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Sector Note on the Canadian Business Services Sector

And The Canadian Management Consulting Market

Andrew Sable

Submitted To:

Professor: Louis-Jacques Filion

HEC Montréal MBA Program

Revised October 19th, 2008

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Table of Contents Abstract ................................................................................................................................................. 3

Introduction ........................................................................................................................................... 3

The Business Services Sector ............................................................................................................... 4

Description of the Sector....................................................................................................................... 4

Importance of the Sector ....................................................................................................................... 5

Pest Analysis (Political, Economic, Social and Technological Analysis) ............................................ 5

Analysis of the Canadian Consulting Market ....................................................................................... 8

Characteristics and Trends .................................................................................................................... 8

Key Players ......................................................................................................................................... 10

“Porter’s Five Forces” Threat of New Entrance ................................................................................. 11

Intensity of rivalry among existing firms ............................................................................................ 12

Threat of Substitutes ........................................................................................................................... 13

Bargaining power of buyers ................................................................................................................ 13

Bargaining Power of Suppliers ........................................................................................................... 13

”Rules of the Game” What makes a good consultant? ....................................................................... 15

What Makes A Good Consulting Firm? ............................................................................................. 16

“Rules of Success” 10 Commandments of Successful Consultant ..................................................... 18

Five Rules of Engagement for a Successful Consulting Firm ............................................................ 19

Conclusion .......................................................................................................................................... 20

Annex 1...……………………………………………………………………………………………21

Annex 2...……………………………………………………………………………………………22

Annex 3...……………………………………………………………………………………………23

Annex 4...……………………………………………………………………………………………24

Annex 5...……………………………………………………………………………………………25

Bibliography…………………………………………………………………………………………26

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Abstract

This paper extensively examines the Canadian Business Services Sector and the Canadian

Management Consulting Market which will give any person(s) who has a business idea to enter

this market a total analysis of the sector that will allow you to know if you’re idea is a go or no-

go. This sector note examines the Canadian Business Services Sector by providing sections with

a description of the sector, the importance of the sector and a detailed environmental analysis

using the PEST methodology. It then extensively examines the market providing sections on its

characteristics and trends, the top seven key players, competitor pressures using Porter’s Five

Forces Model, customer characteristics, “Rules of the Game”, “Rules of Success” and finally key

success factors.

Introduction

This sector note analyzes the Canadian Business Services Sector and the Canadian Management

Consulting Market that will allow someone with a business idea and interest to enter this market

a full understanding of the steps and focus areas necessary to allow one to have a sustainable and

successful consulting firm. The business services sector is a sector that its customers turn to

when they have a need for the knowledge and skills of its workers to provide solutions to an

array of issues it may be experiencing. This sector has been increasing in size rapidly since 1997

in terms of GDP as companies turn to the knowledge based firms for their specific expertise.

Growth in this sector can be attributed to two main trends: the growth of other sectors and

outsourcing. Strategic HR policies will be important for firms to attract and retain top talent

because there are concerns with the talent shortage in Canadian society and if there will be

enough supply of workers for this sector to sustain its growth.

The management consulting market has been growing steadily since the economic downturn in

2000 and after 9/11. Even though there are big players in the Canadian Consulting market such

as Deloitte, KPMG and Price Waterhouse Coopers that have the size and know-how to provide a

large breadth of services to the market there are many medium and small firms that provide a

smaller portfolio of services making this a more fragmented market than the U.S. The problem

for these firms is how they are to survive even though the barriers to entry and exit for that

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matter are low financially. The “Rules of the Game,” and “Rules of Success” were developed

using a combination of consultants input that was retrieved from the web and professional

journals which if followed will lead to success.

This paper was undertaken because of the growing importance of this sector and the lack of

examples in this industry. Our entrepreneurial students who have an interest in entering this

market can use this sector note to turn their idea into a sustainable success.

The Business Services Sector

Description of the Sector

The business services sector includes professional, technical and scientific services. It is a sector

where the main input for carrying out activities is human capital. On a case by case basis the

businesses in this sector make available to their clients the knowledge and skills of their

employees. Expertise and training are the two elements which defines the industries in this

sector. For the most part this expertise and training comes in the form of a combined University

education and extensive work experience in the industry their core competencies are in. What

makes this sector different from most other sectors is that the equipment and materials are not of

great importance; the method of production is based on the skills of its workforce.

