End of the warm period
|Some consultants might just answer as follows the question of how business currently is: It feels like autumn in an English country house. The fire in the chimney heats up front, but the cold is creeping already through every crack. Up into the summer, it had still been different: The economic upswing made the sector feel good. "Consultants showed good increases on the books", says Eva Manger-Wiemann, partner at the meta-consultancy Cardea, with a view towards the good start of the year. That was confirmed in a study by the Bundesverband Deutscher Unternehmensberater (BDU – Federal Association of German Management Consultants): "Seven percent additional turnover", that's what it still said in February with regard to expectations for the course of the year.|
Meanwhile, there are first clouds in the sky. Growth will probably be less than predicted. One indication for it: Following the economic trend, the business climate in the consultancy sector cooled off fast. The index determined by the BDU dropped from its peak level of 53 points at the end of last year to 32 points in September. How close together hot and cold currently are is also shown in an assessment by McKinsey: "The first quarter of 2011 was the best we ever had", said Dominik Barton, Global Managing Director of the top company in the industry. But at the same time, he qualified his statement: "The world has become more volatile." He said that McKinsey's success would differ from one region to the other. Moreover, he is worried about the lack of staff. "We have to fight for good people. Sometimes, we don't have them in sufficient number."
What's more, there are tough fights for warm places near the fire: If you want to play up front in the market, you constantly have to come up with something new. "We only stand a chance when we can generate a 'wow' effect with the client", says Fabian Dömer, Managing Director Central Europe at Arthur D. Little (ADL). McKinsey is already implementing it: Frank Mattern, Managing Director Germany, wants to make yet more exclusive know-how available to clients which can only be obtained from the consulting industry's number one. Part of this offensive are new offers. Since June of this year, clients cannot only order consulting but also trainings.
This difficult and trying search for additional business concepts shows the worries of the entire industry: "Booming economy, booming consultancy", that old equation no longer holds true. One look at the Lünendonk list confirms it. The annual sales ranking divides the top of the market into winners and losers. McKinsey and the Boston Consulting Group were able to gain considerably in Germany. In contrast, for Booz, Steria Mummert and Deloitte, sales developed rather badly. Overall one third of the top 25 reported shrinking or stagnant business for 2010. In former years, such bad results would not have happened in a year with an economic growth of four percent.
That goes to show how much the business has changed since the financial crisis. "Companies define very precisely which assignments they still given on to consultants and which not", explains Frank Zurlino, partner at Horn & Company. If a client wants to modify internally, must do tough restructuring or make strategic decisions, the contract will usually go to the consultant. For many smaller projects, the industry needs consultants less than in times past. "Companies have become smarter", says Zurlino. Many former consultants and in-house consultants working in the industry today are quite able to handle certain projects internally which formerly would have been awarded to the external service provider.
And should a consultant finally feel the nice warmth of the next order, there will first be a cold shower: The procurement department wants to know everything in detail. "Purchasing is often a burden", groans Wayne Nelson, Managing Director Germany of Monitor. Even if the job is clear already, the consultant will still have to compete against other bidders.
At Lufthansa for instance, the purchasing staff for consultancy services is using an evaluation matrix which weighs price and performance such that the procurement people are able to filter out the best offer. "Thus, access to the client really makes work for the consultant", explains the Cardea partner Manger-Wiemann. However, clients want this expenditure because it's frowned upon to obtain contracts only through relationships. Buyers and sellers should not become pals; doing business on the golf course is no longer possible – long the practice of some consultants. "Any form of amigo relationship is suspicious", says Dirk Zupancic, Professor for Marketing at the German Graduate School (GGS). Such wheeling and dealing would disturb the thoroughly optimized world of the customers who will use ever new purchasing tools to hunt for even the smallest financial benefit. The Managing Director Europe of ADL can tell about 150 pages of invitations to tender which he and his colleagues had to work off in the bidding phase. "Years ago, that kind of thing just didn't exist", says Dömer.