SURVIVAL tactics – Collaborate … maybe Merge?

Attention consultants and professional advisors – What’s your agenda for the upcoming ‘reflective’ time? What business futures are likely to be ‘top of mind’ over the Christmas / New Year / January break?

This year, I see just one major imperative – survival – no matter the size of your consulting / professional advisory enterprise.

What prompts this rather stark conclusion? …

The steady market share growth of Deloitte, Ernst & Young, KPMG and PwC (‘Big-4’) over the past two years
The continuous acquisitive activities of the 'Big-4'
The proposed merger between PwC and Booz & Company
Australian public sector agencies issuing RFIs that seek a collection of imaginative and innovative solutions which would generally emanate from the boutiques, but need a large firm as the prime contractor
A steady ‘churn’ of sole practitioners and smaller boutiques that either leave the market or launch a different enterprise
A steady stream of new entrants, sole practitioners and smaller boutiques, some with little hope of a long-term future.

#3 – Booz + PwC – has to be a ‘game changer’ … taking us back to the pre-Enron / Sarbanes-Oxley days when the ‘Big-n’ offered a full service management consulting capability. But the huge, difference is that we did not have the large numbers of sole practitioners and boutiques that we have today. So we are moving into uncharted territory.

#4 – has been more of a gradual, but significant, event. There’s no question that the boutiques can come up with imaginative and innovative solutions … this is why they are labelled boutique in the first place. But the client needs their discipline-specific solutions to be aggregated and integrated and it’s more likely that a large firm will be needed to do that. Otherwise the client would need to take on the prime contractor role and that’s uncharted territory too.

So what are the survival tactics? …

Collaborate – with 23 ways to collaborate this should already be a ‘business constant’ … but were you aware of so many ways, and the principles and keys for success?
Merge – the ultimate collaboration, #24, … but do you know how to achieve an optimal outcome?
‘do nothing’ – if you think that your enterprise is really distinctive and can survive without collaborating or even merging, then fine … but regularly re-assess your decision, please.

COLLABORATE

I had already defined 23 ways to collaborate, because I saw collaboration as key to business growth, key to future strategy, but today it equally applies to survival. I am happy to share my definitions on request.

But for a collaboration to work there have to be some shared principles, and these are my ‘top 4’:

Complementary – in terms of skills, knowledge, and, experience
Code of conduct – a common code that all parties can sign-up to
Quality ethic – has to be the same
High work standards – must be high, nothing less.

And these are my four keys to a successful collaboration:

It’s “we” and not “i”
A candid exchange of expectations
The ability to say “yes” and the ability to say “no”
Mutual respect.

With an agreed definition, shared principles and adoption of the success keys – you will be in a good collaborative space.

MERGE

This is the ultimate collaboration, but l believe that M&A activities using traditional forms of merger and integration approaches fail to fully realise both the short-term and certainly the optimal long-term outcomes for a successful merger.

What’s really needed is an assembly and re-assembly form of merger integration, which utilises the key models that I use for all my work. Because in my experience very few consultants and professional advisors are crystal clear on:

where they sit on a pure product to pure services continuum
what their services provider type/s are
how the success levers, for each type should be set
what the tactics for growth should be, and
how the core business functions and processes should align.

And this leads to both internal and external confusion as to the very core, the very ‘definition’, of the enterprise. And a great deal of my work is associated with developing the definition along with sound supporting operational plans for a sustainable and profitable enterprise.

And when one enterprise acquires another, then these issues become magnified, leading to more confusion ... both internally, because there would be many 'definitions', and likewise externally for the targets/prospects/clients looking in.

If the acquiring enterprise hasn’t defined itself in the way that I advocate, and particularly the desired or target state following each acquisition then I maintain that it sets itself up for a sub-optimal post-acquisition, long term, business. Because there was no pre-defined framework within which the acquired enterprises can be 'merger integrated', to use the classic terminology.

So, assembly, is all about making sure that all the parts (acquirer, acquired/s) can be joined and aligned side-by side, with typically the acquired enterprises operating as separate service areas, perhaps with some economies of scale

Whereas, the bolder re-assembly, is all about creating a minimum of three or four service areas (ie one per services provider type) by disassembling the acquired enterprises by their services provider types and re-assembling them into those three or four service areas.

But there is a ‘negative’ side to re-assembly … it breaks-up the acquisitions … but there is a ‘positive’ side … it creates very complete, very self-contained service areas. Just picture what you could do by putting all the game-changers together, or the vendors, or the specialists, or the total solution providers ... potentially very powerful, and definitely not sub-optimal.

Using my approach, most acquirer enterprises end up with a hybrid, ie part assembly, and part re-assembly … but never sub-optimal.

in conclusion

Happy to further expand upon these topics, or any of these Reference Stories.

I wish you all the very best with your reflective thinking.