New Responsibilities for Consultancies
It is interesting to reflect that only two years ago, many industry watchers and partners in the large consultancy firms were beginning to wonder where, as an industry, management consulting was going. Lay-offs, particularly in the weakening ERP sector, had already begun. The two key growth areas—complexity and knowledge management—had failed to produce the lengthy and lucrative projects found in the quickly evaporating ERP market, and there seemed nothing ahead except piecemeal systems upgrade work and minor business process improvement projects to sustain an industry bloated with thousands of young generalists and heads-down technical specialists. Then, to everyone’s relief and to many consultancies’ total surprise, e-business in all its forms exploded onto the business scene.[7]
The very fact that nearly every consultancy now markets itself as “leading” and “thoroughly experienced” practitioners of e-business should be a cause for concern. After all, taken up by the sheer energy of the media blitz surrounding e-business, it is easy to forget that only three years ago, the Internet, online sales, e-procurement portals, and online trading communities and auctions were totally alien to most consultancies’ experience.
Yet, as nearly every consultancy attempts—through ever-creative marketing—to convince customers that they are uniquely qualified to help an organization with creating and implementing an e-business strategy and infrastructure, it is important to realize that transforming an organization from a bricks-and-mortar business to an extended, electronically integrated enterprise is as revolutionary as the nature of e-business itself, and in many ways far more difficult than implementing an ERP system. It is certainly more complex than simply creating a Web page or browser. Of course, the chickens are just now coming home to roost, and at the time of press, the share prices of the top 15 listed Internet consultancies have dropped as much as 90% since their phenomenal highs during the dotcom craze. They have laid off, as an industry group, more than 3,000 employees, and more are likely to go in the near term. There are many lessons to be learned (one is, don’t bet your company on fees to be repaid by insolvent dotcom start ups).
In order to help organizations successfully make this transition to e-procurement, consultancies will need to provide sophisticated, impartial, well-informed advice, and will need to take on new levels of responsibility for their recommendations. In short, they need to do what they failed to do with ERP. Unfortunately, as many organizations are already finding out, despite the fact that nearly every consultancy boasts the ability to provide a full-service e-business offering, in most cases these consultancies are severely overselling themselves. Moreover, the industry (and in fact the economy as a whole) is woefully short on the specific skills in e-procurement software implementation and large-scale transition change management that are now necessary in order to help companies make this important transition. The majority have only one or two areas of specialty focus and often a limited capacity to advise on or implement even a basic level of business process or organizational change. Unfortunately, the software providers themselves, although they know their products well, seldom will enter into the realm of advice at the level required to rethink and optimize an entire procurement process.
In fact, the complexities involved in designing and implementing an e-procurement strategy effectively is something for which the vast majority of consultancies simply are not prepared. This is something that every client should think about and economists should note, because the success of individual businesses, and ultimately, the increases in productivity necessary to sustain our current level of growth in the manufacturing area and in the economy as a whole is dependent in no small way upon the ability of consultancies to help organizations through this challenging transformation.
Accordingly, there are several basic things that you can do to help mitigate the risk that comes from overdependency on consultants.
Make certain that you do not cede overall responsibility for the success of the project to any one consultancy. Even if a large and ambitious consultancy promises to be the “general contractor” for the initiative (often a good idea), there is no substitute for client-sponsored program management supported by a well-informed and involved executive steering committee. Too often, after a brief enthusiastic blessing of the project, executives retreat from active participation, leaving a well-intentioned but politically less powerful project manager to run with the project and deal with the many risk and change issues that will arise. Invariably problems develop that are beyond the project manager’s power to resolve, leaving them to try to keep the issues under wraps or fearfully bringing one-off issues for resolution back to an ill-informed and impatient executive group.
Many of the most successful projects have therefore appointed a strong internal program manager, who, as the deputy to the CEO, is seen as the person responsible (after the CEO) for the success of the overall initiative. Remember that program management skills (enterprise-wide management of multiple projects) are often very different from project management skills (focused on the success of one separable segment—a project—of the overall initiative) and require a different personality and a different level of political clout. A program manager should be able to garner wide support within the organization and have the presence to engage other executives on equal terms.
Give both technical and business process and change aspects of the program equal weight by appointing technical and nontechnical project managers who report directly to the overall program manager. The technical project manager should be responsible for all MIS-related matters; the nontechnical project manager should oversee all business process and change management initiatives. Though it is often valuable to also have outside consultants with “shadow” positions in these areas, these two key people should be from your own company and should be responsible for resolving inter-consultancy conflicts and for driving the project forward in a balanced way. They will be the operational-level managers of the entire program.
Finally, make certain that you come to agreement with the outside consultants early on as to a plan for integrating their activities with those of the many other participants involved. There will be a scramble between any consultants worth their salt for control over key aspects of the project. Help them to clearly outline their proposed approach, including activities and named resources, before you begin the project. Clarity as to specific roles, responsibilities and deliverables is essential.
The fact is, as promising and revolutionary as e-procurement is, it will mean new challenges to businesses and consultancies alike. In order to avoid the pitfalls of the ERP era, consultancies will have to truly provide—rather than just pay lip service to—a full solution, or else learn to collaborate with other specialty and niche providers. Because e-procurement initiatives by their nature are enterprise-wide and dependent upon critical changes to business processes, consultancies will need to develop the ability to integrate business process and change management into their offerings much more successfully than they have in the past.
Client organizations, for their part, will have to learn to take more responsibility for the overall success of projects, helping to provide a collaborative forum for multiple consultants without ceding full authority to any single group. Because of the strategic nature of e-business (particularly with direct materials), and because of the inability of most consultancies to provide a full-service offering, it is likely that organizations will find themselves increasingly taking on a much more active role as program managers and coordinators. This, when combined up front with honesty and clarity from consultancies on what services they can and cannot provide, will make a client’s new-found role as catalyst and consultant manager much easier and more successful.
Finally, don’t forget the lessons of the past and allow your e-business project to once again drift toward a purely technical implementation. One of the unavoidable facts of modern business life is that business, change management, and technical specialists seldom work and play well together (even within the same consulting firm, let alone among competing ones). Civil war within your project can be best avoided by structuring a project approach that retains program management authority internally and gives equal weight to both technical implementation and business change.
After all, neither side—consultants or clients—can afford a déjà vu of ERP.