What is Consulting? Part 1
These days, we’re in the golden age of consultants. Real estate consultants, used car consultants, mobile phone consultants—many professions now carry the title “consultant.” Broadly speaking, consulting means diagnosing and solving problems, which could make almost any job a form of consulting. This article, however, will specifically focus on management consulting.
This post was initially drafted to explain the field to a friend in the medical industry, so you’ll notice some analogies to hospitals and healthcare throughout.
Part 1: What is Management Consulting?
1. Consulting? It’s unfamiliar—what is it exactly?
Management consulting may seem unfamiliar unless you’ve worked on a consulting project or are preparing for a career in the field. Yet, the scale of the management consulting industry might surprise you.
As of 2021, the global consulting market was estimated at $23 trillion. For comparison, the global legal market is around $1 trillion—23 times smaller. Even the $12 trillion healthcare market is only about half the size of consulting.
Despite its size, consulting is an elusive field for the general public. Management consulting primarily serves companies and organizations, so it rarely intersects with individual experiences. Furthermore, due to the confidentiality of consulting engagements, even employees at the client company—except for top executives—rarely know the details. This is because consultants act as trusted advisors to the CEO, tackling their most pressing challenges.
2. How can we simplify consulting for better understanding?
Consulting is often referred to as the “doctor” for businesses.
When someone feels unwell, they visit a hospital for treatment. The general process looks like this:
- Realizing something is wrong
- Visiting a doctor
- Diagnosis and identifying the root cause
- Treatment through medication or procedures
- Follow-up visits to monitor progress
A consulting project follows a similar structure:
- A company recognizes a problem internally
- Engages a consulting firm (starting the project)
- Consultants analyze the current situation to diagnose root causes
- Propose solutions and assist with implementation
- Monitor progress and conduct follow-up projects as needed
Some companies proactively engage consultants for periodic health checks, even when no major issues exist. These are called Pulse Checks or Organizational Health Checks.
Just as hospitals are judged on their state-of-the-art equipment and experienced doctors, consulting firms compete on their proprietary methodologies (diagnostic tools and solution frameworks) and the expertise of their consultants.
Major hospitals often build their reputation through significant investments in infrastructure, top-tier personnel, and a history of reliable care. Similarly, companies don’t entrust just any consulting firm with their projects, as these engagements often involve the livelihood of thousands—or even hundreds of thousands—of employees.
3. What do consultants actually do?
Hospitals have departments like internal medicine, surgery, ENT, and obstetrics. In smaller clinics, one doctor might handle multiple disciplines, but specialized hospitals divide these fields into even narrower areas (e.g., ENT could include otology, rhinology, and head and neck surgery).
Similarly, companies organize their operations into functions like R&D, procurement, production, marketing, strategy, finance, HR, and IT. Within HR, for instance, sub-functions like recruitment, evaluation, compensation, and organizational design require specific expertise.
Consultants specialize in their assigned areas, conducting in-depth analyses and providing tailored solutions to address specific issues.
Consultants typically work with senior executives, including CEOs, who have decades of experience. To engage and advise such seasoned professionals, consultants need to possess superior knowledge and expertise.
To maintain their edge, consulting firms heavily invest in thought leadership. They develop new theories, frameworks, and case studies in response to rapidly changing business environments and share these with clients.
For example, just as a hospital that clings to 20-year-old equipment or outdated research will struggle to compete, consulting firms must innovate continuously to stay relevant.
4. Why do companies hire consultants?
It’s the same logic as visiting a doctor.
When someone first feels unwell, they might try home remedies. If the condition doesn’t improve, they visit a clinic, and if the illness worsens, they go to a larger hospital for more comprehensive diagnosis and treatment.
Companies follow a similar path. When issues arise internally, they first rely on in-house experts to troubleshoot. If the problem persists, they call in external specialists—consultants—to provide a fresh perspective and advanced expertise.
Consultants bring specialized diagnostic tools and frameworks, combining their expertise to diagnose problems and recommend actionable solutions.
Notes
1) The Debate on the Usefulness of Consulting
Some argue that hiring external consulting firms doesn’t create real value. They cite reasons like:
- Cost vs. effectiveness
- Lack of internal knowledge transfer
- Short-term focus
While consulting failures exist, it’s important to consider other variables. For instance, a doctor might prescribe the right treatment, but a patient might fail to take the medicine as directed, or the patient may have a unique reaction to the treatment. A single failure doesn’t invalidate the overall efficacy of consulting.
The continued growth of the consulting market, especially in emerging fields like IT and AI, highlights its enduring value to companies seeking a competitive edge.
2) The Decline of Consulting’s Value
Another critique is the perceived decline in the prestige of consulting. In the early 2000s, many talented consultants transitioned to corporate roles, diminishing the allure of consulting as a career path.
While there’s some truth to this, it underscores the importance of thought leadership. Firms that innovate and adapt to new challenges will continue to dominate, while those that don’t will fall behind. As a result, consulting firms are placing greater emphasis on research and development to stay ahead.
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