Study: Management Consulting adds value to clients

10 November 2014

It is without a doubt the question that lies at the heart of the management consulting industry: do consultants actually add value to the businesses that hire them? On the one hand often criticised by executives and media for the high fees and PowerPoint approach to problem-solving, on the other hand acclaimed by many for the high-value delivered to complex challenges. A new study by the World Bank and Stanford University now provides some more science to the long standing debate. Based on a ‘consulting experiment’ they executed across 20 companies they conclude that consultancy does add value. So is it a fact now?

It has been an ancient practice to sell services that have, when it comes down to it, questionable added value. In one group, the sellers know their product will not help their mark, they trade off the ignorance and good will of their “customer”, consider here the predictions of the fortune teller or the profound but defunct wisdom of the sophists. In another group, the truth is greyer, the product may be beneficial, the party that sells their knowledge believes in what they do and intend to bring the benefits of their knowledge to their customers, even if they themselves handle from a profound ignorance, take as an example the 18th century medical practice of leaching to cure almost any ailment.

Management Consulting Cloud

Management consultants, in general, don’t belong to the first group, yet do they belong to the second? In recent years several attempts have been made to quantify the value of consulting, however the majority of research papers have either been unconvincing, or in some cases it remains questionable as to how ‘independent’ the analysis were.

In the UK, the best example at hand is a research conducted by the MCA in 2010, titled ‘The Value of Consulting’. The study was thorough, arguably the most comprehensive of its kind in the region – 1,800 public sector consultancy projects were assessed on client performance* and in-depth interviews were held with 30 clients. Based on a model, the representative body of the UK industry market concluded that management consultancies had created £56 billion of value to their UK clients in a single year. On average, the return for clients averaged £6 for every £1 spent, although the benefits in some best practice cases even increased to 20 times the costs involved in hiring consultants.

The Value of Consulting

Yet at the same time for outsiders and critics the key findings did not come as a real surprise. The MCA represents the industry and consulting firms, and has a clear interest in promoting the industry’s value. The report’s key message for government institutions – “think twice before reducing the use of consultants” – came in a period when the UK government was contemplating plans to cut excessive spending on consultants. “It is interesting that the sector still feels the need to justify its existence,” commented Professor Laura Empson, director of the Centre for Professional Service Firms at Cass Business School (London), at the time.

Does Management Matter?
In the recently released report ‘Does Management Matter?’, the World Bank and Stanford University embarked on answering the same question, with the key difference being that they can be deemed ‘independent’. To identify the value of management consulting the authors conducted an experiment at 14 large, randomly selected multi-plant textile firms in India**. These 14 companies received a five-month management makeover, executed by consultants from Accenture, and at the end of the road the profitability and efficiency of these revamped factories was compared with a group of six factories that continued doing business as usual.

Quick-Scan and Diagnostics - Implementation of improvements - Analytics and Business Case

The experiment consisted of three phases. The first phase involved providing management diagnostics for one month at all the plants, effectively an initial management-health check. In the second phased the fourteen participating factories received four months of management consultancy. For the most part, all was left status quo, but the old ways of working were upgraded based on 38 best practice management standards. Finally, in the third phase a follow-up evaluation was performed in all factories to assess the effectiveness of the intervention techniques.

The results were clear: management consultancy matters. Besides reduction in waste from defects and loss of inventory to poor storage, there were significant improvements in the operation of treatment plants. On average, the introduction of new management techniques increased productivity by 17%, translating in a $325,000 on average annual increase in profitability per plant. Given the $250,000 fee the consultancy reported it would have charged an individual firm for comparable services if it paid directly, it came down to a 130% one-year rate of return. In addition to first year economic benefits exceeded the cost of the consulting, the implementation of the techniques, over a period of years after the experiment, allowed the firms to expand their business further, boosting long-term benefits.

MCA - Stanford University - Accenture - The World Bank

Fact or not?
The results from the experiment highlight the value of implementing management principles and the use of consultants. On a positive note, the study was conducted by two renown independent institutions, and executed by a consultancy that is highly regarded in the field. Yet similar to any research, reservations can be made. The experiment was performed in India, in an environment where modern management knowledge was not well embedded and overall lags the maturity found in Western markets***. So would the experiment also hold in a different industry, or region? Or beyond the field of operations management? And in more mature, large companies? Going forward, one thing remains evident. The search for the holy grail of the consulting business continues.

* The MCA asked all its members (>50 consulting firms) to send their client satisfaction surveys. To ensure the validity of the research, firms were obliged to send complete sets of data: they were not allowed to pick only those where the feedback was positive.

** The firms were all family owned, had been operating for more than 20 years, and the firms had an average of 270 employees, placing them in the top 1% by employment for Indian manufacturing.

*** Prior to the experiment, the companies used only around 10 out of the 38 management best practices.


Accenture's push into the creative sector is an identity crisis

18 April 2019

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.