Virtual Consultancies

Dec. 21, 2004
They can be more than the sum of their parts. They offer clients cost-effective efficiency -- or do they?

Whether faced with the need for a large-scale systems implementation or a targeted marketing strategy, many manufacturers find themselves caught between the two poles of contemporary consulting. Looming at one pole are the Big Five accounting/consulting firms, promising a broad range of expertise and brand-name assurance. Clustered at the other are thousands of small firms and solo consultants, offering their clients lower costs, highly personalized attention, and working relationships with seasoned professionals. However, there is a third option: groups of small, specialty firms that have banded together to offer full-service consulting to their clients without erecting the kind of heavy corporate infrastructures that drive costs up and drag efficiency down. These "virtual consulting companies" take different forms. Some are incorporated, some function more informally through ad hoc strategic alliances, and some are linked through the Internet. "Here's their long-term selling proposition: These virtual consultancies say they have the firms, they have the capabilities, but they don't have the mahogany offices in New York," says Keene, N.H-based Tom Rodenhauser, publisher of The Rodenhauser Report, a monthly electronic newsletter on the consulting industry. "That's appealing to clients who are looking for a consultancy that can give them answers quickly and efficiently, that can help their business prosper without all the bells and whistles. [They] want a SWAT team of the best people available in a particular niche." Indeed, many executives have found that these virtual consultancies can deliver considerably more than the sum of their parts. In the second year of Wilmington, Del.-based Du Pont Dow Elastomers' existence as a joint venture, human-resources vice president Robert Cooke was concerned that the HR systems with which the new company had started might not be adequate to assure the venture's ongoing success. Instead of calling in one of the big consulting firms that had steady relationships with both the new venture and owners Du Pont & Co. and Dow Chemical Co., Cooke called on Solutions Network, a five-year-old virtual consultancy with 30 affiliates. Solutions Network brought in several of its affiliates to work with Du Pont Dow's HR team to analyze and update the company's compensation systems, devise a variable-pay-for-all plan, and integrate the company's other HR functions into its overall business-planning processes. All this was accomplished quickly at lower-than-Big-Five rates. In addition, Cooke found that the Solutions Network team offered a rich mixture of experience and perspectives. "We were trying to get the pulse of what different industries were doing, what was leading edge, what were the benchmarks," Cooke says. "They were able to bring in people from different consulting backgrounds, who had been around for a long time and who had experience in many different industries. It was very positive, and we'd certainly use them again." A major appeal of virtual consultancies is the fact that they offer clients a working relationship with senior talent throughout the duration of a project -- a contrast to the experience that many manufacturers have with big consultancies, in which they think they're buying the A team but wind up working with a B or C team. Solutions Network founder and managing director Richard Anthony boasts that nearly all of his 30 affiliates -- which also operate solo consultancies -- have more than 20 years' experience per person. Rodenhauser estimates that professionals at the Big Five firms plus ndersen Consulting average far less: two to five years for a consultant or team leader, five to seven years for a senior consultant or project manager, and eight to 10-plus years for a partner or vice president. With 27 years in consulting -- many in big firms including Towers Perrin and Alexander Consulting Group -- Anthony started Radnor, Pa.-based Solutions Network to link a variety of veteran consultants with whom he had worked over the years. "Some of the things I learned in a big company are applicable to what I do now," he says. "When a client opportunity would come to our attention, I'd go out to the site with some of my colleagues, listen, determine the need, then come back and look down the hall for the talent and expertise to satisfy that client. I do exactly the same thing now, but instead of looking down the hall I have a mental file of 30 firms that I know very well, and I put together a team. Solutions Network presents itself as the consulting firm that will be responsible for the conduct of the assignment and the quality of the assignment." Although Solutions Network has neither a payroll nor a big staff -- Anthony and a part-time assistant are the company's only employees -- the network meets monthly. Also, affiliates voluntarily undertake speaking engagements in the company's name, participate in company task forces, and publish together. Some industry analysts believe that such organizations are rare and that the actual state of virtual consulting is more hype than reality. "There are more consultants out there, so maybe it happens a little more frequently these days," says Tim Bourgeois, director of the Kennedy Information Research Group, Fitzwilliam, N.H. "But formal structures of affiliated firms rarely exist and for a good reason: They