I interviewed James Ransdall who discussed Asset-Based Consulting.
James, and looking forward today to hearing your views on asset based consulting. Before we start, can you provide a brief background of yourself?
Sure.I've been, in my career, moved back and forth between sales leadership and consulting.Consulting focus has been around innovation services, innovation solutions, helping companies figure out how to organize the innovation efforts,how to deal with cultural challenges, organizational challenges around that.And in the course of that work, one of the things that's come up often is this notion that a consulting firm should build “assets” which essentially capture their intellectual property, as software, preferably.
So the frameworks, the practices they use, the standardized approaches that they develop over the course decades of engagement have tremendous value, if they can be crystallized literally into code.And most recently, as a senior managing consultant at IBM, my charter was to pull together a whole set of assets that would support this innovation as a service model that IBM wanted to market.And in the course of working on that, a lot of things became evident, or a lot of challenges became evident,as a consulting firm attempts to move into this new realm having these assets, which support long term client engagement.
And what is asset based consulting?
It really is this notion of taking what can be decades of intellectual property, which exists in consultants' minds, which exists as frameworks, which might reside in PowerPoint presentations, might reside in Word documents.But which rarely has been captured as actually software, where we can standardize our approach, and then bring the combination of that software, and our professional services to engage with a client around solution delivery.
The first really well pointed out example of that was from 2007 when McKinsey launched McKinsey solutions.You can think of sort of a first generation of ABC, which is what the acronym for Asset Based Consulting is.What we've seen since then is a lot of companies — a lot of consulting firms, all of the large ones that you would expect, KPMG, Deloitte, PWC, IBM, etcetera — all put their toe in the water, and begin to think about what assets they might bring to bear.
The business challenge for them has been that it's a disruptive business model, in that it favors the delivery of a priced solution, usually in smaller consumable chunks, and it's fundamentally not built around the billable hour, which is what consulting firms sell.They give you their expertise at an hourly rate, and this favors sort of the shared risk, shared return solution model, where the solution delivers an economic benefit, and both the client and the consulting firm participate in whatever the cost saving stream is, the revenue increase stream might be. So that's why it's disruptive.That's why it’s been difficult to often go beyond the dipping of the toe stage.
And where does it come from?
Well, it's been around for a while, in the sense that do consulting firms try to figure out how to standardize solution design, solution problem solving,how to standardize discovery processes, to understand problems.They're very effective at building out engagement frameworks of all types across multiple vertical markets, across multiple domains.So, if they're involved in an engagement say, around customer relationship management, customer care, customer sensitivity, they will build out a lot of best practices and frameworks for delivering solutions.They will often verticalize those, so that solution delivered into pharmaceutical is different than that solution delivered into the energy sector or the financial sector.
So they've got all of that intellectual property, and the question is can they define it well enough, and they define the processes around it well enough, that it can be distilled into what would be a set of business and technical requirements that you could hand to a development team and say, "Hey, go build this thing, and let's really try to capture our intellectual property that way."Not surprisingly, that’sthe point of origin for an awful lot of software companies.And remember, a lot of software companies start life when a consultant sees a problem, thinks it can be addressed by software, probably knocks on the boss's door, and says, "Hey, I think I've got something we could build as software," discovers after asking many times, that the consulting firm is not really tuned to become a software company, goes out on his or her own, starts a software company and presto!Three years later,you've got somebody who is taking something public.
The effort by the consulting firms is to capture that, and to begin to build solutions around their intellectual assets, which are considerable.One of the things that should be noted is that there's a new generation of development tools.So-called low code development tools, that might be the major tipping point for this asset based consulting approach, in that using these tools, it's possible to assign business analysts, solution architects to define a problem in terms of process flows,in terms of relationships and data elements that need to be connected and rules for connecting those data elements to support a flow or a process.And the low code platform will actually write the code for you, so you don't have to actually go to development.
You don't have to actually hand things off to a whole team of developers and work that cycle that's been the typical cycle for software development for so long.Those tools particularly should be particularly attractive to large consulting companies who have solution architects and business analysts and such.They employ those people by the tens of thousands, so they have a huge skill repository that might be harnessable, given the power of these new low code development platforms.
And can you talk more about how it’s done effectively?
Well, I think the challenges that are first, you have to have fairly... You have to have sea level sponsorship within the consulting firm to drive this forward, because it a disruptive business model.Right now consulting firms are rewarded and individual consultants are rewarded an incented by maintaining their billable commitments.So the utilization ratio is the single largest measurement used for incentives, promotions, career advancement, etcetera. Doing something that is disruptive can't come from midlevel people.It'll never gain the sort of support that it's needed to succeed.There need to be proper metrics in regular reporting, and so the billable hour is not end all be all, when you're measuring the success of this asset based consulting approach.You have to have a different set of performance metrics in place.They need to really embrace the disruption.You know, they can't pay lip service to it.This will change what they sell, it will change how they sell, it will change their pricing model quite dramatically.
