From Australia Financial Review (AFR), Dec 30 2015
by Agnes King
Boston Consulting Group is struggling to keep up with the demand for digital transformation services and claims it could grow faster than the 20 per cent forecast for the year to December 31, if it could find more able bodies.
But a greater portion of BCG's fees will be "at risk" as clients demand greater accountability from highly paid consultants.
BCG's at-risk fees have quadrupled in the last four years in dollar terms, while performance based income as a percentage of BCG's work has doubled in the last two years.
"It's a substantial change and it's growing very fast," BCG's Australia and New Zealand managing partner Andrew Clark said.
BCG's domestic income rose 30 per cent, to $141.4 million, for the year to December 31, 2014.
At current growth rates, at-risk fees could quickly account for half of BCG's domestic income. However, Mr Clark cautioned against this over simplified extrapolation since demand for hard core fee-for-service strategy work continues to be important.
Driving the change is an almost insatiable desire from clients to digitise existing companies and co-create new digital enterprises.
"We're almost at the point of having skin in the game in the new business," Mr Clark said.
DOTCOM BOOM IS BACKBCG has hired 45 technologists into its digital arm in the past 12 months.
Since acquiring Sydney-based design agency Strategic & Creative last July to gain a foothold in the rapidly expanding digital arena, BCG's freshly rebadged Digital Ventures Asia has grown to 60 staff, up from 15.
"We're really struggling to keep up with demand," Mr Clark said.
"The degree of excitment feels a little bit like the dotcom days of 2000 but it is different in that there is real money and people are more pragmatic about the opportunities."
"Building that business out as fast as we can has been a big challenge."
SKIN IN THE GAMEIn a highly confidential deal, BCG's North American firm has taken an equity position in a client's new digital company. The client, who remains anonymous, engaged BCG to create a new entity off the back of its existing operations using sophisticated data analytics. BCG took some fees for the work but also took a "material" equity stake.
BCG Australia has not gone down this path yet, however, Mr Clark said it's possible.
"It ties you more closely. Your compensation [is] driven by how these businesses perform, the pace with which they're launched and the degree to which the client buys into the whole concept," he said.
Fees at risk has always been a fringe component of strategy consulting but over the past three or four years the proportion of business subject to this rigour has dramatically increased.
"The mix of work has been changing over the last few years and it's starting to accelerate," Mr Clark said.
For the "right type of work", Mr Clarke embraces the concept of increased accountability saying it gives consultants an opportunity to prove their mettle.
He points to BCG's work on Horizon Power in Western Australia as an example of how this model can produce a win-win. BCG earned $5.1 million on a strategic review that saved the WA government $160 million according to figures cited in a parliamentary session last year.
MORE PROFITIn the same way banks charge more interest on high risk loans, strategy consultants earn higher fees on at-risk work, provided they deliver.
But it requires a trusted relationship with the client to work well, says Mr Clark.
"You don't ever want to get down to granular contract discussions. There has to be a degree of trust so you can collectively form a view as to whether the work has been successful beyond the specific milestones," he said.
RISE OF FREELANCERSAside from the demand for digital skills, large scale transformation work has changed the depth and breadth of expertise BCG needs to access. Like most other professional services firms it is forming more partnerships with independent consultants and external consultancies, while its global network of highly skilled and typically nomadic freelance experts has expanded exponentially over the last few years.
"Our core workforce continues to grow at the same rate as the overall business but we are inserting more of these people into our teams," Mr Clark said.
50% off our Starter/ A la cart package. Usual price $200, now $100 only. Just quote "ConsultingPrepLaunchOffer101". Sign up NOW!
By Katie HopeBusiness reporter, BBC News
5 January 2016
A consultant is someone who borrows your watch to tell you the time, and then keeps your watch, so the joke goes.
There are plenty of other ones along similar lines, all suggesting that what a management consultant does is charge people an awful lot of money for delivering something they already knew.
