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Ex-consultant turned founder here. Think productized consulting services are really interesting as a business for three reasons: 1) consultants are traditional

Ex-consultant turned founder here. Think productized consulting services are really interesting as a business for three reasons: 1) consultants are traditionally really expensive (as a 23-year-old, non-technical little shit, my firm would bill the client at $200+/hr), so as a result we could only be there for a few months. We'd come in, make things better, and then were gone. So within a few months afterwards, things went back to the way they were (aka a disaster). Productized consulting services, on the other hand, are generally cheap enough to be perpetual. 2) Businesses generally suck at executing the consultant's recommendations. We'd provide really rich data and detailed action plans to clients -- and this powerpoint printout they paid a ton for would just sit on the desk or on the shelf. It was frustrating. But other client priorities would get in the way. At best, someone would half-ass our plan. 3) Consulting is a machine; 80% of what you do is the same for all clients. We're taught to search internal databases for past work and frameworks before doing anything from scratch. For that reason, it actually lends itself really well to automation.

davemel37 11y ago
> 80% of what you do is the same for all clients. This is a crucial insight because information asymmetry forces you to pay a premium for that 80% that can be systematized or worse, pay a low price for that 80% and end up getting the lowest quality work on the 20% that needs deep expertise. This leads to adverse selection or overpaying... I read somewhere about travel agencies and how the low end work like booking hotels and cars was replaced by websites, but the more complicated travel services like planning a vacation are still sourced to travel agents. Hopefully every industry would move towards an environment where you can pay a premium for the part that needs expertise and pay fair market value for the part that can be systematized or reliably sourced for less.
- aaroncohn 11y ago
  > Hopefully every industry would move towards an environment where you can pay a premium for the part that needs expertise and pay fair market value for the part that can be systematized or reliably sourced for less. That's a great insight. I hope that's where things are moving!
  - davemel37 11y ago
    I can't take credit for that insight. It is a relatively common theory if you research information asymmetry.
mdorazio 11y ago
I believe you're referring specifically to management consulting. There are many consultants outside the McKinsey/Bain/BCG ecosystem who work specifically on execution rather than just recommendation, at manageable rates to clients. For example, the consultancy I work for primarily works on longer-term software/strategy/change implementation, staffed by people who have been around the block a few times.
- exelius 11y ago
  The consulting work he is referring to is rapidly disappearing. Mostly because the big global consulting firms are execution-focused, and they're essentially willing to give away the recommendation work for free as part of a bid for the execution work. Buyers caught on, and realized that instead of hiring McKinsey, all they really needed to do was issue an RFP for the implementation and they would get what they needed. McKinsey/Bain/BCG have had to branch out to other types of work as a result.
  - aaroncohn 11y ago
    Yep, agree with you that pure "strategy" is rapidly disappearing. I was at PwC -- their whole mantra was "strategy through execution." Which is why they bought all these strategy shops (Booz/Diamond/etc), because clients were saying they were sick of Bain/McKinsey/BCG leaving them with strategic plans they couldn't execute on. Deloitte is pursuing much of the same, evidenced by the Monitor acquisition. And now EVEN the Big 3 MBB strategy shops are getting into the execution side of the game to compete.
    - exelius 11y ago
      Yep; though for the purposes of consulting you have to consider the pure execution shops as well (Accenture, Infosys, etc.) Those guys are throwing in strategy for free as well; albeit with a different model (they just hire ex-McKinsey/Bain/BCG partners to sell big projects for them, which often includes doing any strategy work that needs to be done up front). Scale will win since consulting (and the larger professional services market) has both huge network effects and huge economies of scale/scope; so I'd look for the consolidation trend to continue and the "big 3" strategy shops to either merge with or form a close alliance with the remaining "big 4" professional services firms (PwC and Deloitte have seen such a boost in consulting revenue from the network effects with their tax and audit practices that ENY and KPMG will be expanding consulting soon as well). There's too much overlap in the overhead functions (travel management, billing, finance, HR, training, branding, etc.) of any professional services business.
exelius 11y ago
You sound like a consultant who didn't like the relationship aspect of the business. 1) This is true; consultants are very expensive. But the $200/hr you're paying for the 23-year-old little shit also has to cover all the hours the partner with 30 years of relevant, awesome experience he can't bill against because he's too busy fixing the little shit's messes all day. It's a leveraged model; the guys at the top have the relationships and experience, while the guys at the bottom have energy and ambition that impress the client. But on the flip side, I've also had enough clients burned by productized consulting services that they avoid them in general. Quality control is hard, even in the consulting world, which is why brand perception and relationships matter so damn much. 2) Relationships are everything. Management consultants are valuable exactly because they can help you solve #2 above: we make recommendations as to what you should do, then we sell you the follow-on work to actually do it for you (or at least train up a team inside your company on it). With "productized consulting as a service" you don't have the relationships, and you don't have a pipeline to win those relationships. 