Mostly, businesses in this sector focus on providing training and instruction on many different

topics. They provide the advice and technical know-how that other businesses need. The main

activities and types of services available from this sector are: management, scientific and

technical consulting services industries, legal services industries, accounting and related services

industries, architectural, engineering and related services industries, surveying and mapping

services industries, design services industries, scientific research and development services

industries, and advertising services industries.1

1 http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis54defe.html

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Importance of the Sector

For the sector as a whole the proportion of staff with higher education and skills has been

continuously growing since 1994. The sector trend is that it has been constantly growing in

importance since 1990. Business Services are a very important part of the knowledge economy

and technical expertise is in great demand.2

Software development, R&D and other knowledge-intensive service activities are essential in

operating a modern business. Interestingly, more than 2 billion dollars were spent on R&D in

this sector in 2000 mostly because of the rapid increase in the computer and technical services.

Most of the concentration of this expenditure is in Ontario and Quebec. Another interesting

factor, the increasing number of employees in R&D is more often coming from people who have

a university education. In 2000, more than 16% of the employees in R&D in the business

services sector had a university education compared to 4% in all industries. Technology

advances has increased globalization of this sector immensely, imports of business services has

increased from 1.2% in 1995 to 13% in 2003 in percentage of business services used in Canada.

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The knowledge-intensive business services sector’s growth rate is so much faster than that of

other sectors that it cannot solely be attributed to the growth of those sectors which uses business

services. It can also be contributed to outsourcing.

Globalization brings down the costs to customers and also allows for more competition leaving

the most efficient and innovative firms remaining. Technology changes have permitted firms in

developing countries to become major players.

Description and Analysis of the Environment

Pest Analysis (Political, Economic, Social and Technological Analysis)

Political & Legal – The Canadian Government provides an enabling environment for companies

in the business service sector to maximize its positive spillover to the rest of the economy. To

gain credibility in this sector one has to be highly educated and have industry expertise. Current 2 http://www43.statcan.ca/03/03e/03e_002a_e.htm 3 http://www.oecd.org/dataoecd/18/55/38619867.pdf

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legislation in our home market: The Certified Management Consultant (CMC) certification is

becoming more requested and their mission is “To advance the practice and profile of

management consulting in Canada through education and certification of consultants, promotion

of ethical standards and professional competency, and advocacy for the profession in public and

government settings.”4

Economic and Demographic - There is currently a talent shortage in Canadian society and next

to Mexico it has the highest amount of issues for employers trying to find the right people for the

right jobs. Factors that are combining to create this talent shortage are: demographic shifts like

aging population and lower birth rates, inadequate education programs, globalization, social

evolution, and entrepreneurial practices like outsourcing and off-shoring

It is a body that oversees the industry which requires workers to act

within a strict code of conduct. There are many in this sector that need to belong to a

professional organization, for example accountants who belong to Chartered Accountants (CA),

Certified Management Accountant (CMA), etc. have a strict code of conduct and regulatory

structures on how one should act. Also, companies need to follow Bill 198, the Canadian version

of the Sarbanes-Oxley Act of the U.S., to protect investors by improving the accuracy and

reliability of corporate disclosures.

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The business services sector now accounts for 6.6% of the Canadian GDP and employs 1.2

million people. The GDP of this sector increased from $30.3 billion in 1997 to $46.3 billion in

2004. This increase represented a compound annual growth rate of 6.2 %. Annex 1 has a graph

of these statistics. According to 1997 to 2002 statistics, another trend is that labor productivity is

growing quicker in this sector than the entire Canadian Economy, 3.9% compared to 2.3%.

Business Services are a very import part of the knowledge economy and technical expertise is in

great demand. A trend in the computer and related services for their workers in that the 2002

numbers showed them earning 60% more than the overall average for workers.

.

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4 http://www.camc.com/index.cfm?PID=12509&PIDLIST=12509

So if today’s

CEO’s are unable to develop viable solutions with the talent shortage issue this sector will not be

able to sustain its growth.

5 http://www.manpower.com/investors/releasedetail.cfm?releaseid=188092 6 http://www43.statcan.ca/03/03e/03e_002a_e.htm

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Technological - A major reason for the growth in the business services sector is due to the

increase in technology-related business services, for example computer and information

technology services. The rapid advancements in technology is causing major problems for

companies trying to find a cost effective way of implementing the best fit technology and how to

make use of it. Even though most companies have an internal IT department, they are turning

very often to the business service sector to keep up with these developments: including sourcing

and configuring complex technology set-ups for example system integration, writing software or

designing web pages, consultancy on IT strategy; or implementing and facilities management.

