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Modern Management Consulting

Management Consulting Firms: The Modern Rainmakers

Published on : Jul-2023 Report Code : 11 Report Format : PDF

An Overview

A new era has dawned where business stakeholders are keenly attuned and fascinated by management consulting processes and the way they are poised to scale up businesses and improve the bottom line.

Management consultants are now trailblazing through diverse industries such as healthcare and the non-profit sector. The prime objective of any management consultancy is to

  • Understand, decipher and analyze clients’ problems and develop novel and unique solutions for the same
  • Deconstructing client data with precise tools to better understand client needs. Thereafter, devising, overseeing and implementing creative solutions to improve clients’ business performance
  • Implement sound recommendations to spearhead organizational changes

Our analysis estimates that over the next 8 years, management consultancy will show robust growth, up 14% from the year 2018. As the business landscape becomes increasingly cut-throat and highly competitive, companies in all spheres are upping their reliance on management consultancies to keep their businesses ship-shape.

Tackling Business Challenges and Change Management

With the advent of digitization, change is rapid and unprecedented and this is bringing to the fore, complex business challenges. Myriad forces are bringing about this change. Highly intricate business models and disruptive technology is forcing companies to re-think their strategies.

We believe that the current COVID-19 outbreak will bring about substantial changes in the overall business landscape and impact the outlook over the next 3-5 years.  Management consultancy firms are grappling with the following challenges which are currently gripping the marketplace today.

  • Skilled staff – Many firms are beginning to feel the high pressure of constantly changing technology. As many as 45% of these firms are ruing the lack of skills in the existing workforce.  The need for hiring employees with top skills is a significant challenge. Towards this management consultants like Fatpos Global are either hiring new talent who possess these skills or are pioneering their efforts in up-skilling the existing workforce.

The challenge that companies face here is training staff which eats into the time spent on actual billable work. In an environment where competition is rife, this can prove to be very expensive. Thus savvy management consultancy firms like Fatpos Global help to obviate issues arising out of an unskilled workforce

  • Increased competition – The threat of heightening competition is permeating every sector, more so for start-ups and new entrants. Many of these companies are seeing consolidation from larger players especially when they still lack a disruptive and edgy business model. This situation is further aggravated and compounded by the ingress of technology which is threatening to commoditize the smaller but more lucrative businesses.
  • Shift in buyer dynamics - The prevailing use of social media, online search engines are helping companies build brands through the smart use of digital and content marketing. Many are ill-equipped to handle the intense competition that exists online and successfully adapt to changing dynamics. This is a unique challenge that management consulting firms tackle for their prospective clients.

Revenue Growth Management (RGM) as a Unique Solution to Build Value at Scale

A niche area for increased profitability is revenue growth management (RGM), now being tapped by us as one of our best practices. Over the last few years, our consultants have mastered its fundamentals to benefit a large section of consumer goods companies.

The 4 key elements to enhancing revenue growth are trade investment, pricing, assortment, and promotions. While this has enabled companies to capture value at scale, the market scape is rapidly advancing and adapting. Companies are struggling to keep up as the bar is rising. Shifting dynamics in consumer behavior, sky-high expectations from potential investors, and advanced data analytics are creating a plethora of challenges.

Core capabilities in RGM have become table staples. Even though dependence on them is increasing, they are no longer giving a competitive edge. We along with many consumer goods companies have learned to work around them and outperform other market players through nuanced strategies.

  • Insight-driven strategic RGM - Through the elevation of the company’s commercial strategy, deep insights can be gained and the company can poise itself to make strategic choices on which markets to play in and how to win. This also includes studying competitors and how they are positioned. Strategic RGM also strives to understand how potential customers are making buying decisions, the attractiveness of substitutes and their sensitivity towards prices.

Once these insights are sought, our consultants can help the company to spark innovations, go in for classic M&A activities, adopt channel specific moves and design requisite portfolios to drive market growth. Further, these insights help the company to give priority to investments that will improve the bottom line.

For instance, a food and beverage manufacturer, one of our key clients, who witnessed steep sales declines in one of its main geographical areas uses strategic RGM to kick-start growth. A novel solution to circumventing the issue is to chalk out a detailed pricing strategy. Short and mid-term pricing tactics that were adapted to insights and consumer behavior helped the company to leverage through smaller and bigger pricing strategies.