The fact that the jokes endure hint at the sense of controversy that surrounds the profession; what does a management consultant really do and more pertinently are they really worth their often exorbitant fees?
The FirmMcKinsey, known as "the Firm" to its staff, is one of the biggest and is arguably among the elite of the management consulting world. Its revenues totalled $8.3bn (£5.4bn) in 2014, and more current and former bosses of the world's largest companies are alumni of McKinsey than of any other firm.
Its advice has not been without controversy, but Dominic Barton, global head of McKinsey, raises his eyes to heaven at the mere mention of the watch joke. He's heard it many times before, but admits it still drives him crazy.
"We cost a lot of money and people are not going to spend money to waste their time. You can't build a firm on that basis," he says.
Image captionManagement consultant fees run into the millions, but McKinsey boss Dominic Barton says increasingly clients only have to pay if they achieve the promised resultsMr Barton says the kind of projects the firm works on are hugely varied, from helping to determine what kind of business model a client should follow to restructuring programmes, building new products, growing new services and advising on management structure after two companies merge.
Contrary to the perception that the industry overcharges its clients, increasingly he says clients only have to pay if the management consultant firm delivers the results it has promised.
"We're saying we see a £100m impact opportunity here, to do that that's going to cost you £9m," he says.
"Please don't ask us how many people it takes. It's none of your business, actually. But we will deliver it. If we don't deliver that, we won't be paid."
The 'right model'In some cases, when McKinsey works with smaller firms with annual revenues of £25m - companies which in the past it would rarely have got involved with - instead of a fee it will take a share of the company, which it then typically cashes in once the company floats on the stock market.
For the kind of work McKinsey does, Mr Barton says this method of payment makes a lot more sense than the traditional law firm model where companies are charged according to the seniority of the consultants involved and how many hours they spend on a project.
"Our associates love it. And then what I like about it too, is it puts us in the right model. I think it's a crazy system we have where we charge people on a leverage labour model. That somehow my value is somehow equated to how many hours I work times my per diem."
In contrast, John Veihmeyer who is global chairman of rival KPMG, says that in the future, he still expects "a significant portion" of the fees it charges clients to be based on the level of effort and time involved when working on a project.
Image captionKPMG's John Veihmeyer says technology has changed the way it charges clientsBut he says the increasing use of technology to solve clients' problems has already had a significant impact on its fee model.
"We are, in more and more cases, solving client issues or helping them realise opportunities that they have, by bringing an asset-based technology solution to bear, rather than a traditional engagement of here's a lot of people spending a lot of time at your location helping you solve this problem."
If they're not overcharging, then is there any truth in the other main stereotype about management consultants: that they are often the henchman for a Machiavellian boss who wants to sack all his staff or carry out an unpopular project, but hasn't got the guts to do it himself?
Mr Veihmeyer laughs at the very idea.
"I don't think we ever want to be in a position where we're being asked to simply rubber stamp a conclusion that a company has already reached."
He believes that the key thing clients hire management consultants for is for the wider perspective and objective advice that they can offer.
Image captionCompany bosses say management consultants can offer a different way of looking at a problemIt's something that Campbell Soup Company chief executive Denise Morrison says she has found useful when she's faced "really difficult" business issues.
"Working with some outside consultants or people that really can bring you an external perspective or a benchmarking to identify opportunities is a really good way to work," she says.
However, she says it's important that the consultants pass on their knowledge and ideas to staff effectively, making sure they don't become a permanent fixture.
'You have to evolve'Not everyone agrees that management consultants can play this role well. Tim Brown, chief executive at design agency IDEO, says while there's always a role for an outside perspective, often the ideas offered by management consultants simply aren't original enough.
Instead, he says he tries to create the same wider perspective from within, hence its staff are sent on secondments to different international offices to ensure they experience different ways of working and living.
Mr Brown says the firm also aims to create an atmosphere where employees feel free to try new ideas out, regardless of whether or not they are successful.