Unfortunately, most IT projects are failures or only partially successful. One way they are

dealing with this problem is to create services which are more like engineering projects so that

problems are told explicitly and formally, and solutions are broken down into well-documented

elements.7

Largely due to cheaper communication costs and the growth of IT, globalization and

internationalization has been a major topic in the past few years which is also contributing to

driving the growth of this sector. From a Canadian perspective when one thinks of consultancy

firms providing IT services one thinks of IBM and Accenture. Interestingly, BearingPoint,

Capgemini and CGI are the ones making significant headway and winning many important

clients.

Social and Cultural - Compliance with environmental regulations, health and safety standards,

and a range of similar issues represents a major challenge for companies. These challenges are

greater for multinational companies spreading across countries with different traditions and

legislation. The business services sector provides basic information, advice and intermediation

services, and help in training clients employees. Some even help clients understand, and relate to,

the markets and cultures, the consumers and stakeholders, that they deal with, some examples

are: market research, marketing, and public relations. Added to this is the increased

diversification of consumer demand and the number of products has contributed to a growth in

demand for these services. Social concern about the environment and environmental regulation

are important issues in today’s society for governments and companies. This is promoting the

7 http://www.eurofound.europa.eu/emcc/content/source/eu05011a.htm

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growth of environmental services, for example: waste disposal, dealing with “clean”

technologies and environmental law. Especially for companies in the transport business services

sector or others requiring large office space environmental issues may impact on how they do

their business.

Firms have increasingly outsourced services which were originally internal operations mainly so

they can focus on their core competences. Also specialized business services could be expected

to gain: economies of scale; the efficiency and effectiveness that come from experience; having

to compete with other suppliers to improve one’s performance. Unfortunately, there are

transaction costs involved with outsourcing and off-shoring; cultural and work practices may

differ with the client firm. Highly strategic functions are often hard to give up on the part of

potential clients, although even activities such as R&D have been increasingly outsourced in

recent years. Outsourcing has increased competition in this sector so the number of firms

offering these services has risen. Off-shoring has lead to service activities being relocated to

developing countries. But with the cultural differences this trend is beginning to reverse. Off-

shoring IT has been the most attractive, since there is the appropriate skill set in developing

countries such as India. Both unskilled for example back office and call centre work has been

off-shored so has skilled work for example, software development, consulting, etc. This has been

made possible because of decreasing communication costs and the expanding capacity of IT.

There has been a lot of talk for the last few years about off-shoring and outsourcing but this is

only responsible for part of the growth of this sector.

Analysis of the Canadian Consulting Market

Characteristics and Trends

The Canadian management consulting market is benefiting from the continuing strong economic

growth in Canada since the economic slowdown after 9/11 and up until very recently. Growth

has been evident in all segments, across all provinces and in many industries including

consulting in strategy, operations management, IT consulting, HR consulting and business

advisory services. From a big picture perspective the trends driving the market can be placed into

two groups: public sector concerns related to rising healthcare costs, risk minimization and

performance improvement initiatives. Some other trends pushing the market include enterprise

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and midmarket company issues linked to the growth, the changing competitive environment,

governance, performance improvements and cost optimizations. The marketplace is represented

by a full spectrum of consulting and advisory firms. There are currently a few big players but

there are also many medium and smaller firms creating a fragmented market. Unfortunately, the

talent shortage is a real problem in Canada for both consulting firms and their clients, and a

solution is necessary to sustain the level of growth in the management consulting market.8

Strategic HR policies will be needed to attract and retain top talent. In the HR consultancy space

in terms of revenue Mercer is the market leader with Hewitt, Morneau, Sobeco and Buck

Consultants also making a name for themselves. Proper communication, salary and a rewards

and recognition policy will be important drivers towards the reduction in employee turnover and

absenteeism, an increase in employee satisfaction, productivity, customer satisfaction, customer

acquisition and sales performance. These benefits should outweigh the HR strategic costs and

produce a positive ROI.9

The Canadian management consulting market was a $9.28 billion market in 2006 and should

grow at a 5.5% rate per year reaching $11.49 billion by 2010.

