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Business Consultancy - An Overview

Aug 17, 2007
Business consultancy, also known as Management consultancy or Strategy consultancy refers to the practice of helping companies improve their performance through the analysis of existing business problems and development of future plans. It involves the identification and implementation of best practices, coaching skills, technology implementation, analytical techniques and strategy development among others.

A consultant also has an advantage of being an outsider, thus seeing things in a completely different light, which might not be possible for the owner or even the top management as a result of being too involved in the business. This different perspective may help a consultant to come up with unique solutions to old problems or even devise a completely different chart for growth. Business consultants usually bring formal frameworks or methodologies to identify problems or suggest more effetive ways of performing business tasks. Business consulting includes management consulting as well as science and technology consulting.

The first management consulting firm was Arthur D. Little founded by an MIT professor of the same name in 1886. Orginally specializing in technical research, it later on went to become a general management consultancy firm. The first pure management and strategy consulting company was McKinsey & Company, founded in Chicago in 1926 by James O. McKinsey. The Boston Consulting Group, founded in 1963, brought a rigorous analytical approach to the study of management and strategy, setting the groundwork for many consulting firms to follow. Accenture and IBM are companies which specialise in technogical consulting and outsourcing.

Management consulting first grew in the US and not in Europe. This was because of cultural factors. As opposed to Europe, in the US it was accepted that the management and the board might not be competent in all circumstances, and thus buying external competency was seen as normal to solve a busines problem. In Europe, however, management is connected with emotional and cultural dimensions, where the manager is expected to be competent at all times. Therefore, seeking and paying for external advice was seen as inappropriate. Also, in those days, the average level of education of the executives was significantly lower in the US as compared to Europe. These two factors made it difficult for consulting to emerge in Europe, and it was only after World War 2, with international trade being led by the USA, that management consulting emerged in Europe.

In 1980s and 1990s the industry had grown by over 20%, with 2004 witnessing a market size of just under $125 billion. Today, large and diversified organizations such as IBM Global Services, Accenture and Bearing Point offer a range of services, including IT consulting in addition to management consulting services. Large management and strategic consulting services such as Bain & Company, McKinsey & Company, and Boston Consulting Group offer purely management consulting sevices, but not for any specific industry.

Today, many corporations also have set up their own internal consulting groups, getting employees from either within the corporation or from external firms. Many of these corporations have internal groups of up to 30 full-time consultants. This approach is chosen for its various advantages. For example, the corporation avoids paying the large fees typically asociated with external consulting firms. Also, the corporate information remains private within the organization. Plus, most organizations prefer an internal group because it can work more closely, and constantly monitor the progress of the company. In addition, an internal group, being familiar with the internal workings of the company, can guide and direct projects right from the planning stage through to the implementation stage, which would be too expensive if an external consultant, were to be hired.

Management consulting has led to innovations in the practice of management, linking academia, firms and thought leaders, leading to the use of a variety of tools and techniques to approach business problems. This has certainly led to growth in the industry and to businesses in general.
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