"Whether you're a management consultancy, a design company, a HR consultancy you have to be evolving, and you have to hopefully be evolving faster than the customers that you work for if you're going to be valuable," he says.
This feature is based on interviews by CEO coach and author Steve Tappin for the BBC's CEO Guru series, produced by Neil Koenig.
REUTERS: Accenture Plc reported a better-than-expected jump in quarterly revenue, helped by strong growth in its consulting business, particularly in North America.
The company also raised its 2016 net revenue growth forecast to 6-9 percent from 5-8 percent in local currency.
Consulting net revenue for the first quarter ended Nov. 30 was US$4.35 billion, an increase of 6 percent in U.S. dollars and 15 percent in local currency.
The business accounts for just over half of Accenture's revenue, with its outsourcing unit contributing the rest.
The company's revenue from North America, which accounted for about 47 pct of total revenue in the quarter, rose 9 percent to US$3.76 billion. In local currency, the rise was 11 percent.
Accenture has been investing heavily to boost its digital business, which offers analytics, content management, social media and cloud services.
It has also announced it would increase investments in research and development efforts in artificial intelligence.
Net income fell to US$858.5 million, or US$1.28 per share, in the first quarter from US$882.2 million, or US$1.29 per share, a year earlier.
Net revenue, or revenue before reimbursements, rose to US$8.01 billion from US$7.90 billion.
Analysts on average expected the company to earn US$1.32 per share on revenue of US$7.92 billion.
Up to Wednesday's close of US$109.08, the stock had risen about 22 percent this year.
(Reporting by Devika Krishna Kumar and Lehar Maan in Bengaluru; Editing by Don Sebastian)
SOURCE: The Boston Consulting Group
December 03, 2015 22:00 ET
Southeast Asian Economies Have Slowed, Yet Consumer and Financial Services Companies in Indonesia Can Still Profit Through a Deep Understanding of Shopper Behavior, According to New Research by The Boston Consulting Group
JAKARTA, INDONESIA--(Marketwired - Dec 3, 2015) - Economic growth in most Southeast Asian economies, including Indonesia, has slowed recently owing to a number of factors. But in the medium and long term, Indonesia remains highly attractive to companies operating in emerging markets, for one principal reason: increasing affluence and urbanization are leading to an upwardly mobile base of consumers. To capture this opportunity in a volatile economy, companies need a detailed understanding of the brand preferences, shopping behaviors, and purchasing decisions of Indonesian consumers across demographic segments. A series of research reports being released today by The Boston Consulting Group (BCG) provides in-depth findings that can guide companies in three industries: consumer durables, fast-moving consumer goods (FMCGs), and financial services.
The three publications summarize the findings of an extensive quantitative and qualitative survey of more than 3,000 consumers across all socioeconomic groups in 19 locations throughout Indonesia. A central element of all three reports is identifying the key demographic groups within the country -- including "young professionals" and "modern housewives" -- which each have unique habits, preferences, and needs.
"Companies need a targeted approach that understands each group in order to apply the right points of influence for their brands," said Edwin Utama, a BCG partner and a coauthor of the reports. "Those that try to apply a one-size-fits-all approach will struggle."
Vaishali Rastogi, a senior partner at BCG and another coauthor, added, "Indonesia's economic expansion has clearly hit some turbulence lately. Despite these bumps, Indonesia is still a growth story, with a consumer base that is growing larger and more economically empowered each year. But growth will not be straightforward for companies. That makes it even more important to use a targeted approach and to rely on deep insights into the behavior of shoppers in key demographic segments. "
Critical Insights in Three High-Growth Industries
Key insights of BCG's research for durable goods manufacturers include the following:
A copy of the report can be downloaded at www.bcgperspectives.com.