3) Maybe in strategy consulting (which is disappearing now anyway because it was always of dubious value); but in the management consulting world, 80% of what you have to do is understand what the client wants to accomplish. Once you have done that, you can go and take a deck that you already have, change a few things, and you're good to go, but getting there is the hard part. I can't tell you how many projects I've sold where what we eventually sold the client was something totally different than what they asked for initially. But this last paragraph is why consulting will never go away (because it's what a consultant will tell a VP with budget after he's built up a rapport): Ultimately, "productized consulting services" are simply shared services for small businesses. They come with all the ups and downs associated with shared services, and as such are not appropriate for every company. Might I suggest a short consulting engagement to identify areas where a shared services cost reduction plan might be effective?
- aaroncohn 11y ago
  Au contraire! I loved the relationship aspect of the business. Drinks with the client? Sure! Big fancy dinners? Yes pls. Talking to them about their kids? Too easy ;) That said, all that relationship was sorta BS stuff the client was paying for, but didn't really deliver value, ya know? To your point #1, fair, although partners are really just glorified sales guys selling a really expensive service. And the leveraged model you describe, while true, perfectly illustrates the massive inefficiencies in consulting. To #3, ehh, all the clients kind of want the same thing. More money! More customers! New products with big new markets! I don't agree that they're all a unique, delicate flowers that all want vastly different things. I think this illustrates what you're getting at though, so we may have to agree to disagree: https://blogs.perficient.com/spark/files/2011/07/treecomicbig.jpg https://blogs.perficient.com/spark/files/2011/07/treecomicbi...
codeulike 11y ago
I think you're misundestanding what Management Consultants are for. They're not for advice, they're for whichever executive hired them to get their way by receiving an expensive report that tells them to do the thing they wanted to do anyway. Executive can then fail to do the thing, and not take the blame. Its a very useful service, and being expensive is a very important part of the package. These productized things look like they actually _do_ something, which puts them in a completely different product space. (source: worked for one of the big six, back when there were six of them)
- exelius 11y ago
  Yep, never underestimate the power of CYA... Also, depending on the company, most consultants can be paid for out of CapEx (depending how you word the contract), but you'd have a hard time convincing accounting that a SaaS service billed periodically is anything but OpEx...
  - aaroncohn 11y ago
    CYA...cover your ass...always top of mind for Mr. Big Business Executive over there!
- aaroncohn 11y ago
  Hah yes -- consultants do get paid a lot to make decisions on behalf of executives who don't want to. Or more specifically, ones who don't want to be blamed if it doesn't go well. A former colleague once quipped, "no one ever got fired for hiring McKinsey." That said, making decisions is EXACTLY where productized consulting services get interesting. I have a productized workplace happiness service (https://worknice.co https://worknice.co), and a massive part of the value is that the AI has the authority to make decisions for the client (granted, they're not big strategy decisions; it's more like whether we should bring puppies to the office or have a wine & cheese night). Tl;dr no one at a company likes making decisions because they don't want to be blamed if it goes bad. But AI built into productized consulting services can potentially make decisions, taking it off the humans' plate, and that's capturing the same value consultants provide.
MattRogish 11y ago
We do productized DevOps/platform consulting (at reactiveops.com) and I totally concur with the above. We started the company to productize AWS DevOps platform engineering (aka giving your your own mini heroku on your own AWS) which has proven to be very popular. Most companies don't/shouldn't hire a "DevOps Engineer" but do because there isn't a off-the-shelf solution for these things. And, there are economies of scale/network/platform effects in having our entire team building a thing that your one or two person team can't do. Tips if you're going to do this: 1) Get a IP-protected MSA to begin with. You'll need to pay a lawyer a lot of money to get it right because most MSAs are work for hires. Get one that says you own all the IP and can re-use it, and your clients get a perpetual, non-exclusive license - otherwise you'll build a product and then realize later that clients from two years ago actually own the core IP of your multi-million dollar product. Makes due diligence (either fundraising or acquisition) stressful. 2) Build in time to work on product. If you're selling yourself at 40hr/week, there's precious little time to effectively funnel your work back into a cohesive product. Take a page from Thoughtbot and work 4 day weeks, have that 5th day be refactor and integration into your main product day. 3) Test, test, test Your consulting clients are a perfect test bed for you to lean-startup your way into your product. Experiment, experiment, experiment. You'll get great feedback and iterate your way to something that profitably, already, has product-market fit. 4) Have fun! Productized consulting is much more painful than getting a check for a few million dollars and building a team. You grow organically, incrementally, and it can be tough to realize "we're n-months away from MVP but at 1 day a week that's 6 years!". It does require a certain sense of "it'll get there" but it also really encourages you to cut scope ruthlessly, because given the little bit you can work on it, you'll never get there.

