When goods-based companies turn to consulting
Why should goods-based companies consider consulting as a new business line? One reason usually is an unsatisfactory development of profit margins in the goods-related business. Better profits can often be obtained from services.
Seven recommendations to start selling consulting services successfully:
1. Like any market entrant, new management consulting companies need clear strategic profiling.
There are three strategies to secure market success:
a) cost leadership, requires huge company size relative to competitors
b) quality leadership, requires long-standing experience
c) niche strategy, focuses on relatively small, specific market niches
2. In entering the market for management consulting services, companies should pursue a niche strategy.
3. The niche should contain customers with highly specific needs and be defined regarding the company’s know-how advantage over its competitors.
Example: In the beginning, IBM Consulting Group focused their expertise mainly on IT-strategy and business transformation. Siemens Management Consulting initially focused on technology-oriented process management.
4. Services as a product cannot be seen. This means that buyers are insecure and need to trust both the supplier company and the company’s representative.
5. If a consulting firm and its representative have gained the trust of a buyer, the representative has to remain the buyer’s partner over the entire project and be removed only if the trust between the two has been damaged.
6. The organizational structures of goods-based companies are not transferable to management-consulting services. Consulting firms have to be structured in terms of clients rather than functions.
7. Throughout an entire project, consultants work closely together with their clients. Much more than their sales counterparts in goods-based industries they need to possess people skills.