Consulting is one of the most attractive graduate careers, but not many students understand what consultants do on a day-to-day basis. This lack of understanding is partly a result of the broad scope and varied nature of the job.
Corporate bankers value companies, lawyers draft documents, accountants count things, while consultants "solve their clients' problems". This could mean anything from increasing the operational efficiency of a UK animal tagging company, to helping a newspaper monetise its online operations, to cutting costs in a global retail bank based in Asia.
So consultants are not necessarily distinguished from other professionals by the content of the work they do - rather, their differentiating factor is how they approach problems.
When given a case, consultants follow a "Structured Thinking" approach, which can be broken down into five steps. This article will shed light on each one.
1. Understand the client's industry
Consultants are tasked with a wide variety of projects, so often need to build up a solid knowledge of the industry, client and function they're working with each time they start working on a new case.
Consultants need to understand how the relevant industry works and what competitive advantage their client has within it in order to be able to get into the details of the problem.
For example, without understanding how a commercial broadcaster makes money it would be hard to advise them on whether they should sell or keep their production studios. Or without understanding what drives media companies it would be hard to advise whether or not to put a paywall on a newspaper's website.
Sources consultants use to understand industries and clients
Industry reports such as Mintel, Keynote, Euromonitor or Verdict Retail reports
Analyst and brokers' reports on listed companies
General press coverage via Factiva searches, such as in the Financial Times or the Wall Street Journal
Specialist press coverage, such as in Retail Week or Broadcasting Times
Internal knowledge management systems, which will have on file past cases from relevant industries and clients.
Colleagues and experts who have worked on similar industries, clients or problems
2. Identify key questions and establish key hypotheses
Consultants are tasked with answering big questions such as "How as a newspaper we can make money from our website?" or "How as a national airline can we attract international customers?"
Such vast questions need to be broken up into smaller parts and structured to ensure that all aspects of the problem are covered and that the solution is found "without boiling the ocean" - that is, in the most efficient way.
The key to successfully planning your work as a consultant is identifying the right questions (making sure you're aligned with client's thinking). This very basic beginning helps you to focus your efforts and provides a framework for structuring your future analyses. It's also important to establish some quantified hypotheses early on.
Hypotheses consultants might make
Taking again the case of the newspaper aiming to make money on its website, our hypotheses could include:
"We'll earn £Xm of revenue by charging users a subscription fee."
"We'll earn £Xm of revenue by offering users additional e-commerce services."
"We'll earn £Xm of revenue by placing more ads."
3. Structure your work to verify your hypotheses
Once you have a set of hypotheses, you need to structure them to ensure that your planned workflow answers the problem exhaustively.
Consultants use many different frameworks for structuring their work. One of the most helpful is the Pyramid Principle. When following the Pyramid Principle, each statement has to support the main conclusion, which is then divided into issues and subissues.
There are three key principles to bear in mind when putting your ideas into a Pyramid. First, ideas at any level in the pyramid must be summaries of the ideas grouped below them. This will ensure logic of your answer and exhaustiveness of your supporting statements.
Second, ideas in each grouping must always be the same kind of idea - for example a grouping concerned with revenue or a grouping concerned with cost.
Finally, ideas in each grouping must always be logically ordered - for example, by chronology or by importance. Such ordering will ensure that your problem framework will have no overlaps and will be exhaustive.
Other common ways that consultants structure a problem
Note that all frameworks should be of be the right logic and design - for example, don't use an organisational structure as a framework when you're looking at process.
Value Chain Analysis: Breaking down the workflow in an organisation to establish revenue/value generated by each of the parts.
Financial frameworks: Analysis on the basis of finance - for example, profit = revenue (quantity sold x price per unit) - cost (quantity bought x cost per unit).
SWOT analysis: Used to identify strengths, weaknesses, opportunities and threats at a business.
Porter's Five Forces: Used for modelling the attractiveness of a business or industry.
4. Identify tasks/timings
Next, you can define the tasks and research that need to be done to verify your hypotheses. For each of these statements, consultants consider what they need to do to confirm their assumptions.
The next step is to agree as a team priorities and timings for completion of each section of the analysis. A useful tip is to work backwards from key milestones such as a team meeting with the partner involved. It's also crucial to check in at this stage with the client to ensure they're happy with the direction of the work.
The data a consultant might need to analyse
For example, in order to back up the assumption that only a minority of users will be willing to pay for a newspaper's content online, consultants might:
Do a customer survey.
Analyse available information about a competitor's payroll.
Talk to an expert to get their opinion.
5. Produce your final report
The final step is to perform your analysis and get your results. This part of the project is about research output and clear communication of the findings to the client. As an entry-level consultant, you'll be focused on this section of the workflow.
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