10 Since the economic downturn

after 9/11 management consulting has made a real resurgence in the business advisory space with

firms for example, Deloitte, KPMG Advisory and PwC Advisory becoming national players in

this Canadian market place.11

8 http://www.consultingcentral.com/press-releases?C=RyojDPodtzxMzuiu&G=S1DWds06IJ3L2BON 9 April Harvey. Canadian HR Reporter. Toronto: Aug 13, 2007. Vol. 20, Iss. 14; p. 20 (2 pages) 10 http://www.newswire.ca/en/releases/archive/February2008/01/c6406.html 11 Management Consulting in Canada: 2007-2010 CMC Canada Member Briefing

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Key Players

Even though, the Canadian management consulting market is more fragmented than that of the

U.S.; a ranking of the top seven “big players” in the Canadian Consultancy Market has been

developed based on 2007 revenues.12 Interestingly, most of these firms had begun as

Accountancy firms and the ranking takes into account companies that are known to be

consultancy firms.13

Company Name 2007 Revenues $000’s

Employees Head Offices

International

Affiliations

# of

Offices

1.Deloitte & Touche

$1,328,000 5,577 Toronto &

Montreal

Deloitte Touche

Tohmatsu

5114

2.KPMG

$1.074,197 3,464 Toronto KPMG

International

3415

3.PriceWaterhouse

Coopers

$1,031,800 3,973 Toronto PriceWaterhouse

Coopers

International

2516

4.Ernst & Young

$ 839,000 2,849 Toronto Ernst & Young

Global Ltd.

1417

5. Accenture

$ 594,825 4,700 Toronto &

Montreal

Accenture 718

6.Grant Thornton

Canada

$ 409,000 2,664 Toronto &

Montreal

Grant Thornton

International

9919

Mercer Canada

$ 357.847 1,661 Toronto Mercer Global 1420

12 This was presented to the SAP certification class on June 16th, 2008 by Deloitte Canada, in Montreal.

13 Financial Post: Business Special Issue: Canada’s Largest Corportations 14 http://www.deloitte.com/dtt/home/0%2C1044%2Csid%25253D3557%2C00.html 15 http://www.kpmg.ca/en/ 16 http://www.pwc.com/ca/eng/main/home/index.html 17 http://www.ey.com/global/content.nsf/Canada/home 18 http://www.accenture.com/Countries/Canada/default.htm 19 http://www.grantthornton.ca/ 20 http://mercer.ca/home.htm

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Competitive Pressures

Porter’s Five Forces

Threat of New Entrance - High

New entrants are often senior managers who have established themselves in their field and either

leave their job to set up niche consultancies or do so in retirement. However, not all new entrants

are small, major new players have entered the field. One never knows where a firm you start will

go in the future. Arthur Young and Alwin C Ernst each formed separate accounting firms with

their respective brothers in the early 1900’s. They were both innovators where they knew they

could apply knowledge for their clients to make better business decisions. Both men understood

the importance of their employees and had implemented what is now known as HR policies with

the development of employees and Young’s company was the first company to recruit directly

from Universities. In the 1920’s each company made alliances with other companies to become

global players. Unfortunately, Ernst and Young never met in life, but ironically died within days

of each other in 1948. Their philosophies lived on and, in 1989, were brought together when the

firms they started merged to create Ernst & Young. The new organization quickly positioned

itself on the leading edge of rapid globalization, new business technologies and continuous

business change. Without a doubt neither of them would have thought the small companies they

started with their brothers would grow into a global organization of 130,000 people sharing their

ideals and passion to help clients improve their businesses around the globe.21

Little capital is required in a knowledge consultancy. The growth of the industry has had its

repercussions: in some ways new entrants have lessened the confidence of the market and

prevented a united industry and this has lead to the fragmented nature of the industry compared

to the U.S.

There is a desire among consultancies for a more regulated market. This would protect margins

and enhance the image of the industry. Widely recognized accreditation would provide a major

barrier to entry. Consultancy generally is an unregulated industry, however, the CMC

certification is becoming more important but today it is yet a necessity. Those areas with a 21 http://www.ey.com/global/content.nsf/International/About_EY_-_Key_Facts_and_Figures_-_History

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specialist skill have the best protection against new entrants for example CA’s and engineers

have to abide by a strict code of conduct with the regulatory bodies they belong to. Also,

university education and work experience adds credibility to the industry. The major

consultancies have been unable to provide either retaliation or an entry deterring price, and

appear to accept lower priced smaller consultancies focusing on niche markets. Normal

marketing channels basically do not exist for medium and small firms so one has to instead rely

on networking and credibility contributing to a low survival rate because these elements are

sometimes out of one’s control

Intensity of rivalry among existing firms - Moderate

Because of the various specialties and somewhat interdependence of firms, aggressive tactics of

firms in this fragmented industry have not been evident. Perhaps as more standards, regulation

and certification become crucial to this market this may eventually create it. This may be

stimulated, by negative comments about the poor quality of some consultants’ work. During the

economic downturns for example, in 2000 and after 9/11 the mergers that took place has shaped

today’s marketplace to be more intense than before this time. For example, globally, the IBM-

PwC, and Capgemini-Ernst and Young mergers and KPMG’s divestiture of some of its

management consulting capabilities to BearingPoint, all started around this time of economic

slowdown and still impact Canada’s consulting landscape today.2223

Competitive pressure has emerged from developing countries because they have the talent and

are able to supply similar services as local firms at a lower cost. For example Wipro, an Indian

company, has made inroads into Canada consultancy space in IT.