don't work. "If you think about the makeup of a typical consultant, [he or she has] a hard-driving, type A personality that doesn't lend itself to partnerships or alliances. There are things I'd rather do than manage a bunch of high-powered, veteran consultants. I guess it doesn't happen as often as it should because it's so tough to pull off." Other industry experts say that much of what's being called virtual consulting has been a staple of the consulting industry for years. "Many sole practitioners have always done strategic alliances and subcontracting, to the extent that the buyer often doesn't even know what he's dealing with," says Jerald Savin, CEO of Sitka Systems Inc., a Santa Monica, Calif., information-technology consultancy, and the chair of the board of the Institute of Management Consultants (IMC). "This has always existed, so it raises the question: Is this kind of virtual consulting company merely a new name for an old trend?" Yes and no. Although there seem to be relatively few virtual consultancies as formally structured and stable as Solutions Network, strategic alliances -- a variation on the theme -- are getting a lot of attention. Four years ago, Linda Sharp, president of the San Francisco-based STRATIX marketing firm, formed the Strategic Partnering Special Interest Group (SIG) within the IMC, believing that like-minded practitioners needed to build a body of knowledge. The SIG now has 80 members and a private online forum within the IMC Web site. When Sharp approaches a client, she presents not only her own firm's capabilities but also a range of services that can be provided by a group of colleagues in other consultancies. "You need to be proactive," Sharp says of this approach. "You need to look at your value chain, at what you can deliver, what the market needs, what's missing, what you feel comfortable marketing, delivering, and managing. Then fill the holes with other people in advance, before you've sold anything. You approach clients with all these people behind you. If I juggled all the people in my core group around, I could configure them 20 or 30 different ways." Sharp and her strategic alliance partners compete effectively against big consultancies, winning major projects with a variety of clients. Kathy Hesketh, a former business development manager at Grace Sierra (now part of Scotts Co.), found the STRATIX blend of high-powered talent helpful when she was put in charge of developing a new market for the company's fertilizers. Hesketh didn't have much in the way of staff or budget, and she wasn't getting much help from the big consultancy already working with the company. She wound up choosing STRATIX for her project, believing that she would get more personalized attention. "While this was a small project for the big consultancy, it was a relatively big one for both STRATIX and me," Hesketh explains. "I got far more attention from STRATIX than from the other company. I'd even get calls from Linda while I was on the road, reminding me of what I needed to do next. In a way, she was managing me." STRATIX pulled in 18 different consultancies to work on Hesketh's project, but this complex dovetailing of separate efforts didn't faze Hesketh; she was hardly aware of it. After the project's successful conclusion, Sharp asked Hesketh how many people she thought had been involved, and Hesketh guessed that it had been only three or four people. "It was seamless," Hesketh recalls. "STRATIX was taking care of everything so well I didn't need to know how many people were involved." Whereas STRATIX and Solutions Network have built their virtual consultancies from working relationships with other firms, a growing number of companies are using the Internet to extend their geographic reach and stitch together knowledge to provide consulting solutions. One ambitious effort is the Premier Expert Net (PEN) group, created by an online consulting database called the Expert Marketplace, Englewood, Colo. PEN provides access to 700 prequalified consulting firms in the U.S. and Canada via its Web site ( Clients can find consultants by searching PEN's database, posting a consulting opportunity on the Web site, or asking PEN's administrative team to recommend talent. Dan Lampinski, technical manager of custom operations at Titleist & Foot-Joy Worldwide in New Bedford, Mass., discovered PEN while he was searching the Web for a consultant to help the company identify environmentally friendly alternatives to a certain chemical. Once at the PEN Web site, he typed in a description of the company's needs and was contacted by a PEN affiliate two days later. "I really did it on a whim," Lampinski says. "We needed a chemical consultant, and I didn't know where to start. We wound up doing all our business over the phone and online with this guy. We never even met." At this point, PEN functions mostly as a referral service, linking manufacturers and others to single consultants. The company has grabbed at least one plum: a team of two PEN affiliates secured a big project from the U.S. Mint, beating out proposals from some of the nation's biggest consultancies. In the future, PEN hopes to build even larger teams and offer project management. "Our first strategic direction was to build the virtual firm," says Joseph Campbell, PEN vice president for brand and business development. "Now that we have the raw materials to put together teams for big projects, we'll be doing more of that."

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