When Consultancies Should Work With Analytic Consultants

This is the second of several blog posts that look at the use of analytics consultants and when consulting firms should use analytics consultants. The first article can be found here.

Management consultancies like McKinsey have been rushing to get in on the analytics boom in order to provide advice based on both qualitative expertise and quantitative data. With data rapidly growing and becoming increasingly important, it is essential for every consulting firm to keep up with the ability to understand data.

The decision to hire internally is usually associated with how often analysis needs to occur and its centrality to the company’s operations. Just like their clients, most consulting firms are developing internal analytics and data science capabilities. And just like other enterprises, consulting firms need to determine the right mix of internal and external resources to achieve this goal. The decision to work with an analytics partner depends on the consulting firm’s specialty, the types of analytics it offers, and the frequency with which they are provided.

Figure 1: Types of Management Consulting

A consulting firm’s specialty may determine the degree to which it hires and trains around data science. Firms with a focus on strategic advice are the ones with the greatest imperative to establish internal capabilities. As published in sourceforconsulting.com’s Advanced Analytics Report 2015, executives believe that analytics’ most significant impact will be on strategy, with marketing being rated as the second highest affected area. There are many consultants that focus on operations, HR, finance, and technology implementations, yet based on their clients’ expectations, they do not have to be as focused on developing analytics as a core competency.

The types of analytics provided by consultants differ based on their specialty. Typically, operations-focused consulting firms are involved with analytics of the descriptive variety. For example, technology consultants that integrate data systems may offer visualization tools for data discovery or other tools for information security monitoring. Many consultants specialize in optimizing marketing campaigns using predictive analytics that, for instance, can determine the credit card customers who are most likely to default on a loan. Some consultants are developing SaaS predictive analytics solutions either internally or in partnership with another vendor. In these cases, while software’s high profit margins are attractive, companies should realize that most of the value being provided to clients is in the implementation of the software and the customization and adjustments made over time. Prescriptive analytics are less commonly offered by consultants that focus on operations, but in one example a call center’s scripts are adjusted based on a data review. Prescriptive analytics are closely aligned with the core competency of strategy consultants. Typified by services offered by McKinsey and Boston Consulting Group, these companies work directly for senior management on what are often short-term, quick-turnaround projects.

Recommendation: For consulting companies that provide operational support, it may be possible to offer descriptive analytics that can take the form of a white-label SaaS solution. Companies that want to provide predictive analytics solutions may find it worthwhile to contract with a data scientist that can set up the solution and then review the effectiveness of the predictive model on a regular basis.

For companies that want to venture into prescriptive analytics or custom predictive analytics projects, they need to consider the process for completing analytics engagements. Below is an overview of the strategic advisory process. It is very similar to the process that is used by many internal business analysts.

Figure 2: Strategy Consulting Process. Source: http://www.consultancy.uk/

Now let’s look at how consulting firms can engage with an external analytics consultant during different steps of the strategic advisory process:

Problem Definition: The actual problem is usually identified by the client or prospect while communicating with the sales or client services teams. It is the responsibility of these customer-facing employees to define client needs and later work with the firm’s analysts to propose analytically-driven solutions. At this stage of the process “lead generation” turns into an “opportunity.” Consequently, most consulting firms will not outsource the work, exclusively employing internal resources to serve their clients.

Approach: The goal is to quickly propose analytical techniques that can solve a client’s problems. The proposal needs to recommend an appropriate approach that is competitive in terms of price and timeliness. As they put together proposals, consultants will often realize that they do not have the internal capabilities to conduct advanced analytics. In those cases, consulting firms should not forgo submitting a proposal and should instead look for an outside partner to be part of the solution. Experfy provides the capability to identify potential partners or individual human resources that can be included in a proposal.

Data Gathering: Much of the data gathering process is often in the hands of IT or a lower-level analysts who are responsible for data scrubbing. Strategic advisories would eagerly purchase new tools or custom services that could cost-effectively deliver usable data in a short period of time. A company like BCG could use their Knowledge Services department to help gather secondary research, including third-party data, and then consolidate that information with first-party data from the clients. The larger consulting firms will often use an expert network to identify an expert on a particular subject matter so that the consultant managing the engagement can quickly get up to speed. Since the larger consulting firms are already big consumers of research services, it is likely that they would be buyers of new tools and data sets that support the data gathering step of the strategic advisory process.

Data Analysis: This is the core of the analytics process. When there is a need for a specific advanced analytics technique or programming ability, it makes sense to outsource it to a third-party. In the case of Big Data techniques, there are many SaaS solutions that can be used if the main challenge is the lack of technical infrastructure. Moreover, companies should also be open to using crowdsourcing and outsourcing tactics to help execute on specific projects, especially when there is a deadline.

Advice: The core value proposition of a strategic consultant is the quality of the advice they offer. Most consulting firms never outsource this, but some may – for instance, consulting firms that focus on technology integration may lack the resources to effectively provide management advice.

Implementation: Strategy consultants usually enact only the early stages of their proposed solution, or simply even allow the clients to handle the entire implementation. Companies that participate in the implementation process themselves often bill these services as part of a complete “change management” capability.

Oftentimes a technology vendor is the driving force behind a company’s mission to becoming a data-driven organization. However, IT providers do not possess the expertise necessary to carry out large-scale organizational change, in which cases they should look to a partner. In addition, other companies specializing in knowledge process outsourcing (KPO) are attempting to expand from just implementation to other areas of analytics.

Although many analytics firms promise assistance with strategy and improving operations, those that focus on providing discrete research services in fields of pharmaceutical trials, market research, and financial analysis are experiencing robust growth. Since projects in these fields are often sourced to third-parties, I am particularly interested in how they can use a service like Experfy to help them respond to RFPs. I plan to expound on this topic in my next blog post. If you are a business development or sales pro at a consulting or KPO firm, please reach out and let me know your thoughts on the topic.