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How do management consultants create value and make money when their clients know more about the business than themselves?

  • Clients of management consultants are the high-level management executives who surely know more about the business at hand than the consultants themselves. Yet, management consultants make tons of money from their clients. What business strategy did they employ to pull this off? How do management consultants create value and get their clients to pay a substantial fee when their clients know more about the business than themselves? Or is my premise just wrong? Are management consultants TRUE EXPERTS in the subject matter?

  • Answer:

    The assumption that a client knows more about their business than a consultancy is often wrong. First, if a retailer hires McKinsey (for example), they are not the first retailer to do so: McK has probably worked with hundreds of other companies, with excellent access to otherwise-unobtainable information. They bring that to the table when they work with their retail clients. Second, McK isn't just hiring fresh 22-year-old undergrads with no experience. They're also hiring many professionals from their client industries, to build concentrated subject-matter expertise, hand-picking people from the best companies across the industry. Third, many (perhaps most) businesses are not great at spotting their own weaknesses and opportunities. If you've ever managed a product, or even written a paper for school, you understand that after a point, you slowly lose the ability to examine your own work objectively and holistically. A fresh set of eyes can help immensely. It's even better when that fresh set of eyes is from other industry experts--something that's hard to get, since you aren't going to ask a competitor for help with your problems!

Andrew Hamada at Quora Visit the source

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Your premise is wrong because of what you think is "the subject matter". A company will not usually use consultants for their core competence (BMW does not need anyone to tell them how to build cars.) They use consultants for any of the hundreds of other subjects that are important to them (recruiting, change management, innovation, kaizen, big data, business model innovation, ...)

Graham Horton

One of the best uses of consultants is to have them look at a problem from a (necessarily) different perspective than is likely from the involved executives themselves. However, one of the most common uses of consultants by senior executives is to provide external support (hence more credibility) for actions the executive has already decided to take but is encountering internal resistance. The following is a true illustrative story. At the time, I was running a small consulting firm in Switzerland. I received a phone call from an Italian executive who wanted us to study something for him. When I finished the conversation, my partner (a Swiss) asked what the phone call had been about. My reply: "Nothing has changed in five hundred years. The Italians are fighting among themselves, and one of them has come to Switzerland to hire help."

Richard I. Polis

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