The organization has to embrace that.They have to embrace the notion that they're actually becoming a software company of sorts, and that they're going to have to have accountability around that and the proper roles in place.You have to have people that have responsibility for the product.Product management has to become a role that gets fulfilled in that organization.They have to think about how they brand, and how they market and how they sell these services.If you do it well, and your client embraces this software platform that you bring to say, deal with financial reporting.Let's say financial reporting is one thing that the consulting firm has expertise in, and they build some set of tools that reflects their expertise and they bring this to client as a solution that combines this platform they've built, plus the services they wrap around it, the client is now using that and will continue to use it for potentially years, if not decades.
And that's the attraction to the consulting firm.This promotes long-term sticky engagement, but this also becomes a product now, that the consulting firm has to support just as software company would.They have to have bug fixes, they have to release new versions, they have to add new features and functionality to these platforms, so they are becoming a software company.More of a product company, which again is one of the payoffs.Consulting firms, if you look at them, have balance sheets that will show a lot of cash, but not a lot of assets.So these platforms start to show up as business assets, real assets on the balance sheet, which is something that is an advantage with it.
They also have to play straight with their own partners.So, if I'm a consulting firm, and I'm starting to build a solution around financial services reporting, I might already have a software partner.Maybe SAP or Oracle,who have been partners of mine for a long time, also have financial reporting software, and there's a potential there, obviously, for channel conflict, that needs to managed and mitigated.The consulting company, at least what I advise, is that they play straight with their partners on this, they be transparent about what they're doing and why, and work through the relationship as opposed to try to pretend they're not really doing what they are.
There's an inventory to be built, and there's an inventory to be surveyed, so there's an effort around going through all of your various practice domains, whether those are vertical or horizontal, and figuring out which of the many, many frameworks and business process models that exist today are most amenable, most suitable to becoming an asset, and build out that asset.
There can be literally hundreds if not thousands of candidates for this type of software build out.Figuring out what you have, and then prioritizing those to select the best is a fairly big undertaking, and it's one that most consulting firms have not engaged in.If you go to a consulting firm and say, "Show me your master repository of all consulting assets," they don't have one.Those exist in highly fragmented forms all across the organization.Sort of woven into the organization, but with no central visibility into what those things are.One of the first efforts is to bring together, pull together that defined inventory.So a catalogue, if you will, so you know what you have, and then to figure out which of those are the ones that you're more likely to take to market.
I think there also needs to be sort of a horizons model applied to this to be successful.The three horizons model, the typical one would be a technology company, and the third horizon is the stuff that's in R&D.The second horizon is the stuff that's not in R&D, but has not become a mainstream product yet.And horizon one are those things which are mainstream products in the market, generating the lion share of cash, the lion share of revenue, the lion share of product profits.
The tricky thing is that second horizon, and how do manage that?The consulting firms that I've spoken with will readily acknowledge that's been there biggest challenge.They can come up with the ideas about which assets to develop.They can do a good job of thinking through that and getting them defined once they've kind of gone through this inventory creation exercise. They've got them.But taking them into the market, and managing them through that second horizon, where they're kind of out liers to the business norm, and they probably need to be managed differently, measured differently, incented differently.It's a bit of a hot house environment, where those things need to be nurtured and developed, before they are turned over to the larger sales and delivery organizations.
Often companies will try rush that.They're in a hurry to get the thing to market, so they kind of ignore the second horizon.Then this little tiny new entity needs to compete with all of the multimillion, multibillion dollar initiatives already at play,the horizon one stuff.And they need to compete for sales time.They need to compete for executive attention.They need to compete for resources, and somebody looks at that, and says, "That's a pipsqueak little thing, I'm going to go take care of the thing that earns the company a billion, or three or four or five billion dollars a year. I don't care about this little thing that's going to make maybe $300,000 or $2 million."
So that second horizon is tricky, and requires kind of specialized management to get through it.And then lastly, I think it's the notion of figuring out what the best development platforms are, and I've become an advocate for this new generation of technology products that enable the consulting firm to leverage its huge store of skill and solution architecture and business analysis, and empower them or enable them to develop assets quickly, flexibly, and without any of the huge overhead, typical overhead that's involved in software development.Those are the keys to success, at least as I see them.
And did we cover all of the points you wanted to make?
Yeah, I think so.I think so.
And thanks for sharing...
You're more than welcome.
About James Ransdall
Chief Revenue Officer at i-nexus