When I was a graduate student in the 1990s at Harvard, a disproportionate number of students in the sciences were actively preparing themselves for jobs in the management consulting industry. They were being hired en masse by the most prestigious consulting firms in the world, not for their technical acumen (although many of them held PhDs in the sciences), but for their intellectual flexibility. Back in those days, a consultant was expected to be a highly analytical generalist, with the ability to apply an ivy league education to virtually any business problem. They did so with a series of templates and rubrics that had been honed to perfection over decades by the brightest minds in Boston, London, New York, and San Francisco.
That model works great if you have large scale, general challenges. These are important Fortune 500 problems. Which of my 87 business units should I divest in order to maximize my EPS? What functions across my 17 most recent acquisitions are redundant, and where can I achieve SG&A synergies without impacting business performance? Hiring talented generalists will deliver excellent ROI in cases like these. Those wunderkind will take apart problems like these, work out rational and logical solutions, and deliver recommendations that will be approved, and possibly adored, by Wall Street.
Moving Beyond General Business Challenges
But what if the problem is not a general business issue but a specific regulatory challenge? Suppose you want to understand the steps needed to go to market with a medical device in China? Or, you are trying to assess the value of your technology in order to pitch investors? What if you need to understand the total serviceable market for your specific product in the country of Myanmar? On a more fundamental and immediate level, let’s suppose you just need to sign commercial contracts ASAP with 5 of the top 10 target customers in your industry?
Budgets in the modern business world are tightly managed, and ROI is expected to arrive quickly and impactfully. This pressure is more palpable for a small to mid-sized business, where cash flow is closely managed and quick results are not only desired but critical for survival of your business.
You can’t always execute a strategy that has a time horizon of three years—because you may be out of cash in 12 months.
While the need for expert advice may be greater, the likelihood that a large consulting firm is positioned to help is less. Time sensitive and highly focused challenges are generally outside the domain of most larger firms. In these cases, specialized advisory firms can work with you to ensure that your project is staffed with dedicated, subject matter experts that can deliver rapid results.
“We just need to generate revenue.”
When the need is immediate and the barbarians are at the gate, there is no substitute for bringing on talent that has a track record of success within your industry. Now is not the time to spend four months recruiting full-time talent in the open market or hiring a major consulting firm who proposes a 12 month deep-dive with a multi-million-dollar price tag. Both of those options are great if you have a long-term horizon, a big budget and low risk tolerance, but when the ship is listing and you need to make immediate forward progress, neither option is sensible. The ship will sink before your new hires relocate to your city, or before you receive your first binder full of charts from that big Boston firm.
A specialized firm can bring exactly the resources you need and staff the project with the right people. You need people that have been in the trenches within your industry and understand the dynamics of your market. You need to know that you’re entrusting your business future on the real-world experiential learnings your advisor brings to the engagement.
These are not “one-size-fits-all” consultants—they are subject matter experts with a practical track record of successfully doing exactly what you need done.
Recently, we worked with a small company that had reached the limits of their growth with their current customers; they wanted to expand by selling their products into Pharma, an adjacent market. While they had already been selling into a variety of other markets, their pharma “rolodex” was small, and they needed to connect with the right people to elevate their profile. We optimized their pharma value proposition within the first eight weeks and immediately put the sales team in front of the right customers. The team began selling right away, and the effort yielded over $7M in revenue during the first 12 months. This was a value inflection point for the firm, and their parent company committed new investments in order to fund the pharma market expansion effort.
A market study by IBIS World (May 2016) suggested that almost half of the customers surveyed wish to increase their use of consultants. However, the market for generalists (i.e. the big strategy consulting firms) appears to be cooling off, with modest CAGR of about five percent, while specialized consulting in the areas of diagnostics, pharma, and biotechnology is growing at more than twice that rate.
For those who consider advisors as compared to consultants, this is a validation of what our customers tell us every day. Companies operating in complex regulated markets, such as diagnostics and pharma, need specialized help in order to quickly execute and drive the most important metric there is in business: ensuring operational changes result in bottom line improvements.