From The Straits Times, Dec 22, 2015:
MS MARIAM JAAFAR, partner and managing director (Singapore), The Boston Consulting Group
I am particularly interested in the opportunity to accelerate the development of a digital economy - from leveraging new digital technologies across sectors to new digital business models to embracing digital lifestyles - entrepreneurship and innovation, opportunities in our regional backyard even as we seek to grow global players, and the impact of all these on jobs and social cohesion.
Germany and the US overtake the UK in the list of the world’s most attractive consulting markets in 2016
The $50billion US consulting market looks set to grow by more than the total size of any other geographic consulting market (except DACH and the UK) in 2016...
After being ranked the most attractive consulting market in 2015, the UK has slipped to third place in 2016 - overtaken by the DACH (Germany, Austria, Switzerland) consulting market and the $50billion US consulting market. The Index, published in a report by Source Information Services (Source), found that the situation with the UK is much as it was last year, and it’s simply been overtaken by two even more attractive markets.
The Source report also found the average consultant in Germany (by far the biggest part of the DACH market) is earning about 80 per cent more for their firm than their nearest counterpart elsewhere. Source says that this is largely because German clients insist on using consultants to provide high-end strategic advice and specialist skills rather than the more commoditised services, including contingent labour, for which they’re often used elsewhere.
The $50bn US consulting market came a very close second to Germany. Source says that it’s hard to see how consulting firms can go wrong investing in the US as it is by far the world’s largest consulting market – with a growth rate that ranks alongside, and even ahead of, emerging markets. If, as Source predicts, the US consulting market grows by 10 per cent in 2016 its size would increase in a single year by more than the total size of any geographic market except for DACH and the UK.
Edward Haigh from Source Information Services commented:“In addition to its world leading revenues per consultant, the DACH consulting market is also attractive because it’s growing well, and is a market in which the use of consultants is well-established in the minds of clients.
Equally, there’s little not to recommend about the US consulting market. Digitisation seems to be turning from talk into action and boosting the market in a way that spells good news for expectant consultants the world over.”
Australia remains a hugely attractive consulting market – ranking 4th in the Index
Despite the belated impact of the global financial crisis and a volatile political situation that wasn’t really a feature of Australian business life in the past, its consulting market is now among the biggest in the world (valued at $4.2bn) relative to the size of its economy. It also has a good supply of highly-qualified talent; its consultants make a decent amount of money for their firms; and there are signs that growth may be picking up again.
The star of the show in growth terms is once again the GCC
Growth in the GCC consulting market has slowed, but it’s doing so from an enormous rate and should still hit about 13 per cent in 2016. However, Source says that if the oil price continues to remain low, then it’s hard to see how it won’t eventually start to weigh heavily on the prospects for consultants in the region. But there’s not enough evidence yet to suggest that consulting firms should steer clear of increasing their investment in the GCC - or that the GCC is about to stop being one of the brightest stars in the consulting firmament.
Edward Haigh from Source added:“The GCC consulting market as a whole is increasingly resembling a mature consulting market. Indeed, relative to the size of its host economy, the GCC consulting market is now bigger than those of many mature markets, including the Nordics, France, Benelux, Iberia, and Italy. There are quite big differences from one individual market in the GCC to the next - but viewed as a whole, it challenges the notion that this is an emerging consulting market, even if it’s an emerging economy.”
Growth in India leads to a rise of six places
India, which was rated the joint 14th most attractive consulting market last year, is now rated 8th as growth returned. However, there’s a bit more uncertainty about India: although likely to deliver double-digit growth in 2016, recent history has shown that it is an emerging market that can easily slump to very mature growth rates. Consulting firms trying to assess their long-term commitment to the Indian market, won’t feel confident that growth isn’t going to dry up again.
Russia hits rock bottom
At the bottom of the Index, Russia’s consulting market is going backwards at an alarming rate, reminding those who got excited by a phase of double-digit growth that volatility reigns supreme. In truth there’s plenty of consulting happening, but its value is being undermined by the impact of a falling ruble, and as long as Russia’s political ambitions continue to impact its economic fortunes it’s hard to see things picking up much.