While the industry may not have high exit barriers in a financial sense, many individuals in their

fields are emotionally committed to it, and would be prepared to struggle to keep their head

above water. Small firms, by collaborating with others, can improve both turnover and profit.

Through effective networking, not only are they able to concentrate on their own specialism, but

they can add value by bringing in specialists from other professions, so offering a full service.

22 http://www.crn.com/it-channel/18821329 23 http://contracts.onecle.com/bearingpoint/kpmg.sep.2001.02.13.shtml

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Hence, their business expands not just through internal growth, but through co-operative joint

ventures.

Threat of Substitutes - High

Buyers bring in consultants to have a different view of how they should be running a particular

service in their company. They don’t have to do this they could use substitutes for example, have

someone internal handle it or hire a consultant as an employee instead of signing a contract.

They could also go to an online consultancy agency or they could outsource that process to an

external supplier.

Bargaining power of buyers - High

In the early days of consultancy, buyers had very little knowledge on which to make

comparisons. But today, buyers have improved their understanding of the market and are in a

better bargaining position. In fact, buyers have all the power in this market since at the current

time the market is fragmented and there are a lot of options for them to choose from.24

Bargaining Power of Suppliers - Low

This is not yet an important force in such a fragmented industry, although specialists normally

contracted in by larger companies forming even if temporary, organizations could change that. In

a sense, universities are suppliers, since most workers in this market come out of business

schools. The Canadian Government is both a buyer and a supplier and has a large influence

through policies, for example, whether to make CMC certification compulsory or other standards

and whether or not they enforce them, whether it offers firms subsidies and grants for R&D,

environmental initiatives, etc..

Customer Characteristics

Management consultancy is the practice of helping customers improve their performance, by

initially analyzing their business problems and then developing an improvement process. In the 24 http://www.emeraldinsight.com/Insight/ViewContentServlet;jsessionid=15D7590BC71A61BC25C63A1DE8D6AB7B?Filename=Published/EmeraldFullTextArticle/Articles/0010340302.html#0010340302002.png

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long run, you can save time and money by funding the right assistance to help you overcome a

current obstacle or avoid costly mistakes in the future. A good consultant, looking at your

situation objectively, should be able to identify and implement the solution to the problem more

quickly and efficiently than you or your staff. Here are some of the many factors why firms hire

management consultants: to gain external and more objective advice and recommendations, to

gain access to the consultants' specialized expertise, or simply as temporary help on a one-time

project, where the hiring of permanent employees is not required. Since consultants focus on

their core competencies they have exposure and relationships with many clients so they are

aware of the industry’s best practices. Consultancies may also provide organizational change

management assistance, development of coaching skills, technology implementation, strategy

development, or operational improvement services. Management Consulting is becoming more

prevalent in non-business related fields as well. As the need for professional and specialized

advice grows, other industries such as government and not-for-profit agencies are turning to the

same consultants that have helped the private sector for years.25

When customer firms fit any or all of the following situations there is a tendency to invest in a

consultant and in turn it is a worthwhile investment:

• When you need an objective point of view. When you are very close to a situation,

there is often a tendency to favor a predetermined solution.

• When the problem or situation is short-term, such as public relations around a

special event.

• When the problem requires special expertise, such as knowing how to buy a

computer system, manage accounting or address legal issues.

• When your firms’ financial situation is not favorable toward hiring

permanent staff.

• When your firm is in a crisis, or when it seems to be operating in a

crisis-management mode.

• To supplement staff time.

• To supplement staff expertise.

• To ensure objectivity.

25 http://www.articleworld.org/index.php/Management_consulting

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• To ensure credibility

• To obtain a variety of skills.

• To deal with legal requirements.26

“Rules of the Game”

What makes a good consultant?

To understand the total skill set and be a complete package consultant you can break it down into

7 key areas. The first three are considered the complete package while the remaining 4 are added

skills that are needed.

1. Designing: This is the technical expertise and competencies that you learn in classes and

through on the job training. You have to always be on top of improving this skill set and staying

one step ahead of the competition.

