Internalizing Consulting Services
We have nothing against strategy consultants, but in our own collective experience many of them are “experts” on things they have never done themselves.
They will tell you what products you should develop, how to approach your customers and how to manage your people, yet they have never developed any successful product, don’t know your customers and never had to fire anyone.
We believe companies can make a bigger impact if they stop relying on strangers to run their businesses and instead move towards the “internalization” of their most critical consulting needs, especially when it comes to their strategy.
By internal consultants we mean top talent, employed full-time by an organization, entirely dedicated to researching the company, the markets where it operates and its competitors.
A group that develops case studies to deep-dive into critical subjects that matter to the company and its executives, to promote better understanding of the internal “mechanics” of the organization.
Don’t take our word for it – there are in fact many successful implementations of internal consulting teams, take a look at the following for example:
- Samsung’s Global Strategy Group
- IBM’s Global Business Services
- Deutsche Bank’s Group Management Consulting
- Cisco’s Corporate Strategy Office
- Google’s Business Strategy Googlers
- Siemens Management Consulting
All these are good examples of companies that have created internal groups to specialize in subjects that matter to the company and the executives.
These consultants will be experiencing first-hand what your people face every day, trying to keep a fresh perspective, bringing external insights and best practices to solving internal problems.
We argue that a team of top talent working as internal consultants could also be offered as external services to customers and vendors, helping foot the payroll bill along the way.
In fact, if your company outsources a lot of consulting work, developing an internal team fully dedicated to strategic matters might be a cheaper way to get the same work done.
With a good team of internal consultants, the external ones would only be used to validate the conclusions of your teams and provide feedback to them, build benchmarks on industry practices or to provide an independent view on certain matters.
Think about it this way. To get the most from external consultants you need to have the ability to challenge their work, and to do that you need people who understand the subject as well or even better than them, because otherwise they will shove boilerplate lingo and acronyms down your throat, and you have to take their word for it.
Therefore, if you agree that even to work with external consultants you need to develop internal talent to challenge what they do, then why not take the whole job over?
If you have to deep-dive anyway, why rely on external judgment to make important decisions?
There’s a reason why some of the CEOs that have delivered the most extraordinary results like Steve Jobs and Warren Buffett never used consultants for strategic decisions.
Here’s a tip not many people know about. There are companies out there like AlphaSights, Guidepoint
These are real experts working in their respective industries who will answer any question and give you their opinions on relevant topics for an hourly fee.
You don’t even need to reveal your name or your company’s. These are more like “blind dates” where you get to vet the prospects beforehand.
Think about all the information you can collect about the market from real field experts for a relatively insignificant amount of money, to develop your own internal knowledge base before making any important decision.
In fact, this is how many consulting firms get industry insights on the fly, so why not skip the middleman and go directly to the source?
Finally, there’s another downside of working with external consultants that you need to pay attention to: confidentiality. You must understand that good ideas are the currency of the consulting business, and most of their success is in bouncing the good ones around with their customers.
The ideas you discuss with consultants will most likely end up on other companies’ plates, in the same way that other companies’ ideas are ending up on yours, all catered by your favorite consulting firm.
This becomes a more sensitive matter if your strategy depends on a level of surprise or perfect timing to be effective. Strategy firms tend to commoditize business ideas over time, making them more predictable and less effective in some cases.
That doesn’t mean that you shouldn’t use external consultants, but they should only play a role that’s complementary to your internal insights, not central.
In the end, your strategy must be yours and not someone else’s, so instead of relying on strangers for things that matter to your organization, you must think about developing talent that you can trust and having them run that show.
Wu, Sun. Strategy for Executives, this book can now be downloaded for free here.
Bernholz, Malte; Teng, Andrew. Why and How to Build an In-House Consulting Team. Harvard Business Review blog. September 2015. URL: https://hbr.org/2015/09/why-and-how-to-build-an-in-house-consulting-team