davemel37 11y ago

> 80% of what you do is the same for all clients. This is a crucial insight because information asymmetry forces you to pay a premium for that 80% that can be systematized or worse, pay a low price for that 80% and end up getting the lowest quality work on the 20% that needs deep expertise. This leads to adverse selection or overpaying... I read somewhere about travel agencies and how the low end work like booking hotels and cars was replaced by websites, but the more complicated travel services like planning a vacation are still sourced to travel agents. Hopefully every industry would move towards an environment where you can pay a premium for the part that needs expertise and pay fair market value for the part that can be systematized or reliably sourced for less.

aaroncohn 11y ago
> Hopefully every industry would move towards an environment where you can pay a premium for the part that needs expertise and pay fair market value for the part that can be systematized or reliably sourced for less. That's a great insight. I hope that's where things are moving!
- davemel37 11y ago
  I can't take credit for that insight. It is a relatively common theory if you research information asymmetry.

mdorazio 11y ago

I believe you're referring specifically to management consulting. There are many consultants outside the McKinsey/Bain/BCG ecosystem who work specifically on execution rather than just recommendation, at manageable rates to clients. For example, the consultancy I work for primarily works on longer-term software/strategy/change implementation, staffed by people who have been around the block a few times.

exelius 11y ago
The consulting work he is referring to is rapidly disappearing. Mostly because the big global consulting firms are execution-focused, and they're essentially willing to give away the recommendation work for free as part of a bid for the execution work. Buyers caught on, and realized that instead of hiring McKinsey, all they really needed to do was issue an RFP for the implementation and they would get what they needed. McKinsey/Bain/BCG have had to branch out to other types of work as a result.
- aaroncohn 11y ago
  Yep, agree with you that pure "strategy" is rapidly disappearing. I was at PwC -- their whole mantra was "strategy through execution." Which is why they bought all these strategy shops (Booz/Diamond/etc), because clients were saying they were sick of Bain/McKinsey/BCG leaving them with strategic plans they couldn't execute on. Deloitte is pursuing much of the same, evidenced by the Monitor acquisition. And now EVEN the Big 3 MBB strategy shops are getting into the execution side of the game to compete.
  - exelius 11y ago
    Yep; though for the purposes of consulting you have to consider the pure execution shops as well (Accenture, Infosys, etc.) Those guys are throwing in strategy for free as well; albeit with a different model (they just hire ex-McKinsey/Bain/BCG partners to sell big projects for them, which often includes doing any strategy work that needs to be done up front). Scale will win since consulting (and the larger professional services market) has both huge network effects and huge economies of scale/scope; so I'd look for the consolidation trend to continue and the "big 3" strategy shops to either merge with or form a close alliance with the remaining "big 4" professional services firms (PwC and Deloitte have seen such a boost in consulting revenue from the network effects with their tax and audit practices that ENY and KPMG will be expanding consulting soon as well). There's too much overlap in the overhead functions (travel management, billing, finance, HR, training, branding, etc.) of any professional services business.

exelius 11y ago

You sound like a consultant who didn't like the relationship aspect of the business. 1) This is true; consultants are very expensive. But the $200/hr you're paying for the 23-year-old little shit also has to cover all the hours the partner with 30 years of relevant, awesome experience he can't bill against because he's too busy fixing the little shit's messes all day. It's a leveraged model; the guys at the top have the relationships and experience, while the guys at the bottom have energy and ambition that impress the client. But on the flip side, I've also had enough clients burned by productized consulting services that they avoid them in general. Quality control is hard, even in the consulting world, which is why brand perception and relationships matter so damn much. 2) Relationships are everything. Management consultants are valuable exactly because they can help you solve #2 above: we make recommendations as to what you should do, then we sell you the follow-on work to actually do it for you (or at least train up a team inside your company on it). With "productized consulting as a service" you don't have the relationships, and you don't have a pipeline to win those relationships. 3) Maybe in strategy consulting (which is disappearing now anyway because it was always of dubious value); but in the management consulting world, 80% of what you have to do is understand what the client wants to accomplish. Once you have done that, you can go and take a deck that you already have, change a few things, and you're good to go, but getting there is the hard part. I can't tell you how many projects I've sold where what we eventually sold the client was something totally different than what they asked for initially. But this last paragraph is why consulting will never go away (because it's what a consultant will tell a VP with budget after he's built up a rapport): Ultimately, "productized consulting services" are simply shared services for small businesses. They come with all the ups and downs associated with shared services, and as such are not appropriate for every company. Might I suggest a short consulting engagement to identify areas where a shared services cost reduction plan might be effective?