2. Delivery: This is a critical skill that many consultants are very comfortable with. Once you

have designed your service, you have to be able to deliver it. This is the skill set that is often

most evident to your clients, or it is what you explain to people when they ask you what we do

professionally.

3. Selling: This is the skill that separates the great consultants from the rest of the pack and is the

skill most need to work on. You want to focus on the benefits your clients get out of your work

instead of focusing on product, process and features of your service. You want to take the

services you provide and turn them into true benefits for your client and not something that they

have to fish for to find.

4. Scope: This skill is about defining the scope of the project you are undertaking: by getting

clear agreements with clients up front about what the work is, what the desired outcomes are, and

what your role is.

5. Relationships: This skill-set is important throughout all your dealings. Networking is key to

your survival. Building relationships that goes beyond having a good rapport with people it is a

commitment to build a long term relationship so your client will inquire about your services in

the future. It is also important to gain the organization information so your project will have a

26 http://www.afmfl.org/PDF/Tips%20for%20Hiring%20a%20Consultant.pdf

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more successful outcome. Companies buy into other people when they believe in their ability to

deliver results. Build a network of relationships within your client’s firm and don’t just focus on

one person, you never know where your services will be needed in the future.

5. Improving the Process: It is important to keep the big picture in mind while with the client.

Understanding group dynamics will allow interpersonal relationships to improve your success.

Clients don’t always realize that this is part of the process, but they will recognize how you

engaged them to make things better when you improve the process, while sharing the content of

your work. This is a key skill that is remembered when future work from a consultant is needed

by your client.

6. Style of Questioning: It is important in your line of questioning that it leads your client to

discover answers for themselves. When someone discovers answers to their problems they will

own the answers. Their ability to hold onto the concepts, apply them, and improve their situation

will skyrocket.

7. Diplomatic No: Most of us need to improve our ability to say a diplomatic no. Improving

your judgment on when to use this word will help you in three ways: time management,

happiness level and client success.27

What Makes A Good Consulting Firm?

There are eight qualities that are measurable that can increase the value of your firm making you

a strong consulting firm. These are depicted in a diagram in annex 5.

1. Sales and Profit Growth - If you can build your firm to have sustained revenue, profit growth

and high margins, you have an attractive firm at hand.

2. Sales and Marketing Process - If you can predict sales revenue with accuracy then there’s a

high probability that you can forecast profits, which is why a quality sales and marketing

machine is vital in the valuating your firm. It delivers a healthy business pipeline and de-risks the

traditional feast and famine issues often found in consulting firms. You will want to establish a

combination of both “pull and push” marketing to attract top talent and deliver a robust sales

pipeline.

3. Market Positioning - The more unique, compelling and targeted your firm, the better you 27 http://ezinearticles.com/?Eight-Skills-of-Highly-Successful-Consultants&id=2075

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can command market attention with greater ease than its competitors and the higher you can

push up your fees. If you are like everyone else competition risks are higher and you have to

fight harder for business.

4. Management Quality – It is necessity to have an experienced leadership team with a track

record of delivering results, working in an environment where they spend more time working ‘on

the business’ rather than in it. This will lead to your firm being innovative, focused, and tightly

managed with good key performance indicator (KPI) measurements, financial control, effective

processes and people willing to go the extra mile.

5. Client Relationships – Firms that use methodologies protect and grow strategic accounts are

more successful, for example using CRM to assist in relationship development with individual

contacts. Quality initiatives like these allow you to enhance your ability to acquire, retain and

build a client base and increase your revenue and profits per client.

6. Quality of Fee Income - If a good percentage of your future fee income is locked in through

long term contracts (12 months or more) with a number of clients, diverse client portfolio with

fee income growth balanced across existing clients and new business and a quality approach to

billing and debt collection, resulting in close to zero bad debt and working capital requirement

then you have your feet strongly planted on the ground.

7. Intellectual Property - A systematic approach to innovation, knowledge management, and IP

building will make your firm more valuable by improving your market position by raising the

height of the bar for competitors.

8. Retaining/Attracting Top Talent - There’s no point in winning all those new deals if you

can’t provide the skills and manpower to deliver. So you need an environment people want to

work in, where they get recognition, reward, personal development, and enjoy their work by

creating a fun atmosphere to work in. If you create this environment, then you’ll be more likely

to hire the best people to keep your business growing and reduce their desire to take the next

head-hunter call. Also, if you’ve locked your key staff into the future of your firm through profit-

sharing and share options, then you’ll have a team where all are focused on the equity growth of

your firm and its future acquisition.