Our consultants also helped to draw the attention of the company towards white spaces untouched by other competitors in the market such as organic foods with a distinct flavor and smaller pack sizes for on-the-go consumption.

  • Precise, data-driven RGM-  Our consultants are ardently looking at the fast pace of data-driven, advanced analytics such as phone location data, surveys of longitudinal purchases, and machine learning to garner insights that were previously purported to be inconceivable.

These insights yield granular data on which areas and channels will yield larger profit pools. Our clients can then strategize on a continuous influx of RGM strategies and activities that target niche product segments.

For instance, a consumer goods company wanted to leverage its revenues through the use of promotional campaigns. While some of the campaigns proved to be highly effective, garnering loyal customers, a part of it actually eroded the company’s value proposition by offering low prices and incentives to a customer base that could have been ready to pay a higher price.

However, with the help of smart analytics, Fatpos Global’s consultants helped the company to design a unique approach and understand customer buying patterns. These included data points such as loyalty cards garnered, data at the point of sale, etc. This helped us ascertain the impact of any kind of promotional activity.

Optimization models were rigorously tested and tried to determine an ideal blend of promotional activity that would boost sales and profitability. The targeted audiences were new customers and light users. The insights achieved were so beneficial that they were also given to some of the company’s key retail partners thus helping boost its relationships with them.

Success factors for RGM include top-notch team commitment, a centralized team that is extended the best support to drive action, and consistent cutting-edge communication between all the stakeholders. Having RGM teams in key markets at the time of introduction and implementation is key to the sustainable impact of strategies and capability building


Using Hypothesis Testing as a Revenue Generation Strategy

Our hypothesis-driven revenue generation strategies are offering seemingly limitless possibilities to management consulting firms. These are helping companies that are riddled with cash flow challenges.

Within the framework of a consulting interview, using hypothesis testing effectively helps management consultants to make a well-informed guess and brainstorm possible solutions to the client’s problem.

Hypothesis testing thus helps to arrive at a start point and then sequentially progress to an endpoint. So if a client comes with a complex problem with causes as A, B, C, D, and E, hypothesis testing paves the way for each cause to be analyzed. Data is gathered to see if it is correct and each cause is sequentially tested.

Depending on the data gathered from each cause, a new hypothesis is either formulated, revised or more data is dug up. For instance, a client, a shoe manufacturer has been experiencing reduced profitability for some time. A non-hypothesis driven approach would entail a conversation with stakeholders encompassing any of the following:

  • Has there been a reduction in the client’s customer base?
  • Has there been a decrease in the client’s market share?
  • Had there been an increase in company costs and overheads?

The analysis revealed to us that the company had recently expanded and invested heavily in a new facility. However, due to less negotiating capabilities with its suppliers, the company experienced high costs. This process helped us to get closer to the challenges faced by the company but it is a haphazard approach as it lacks structure.

Approach using hypothesis testing will focus primarily on all revenue parameters to be able to detect key areas that are impacting profitability. If volume losses are not affecting revenue and bottom line then our consultants can next hypothesize on stiffer competition based on the data collected and analyzed. This allows both parties to adjust their hypothesis in accordance. A typical conversation with the client using this approach would be as follows:

  • Please provide data on sales volume…
  • Here it is. You will see that our production capacity has increased and so has volume...
  • Could you also provide me the requisite data on pricing dynamics and changes if any?
  • Prices have stayed stable for a while now...
  • I surmise the lack of profitability is not due to revenue and assume it is due to costs and other overheads. Yes, the fixed and variable costs have increased substantially over the last year. Here is the data for the same

While this is a mere example of what a hypothesis-driven approach looks like, it gives our firm an upper hand by providing clients with greater structure and clarity in order to solve complex profitability issues and speedily arrive at a solution.

Frameworks as a Potent Weapon in the Fatpos Global Consultant’s Toolbox

Most management consultant firms falter in their approach by haphazardly arriving at a solution in order to fix the problem. The problems that businesses face can be manifested in quantitative ways such as a decrease in sales. However objectively looking at it, it can be symptomatic of a deeper qualitative factor such as the existing company culture.

Issue Tree Analysis

The use of an issue tree analysis as a framework is enabling our finance consultants to actually pinpoint the root cause that has led to the problem at hand. Issue tree enables consultants to cull out other factors that have had a secondary effect on the company’s financials and sales figures.