aaroncohn 11y ago
Au contraire! I loved the relationship aspect of the business. Drinks with the client? Sure! Big fancy dinners? Yes pls. Talking to them about their kids? Too easy ;) That said, all that relationship was sorta BS stuff the client was paying for, but didn't really deliver value, ya know? To your point #1, fair, although partners are really just glorified sales guys selling a really expensive service. And the leveraged model you describe, while true, perfectly illustrates the massive inefficiencies in consulting. To #3, ehh, all the clients kind of want the same thing. More money! More customers! New products with big new markets! I don't agree that they're all a unique, delicate flowers that all want vastly different things. I think this illustrates what you're getting at though, so we may have to agree to disagree: https://blogs.perficient.com/spark/files/2011/07/treecomicbig.jpg https://blogs.perficient.com/spark/files/2011/07/treecomicbi...

codeulike 11y ago

I think you're misundestanding what Management Consultants are for. They're not for advice, they're for whichever executive hired them to get their way by receiving an expensive report that tells them to do the thing they wanted to do anyway. Executive can then fail to do the thing, and not take the blame. Its a very useful service, and being expensive is a very important part of the package. These productized things look like they actually _do_ something, which puts them in a completely different product space. (source: worked for one of the big six, back when there were six of them)

exelius 11y ago
Yep, never underestimate the power of CYA... Also, depending on the company, most consultants can be paid for out of CapEx (depending how you word the contract), but you'd have a hard time convincing accounting that a SaaS service billed periodically is anything but OpEx...
- aaroncohn 11y ago
  CYA...cover your ass...always top of mind for Mr. Big Business Executive over there!
aaroncohn 11y ago
Hah yes -- consultants do get paid a lot to make decisions on behalf of executives who don't want to. Or more specifically, ones who don't want to be blamed if it doesn't go well. A former colleague once quipped, "no one ever got fired for hiring McKinsey." That said, making decisions is EXACTLY where productized consulting services get interesting. I have a productized workplace happiness service (https://worknice.co https://worknice.co), and a massive part of the value is that the AI has the authority to make decisions for the client (granted, they're not big strategy decisions; it's more like whether we should bring puppies to the office or have a wine & cheese night). Tl;dr no one at a company likes making decisions because they don't want to be blamed if it goes bad. But AI built into productized consulting services can potentially make decisions, taking it off the humans' plate, and that's capturing the same value consultants provide.

MattRogish 11y ago

We do productized DevOps/platform consulting (at reactiveops.com) and I totally concur with the above. We started the company to productize AWS DevOps platform engineering (aka giving your your own mini heroku on your own AWS) which has proven to be very popular. Most companies don't/shouldn't hire a "DevOps Engineer" but do because there isn't a off-the-shelf solution for these things. And, there are economies of scale/network/platform effects in having our entire team building a thing that your one or two person team can't do. Tips if you're going to do this: 1) Get a IP-protected MSA to begin with. You'll need to pay a lawyer a lot of money to get it right because most MSAs are work for hires. Get one that says you own all the IP and can re-use it, and your clients get a perpetual, non-exclusive license - otherwise you'll build a product and then realize later that clients from two years ago actually own the core IP of your multi-million dollar product. Makes due diligence (either fundraising or acquisition) stressful. 2) Build in time to work on product. If you're selling yourself at 40hr/week, there's precious little time to effectively funnel your work back into a cohesive product. Take a page from Thoughtbot and work 4 day weeks, have that 5th day be refactor and integration into your main product day. 3) Test, test, test Your consulting clients are a perfect test bed for you to lean-startup your way into your product. Experiment, experiment, experiment. You'll get great feedback and iterate your way to something that profitably, already, has product-market fit. 4) Have fun! Productized consulting is much more painful than getting a check for a few million dollars and building a team. You grow organically, incrementally, and it can be tough to realize "we're n-months away from MVP but at 1 day a week that's 6 years!". It does require a certain sense of "it'll get there" but it also really encourages you to cut scope ruthlessly, because given the little bit you can work on it, you'll never get there.