Summary - To enjoy real value in your consulting firm you have a firm with a solid track record

of profit growth that has: systematic team approach, a proposition that WOWs your market, a

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management structure with breadth and depth, effective client relationship management, built its

IP, locked in its staff to the future of the firm.28

“Rules of Success”

Ten Commandments of a Successful Consultant

1. Do Not Assume: Don't expect the customer to be in a rational state: if your client did not have

a problem (which they may not even know what the problem is) they wouldn’t have hired you.

2. Problem Solver: Constantly be solving problems: Paereto’s 80/20 rule applies here: even if

you only have 80% of the solution nailed down show your work you will have time later to finish

the last 20%.

3. Resourcefulness: If you do not have the correct skill-set to resolve the problem quickly learn

or hire someone who does.

4. Be Humble: Never make yourself seem like the most important part of the project and do not

take the glory for its successful completion. Pass the kudos of your work over to your firm or

manager since this is the reason you were hired on the project in the first place. This attitude will

not show up your client so there will be no resentment on their part.

5. Role Model: Don’t Squawk! There is enough complaining as it is that is why you are needed.

Cut through the office politics and red tape and make a positive change to the client company’s

culture.

6. Work Breakdown Structure (WBS): Set milestones: this will enable you to justify your

steps toward the project’s success.

7. Diplomacy: Know your surroundings. Avoid confrontations in meetings, be agreeable during

group meetings. If it is something you disagree with take it up with the person responsible on a

one on one basis. Focus on succeeding with results.

8. Ethics: Don’t compromise valid principles since integrity is your main assets.

9. Differentiation: Don’t be arrogant to think you are the only person for the job. Or that only

you can figure out a solution for their problems and no matter what you do your job is secure.

Think of it as an opportunity for you to show your skills and to prove you were the right

28 http://www.managementconsultingnews.com/articles/collins_sell_firm_2.php

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choice.29

Six Rules of Engagement for a Successful Consulting Firm

1. Land the contract: Set the ground rules and specifications with the client because whoever

sets the specifications has the best chance of winning the assignment. To do this you have to be

savvy with your client in face to face meetings selling your objectives. Expect competition and

excel under the pressures of it. Good consulting firms have strong communication skills to have

their clients acknowledge the value of their unique service. The odds of winning a contract are

much improved if you create the specifications with your unique service but remember you must

be vigilant.

10. Baby Steps: You can’t please everyone. Do the best you can to provide a solution and

minimally leave the client in a better place than when you started.

30

29 http://www.lostechies.com/blogs/chad_myers/archive/2008/06/08/some-consulting-wisdom-i-picked-up.aspx

2. Up-front deposit: Remember you want to be paid for your services. Be wary of the clients

who say the following: "I know this is a small project, but I'm going to have lots more work for

you really soon." That means that a) they don’t value your work and/or b) they don’t want to pay

you much for this project and there will not be an upfront payment.

3. Signed Contract: This rule should remain a formal one and not be done through email. If you

do not have a written contract what would be your recourse if the client refuses to pay, if midway

through the project the scope is changed or the project is cancelled, or if the client wants to lower

the fees after your work is completed. A contract will protect oneself.

4. Limit Free Revisions: This is where the wording of the contract is very important: you should

be liable within the scope of the project to correct any errors or mistakes that were made because

you did not understand the client clearly. But there should be a time frame for this for example

they should be presented to you within 30 days. Revisions outside of the scope or after this 30

day grace period should be considered a new project and billed accordingly.

5. Timeliness is next to G-dliness: If you don’t want to alienate clients and hinder your

professional reputation pass work in on-time. This will allow your client to look good which will

lead to repeat business and referrals. Rule Number Six: Invoices should be delivered in a timely

manner

30 Don McNamara. Consulting to Management. Burlingame: Sep 2004. Vol. 15, Iss. 3; p. 11 (3 pages)

20

6. Timely Billing: This may be an obvious rule but we have to remember the sooner you get

your invoice in, the sooner you get paid so keep on top of your accounting. You should send a

dual copy one by email and one by snail mail.31

The Key Success Factors are: ability to measure risk, establish a proven track record, set

appropriate prices, attaining the appropriate industry experience, highly educated, establishing

oneself amongst business leaders, landing key contracts with leader firms in their industry so

other companies will follow, knowing your customers inside and out and offering personalized

services so you can retain them, being able to save your customers money in the long run,

credibility, Networking, Networking, Networking, staying on top of market trends and letting the

market work for you, customer centric, listening to the customer and finding out what his needs

are, aligning your services to what the customer needs, staying on top of technological advances

in the market that can make you more productive and efficient, keeping an eye on the leaders of

the sector and see which directions they are taking their business, differentiation, thinking like an

entrepreneur and keep re-creating yourself when necessary, strategic HR policy so people will

want to work for you and attract the right people so you can develop, train and retain them,

making money, and creating a sustainable competitive advantage.