The framework used for issue trees is called the MECE (mutually exclusive collective exhaustive) where all data is collected and broken down in an exhaustive manner right down to the smallest segments.

This approach helps to isolate niggling financial problems while analyzing income statements. Profitability can be restored by isolating the factors that have undermined performance. For instance, if sales have dropped due to severe price cutting in one specific geographical region, proactive efforts can be made to push forth revenue growth in this region

Analysis through Funnels

It’s imperative to prepare a map of the conversion steps at the time of purchase by customers. It is a practical and useful framework to identify pain points during any quarter when sales dropped.

Cost Segmentation

This procedure helps to formulate techniques used to reduce overall costs and increase margins. Our consultants help businesses to build categories of various costs incurred on the business. The method usually uses a four-tiered system as below:

  • Unavoidable costs that are necessary for the company to function such as the requisite registrations and licenses

  • Costs incurred for conducting business as usual such as rent, lighting, water, etc.
  • Competitive differentiator or the secret sauce to stay in the game such as a key designer who helps the company to gain a competitive advantage
  • Costs that serve no purpose like redundant software which isn’t helping assist sales

Returns Incurred on Talent Acquired

Fatpos Global’s management consultants also do talent audits and appraisals by scrutinizing the role of the staff for a pre-determined business line. This helps to ascertain if the company is hiring staff that is undeserving or whether some portfolios in the company are excessively bloated.

Mapping the staff that is being hired helps companies to cut costs in business units that require correction. This is especially true in back office roles which are not serving more than one or two functions for the company.

Balance Sheet Appraisal

When the broader financial health of a company needs to be ascertained, issue trees can be successfully used to incorporate balance sheets. Here frameworks used such as the DuPont analysis tool in amalgamation with balance sheets and income statements help to ascertain how much leverage a company has in terms of return on equity (ROE).

The metric of ROE is important for management consulting firms to assess a company’s financial health especially in industries such as banking. Most banks on the face appear to be profitable. However, when we systematically use a DuPont issue tree for analyzing the similarities between balance sheets and the bank’s income statement, it helps to uncover lower returns on equity even if profits may have risen. Our firm in such a scenario would recommend that the bank retrenches from certain areas to spike its ROE.

Cash Conversion Cycle as a Metric

This is a formidable metric used not only by our management consultants but also by money lenders of a business. The metric if correctly used can be used to gauge how quickly a bank can turn its operations into liquid cash. With longer life cycles, checks can be put in place to enhance liquidity and reduce negative implications on business. A simple formula has been instituted to calculate the cash conversion cycle:

Cash conversion cycle = outstanding inventory of a day + outstanding sales of a day – outstanding payable of a day

Business consultants along with the company’s stakeholders can help to regulate cash inflow and revenues and gauge liquidity positions thus being in better control of profitability.

Creation of Canvases for a Business Model

These canvases are used by our consultants as tools to get qualitative insights on operational aspects of a company that could impact the bottom line. These give a bird’ eye view of current operations to assess for viability, an exercise which companies rarely touch upon while writing their initial business plan.

These include key partners and external stakeholders that are providing assistance to the business model. We determine what are the company’s most valuable assets without which it cannot excel? For instance, an important patent. Important activities that help the company to flourish are also factored in.

Relationships with customers and value propositions help to explain in a succinct manner why customers are drawn to the business. Cost structure and revenue streams are deep-dived into to see how the company makes money.

This exercise helps to uncover potential red flags. Consultants at the helm can then devise plausible solutions to counter these. One such example is fallacies in the company’s initial value proposition owing to which the company’s financials have gone awry. Thus a new focus on tweaking the plan can be achieved.

Conclusion and Summary

Management consultant companies are striving to achieve continuous innovation in the field of revenue generation which is often extremely hard to achieve. Consultants have to stay abreast of the latest technological innovations. Stagnation of products and services can make the pursuit of an aspiring management consultant firm less attractive to businesses.

An example of this is Yahoo. The company previously staked nearly 20% of sales in online advertising. Due to a lack of expertise in harnessing innovative best practices, the market share of the company steadily spiraled downward. Today, the company is barely managing to stay afloat with fierce competitors such as Microsoft, Google, and Facebook.

Management consulting companies such as Fatpos Global are striving to create unique solutions to achieve scalable results for businesses. In our quest to create a second generation of loyalists we strive to better business functionalities, lower costs and improve profitability.