments

Advisory Units within Government

Ministries – EO‟s, PSMD (Jamaica)

Project Units in public sector and private

organizations

WHAT DO THEY DO

Listen to client (department) describe problem that requires intervention

Explores with client options for solving said problem

Offers advice on best approach(es) after assessment

Design specific intervention

Implement (sometimes) intervention

Monitors intervention

Evaluates intervention

Exits

SOME PERSONAL IN-HOUSE

CONSULTING ACTIVITY IR Officer in large public utility company in 1996 - and did first

job analysis study – for the purposes of Wage Negotiations.

Findings were not favourable to the company‟s negotiating

position and PWC was engaged. They made similar findings - for

a price of $150K (in today‟s money $2.5M)

SEO - conducted management reviews of tertiary institutions

designed to inform institutional strengthening and other BPR

(Wrote peer reviewed paper “Education Supervision as MC”)

Managed IT project establishing JREN – Ja‟s entity of

C@ribNET

Managing several projects including the merger of the police

forces and oversight bodies as well as projects to upgrade IT

capabilities of the police, plus others – engage with large firms

globally