Conclusion: The basic idea of this sector note is to shine light on the Canadian Business

Services Sector and the Canadian Management Consulting Market. To enhance the chances of

success for a firm trying to enter this market there are special steps a potential owner needs to

take to ensure he/she has a strong understanding of his potential consumers, competition, key

players and the know-how to build equity in one’s firm. Potential entrepreneurs for this market

should note that although this market has a few key players who have a complete breadth of

services with consulting in strategy consulting, OM, IT consulting, HR consulting and business

advisory services. The Canadian consulting market is much more fragmented than their southern

neighbour with many small and medium firms competing. To survive they need to focus on a

sector or geographical location offering a unique service. Clients appreciate these types of firms

because of their focus, they are dealing with senior manager level type consultants and they

know that their time will not be taken up with larger clientele.

31 http://articles.techrepublic.com.com/5100-10878_11-5060012.html

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Annex 1

Increasing growth rate in the Business Services Sector

22

Annex 2

S.W.O.T. Analysis (Strengths, Weaknesses, Opportunities and Threats): A business partner and I will open up a consulting business in five year with our core

competency in project management. My future business partner was my co-supervisor in my last

job in IT and we worked together for five years up until the time I left to do my MBA.

Strengths

Combination of education and industry experience to be able to differentiate ourselves from the competition.

Possess the following skills which are crucial to being an entrepreneur: insightful, innovative, avid imagination, good judgment, resourcefulness, dexterity, perspicacity, originality, flexible, foresight, and good communication skills.

We have connections in IT so we can develop project management software that works perfectly with our system. We both have management experience.

Proven history of being leaders

Weaknesses

We don’t have the industry experience yet but when we do we will be a new company in the market so we will need someone to take a chance on us. We will be based in Montreal and neither of us speaks French. Companies may think well we will hire PMP’s and we’ll be fine. We don’t have business leader contacts. This will be our first business.

Opportunities As stated in the report to this section project management will become a tool that will be increasing in use with companies as they move to a more matrix structure. Developments in outsourcing for example negotiating contracts

Health care prospects

It consulting

Threats There are competitors already on the market focusing on project management so by the time we start they will already be established. There is a recognized certification on the market so companies might think if they have PMP employees they might not need us. Globalization: Well educated consultants in emerging markets able to offer this service at lower costs.

23

Annex 3

TOWS Strategic Analysis (Threats, Opportunities, Weaknesses and Strenghts) The strategies we will use to make the most of our strengths, circumvent our weaknesses,

capitalize on our opportunities and manage our threats are:

External Opportunities External Threats

Internal Strengths

Maxi Maxi Strategy

Since we will have business contacts (assumption that this will be the case in five years) and good recommendations our system will be bases on high quality and will save companies money in the long run.

Our strategy will be high quality with high costs the companies who attain our services will save money in the end.

We will be generalists offering a training schedule to implement our system of project management and to use the software we develop. We will offer to run the project or grade and improve their system.

Set up a goal orientated system that people would want to implement help companies achieve a competitive advantage by having them achieve expected results on-time and on-budget.

We will have different levels of project management based on the cost of the project so employees have something to aim for.

Maxi Mini Strategy

Our strategy is to join future customer groups for example the Chamber of Commerce and to network with business leaders in Montreal and Toronto and establish ourselves and then sell ourselves.

The next company I work for I will take French courses and speak to people in French.

Offer a system that will save the company money in the long run and get contracts from industry leaders that others will follow so they will think they need us.

Internal

Weakness

Mini Maxi Strategy

Get industry experience before starting our business and to learn French.

Our strategy to take advantage of this eventual growing market is to know companies well and to investigate what they are changing in their businesses.

We will have leader companies’ recommendations which will lead to word of mouth clients.

Mini Mini Strategy

Our strategy to establish ourselves we will choose a company that is a leader in their industry and a well known matrix company for example ABB and get them as a client to implement our system even if we have to do it with a very little charge.

Once we have them as a client other companies will follow. We will also be PMP and insist that if you only hire PMP’s they will not do some project because they may think it’s not PMP worthy.

24

Annex 4

Porters 5 Forces – “Diagram”

25

Annex 5

The core pieces to measure value in your consulting firm.

26

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