Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 1, 1995 TAG: 9501110014
SECTION: BUSINESS PAGE: D-2 EDITION: METRO
SOURCE: CHARLES STEIN BOSTON GLOBE
DATELINE: BOSTON LENGTH: Long
Competition is getting tougher. Products come to market ever faster. Technology is making the old way of doing business obsolete. As they ask in ``Ghostbusters'': Who you gonna call?
More and more, the answer is: management consultants. Whether they need help downsizing their companies, cracking the Chinese market or installing a new set of personal computers, executives are turning to consultants to be their guides. The result, not surprisingly, has been a boom in the consulting business.
``This is the golden age of management consulting,'' said David Norton, president of Renaissance Strategy Group in Lincoln, Mass.
If this is the Golden Age, then Boston must be Athens. The Boston-Cambridge, Mass., area probably has more consulting firms per square mile than any place in America. All of them - from big-name firms such as Boston Consulting Group and Bain & Co to the smaller boutiques - say they are busier than ever.
Boston Consulting Group reports sales rose by 20 percent in 1994; Bain & Co., also of Boston, says 40 percent. Monitor Co. in Cambridge has had to turn away clients because its backlog is so large.
It isn't simply that consulting firms are getting more jobs. The jobs themselves are expanding. Once upon a time, consultants were like dinner guests: They came for a brief visit, gave advice and went home. Now they are like guests who come for dinner, move into the spare bedroom and stay for a year or two.
Consider the experience of Gemini Consulting, a New Jersey firm hired by British Telecom, an old telephone monopoly that must now learn to compete. The job is expected to take three to five years, with billings in the $30 million to $40 million range. ``Not so long ago, a big project was $400,000,'' said Dean Berry, a senior vice president at Gemini.
The good times in consulting have led to a fierce competition for talent. MBAs from top schools can expect to earn $100,000 or more as first-year consultants. Northwestern's Kellogg School of Management says that consulting firms this year will interview 45 percent more students than they did two years ago.
Local consulting firms are adding staff at a steady clip. Sapient, a Cambridge consulting firm, had two employees in 1990; now it has 150. Precise numbers for the whole industry are hard to come by, because the state lumps management consulting with other businesses for counting purposes. The ranks of consultants also have been swollen by people who've lost jobs in other sectors and have turned to consulting as an alternative.
Mel Blake has seen boom times - and bad times - in the consulting business before. A former consultant, now an executive at Bank of Boston, Blake is skeptical about claims that the industry has changed in some fundamental way. ``The economy is better, so companies have more money to spend on consulting,'' he said. ``This is a cycle. Eventually there will be layoffs. You can count on it.''
Perhaps. But consultants say they are riding economic waves that won't disappear when the current expansion fades into recession - like competition.
``No one has ever seen this kind of intense competition,'' said Berry. ``You can't hide from it. You can't wall yourself off.'' The list of competitive industries includes all the traditional ones, plus new ones such as telephone companies, electric utilities and hospitals - all of which once were immune to marketplace pressures. AT&T alone spent almost $350 million on consulting services last year.
The new competition doesn't stop at the American border. Companies from Chile to China must slug it out in the same competitive environment as AT&T. And American consultants are there to help them. Five years ago, Bain had six foreign offices; now it has 23. Arthur D. Little of Cambridge does more than half its business overseas, advising both American and foreign clients.
Another economic trend - the move to "outsourcing" - also has played into the hands of the consultants. In this lean-and-mean era, corporations don't have as many people or as many capabilities as they once did. When they need something they buy it from an outside vendor. For many companies, consultants are just high-priced temps.
Finally there is "re-engineering." ``It has opened up a whole new market,'' said John Clarkeson, president of Boston Consulting Group.
The word re-engineering was coined by two Boston-area consultants, Michael Hammer and James Champy of CSC Index in Cambridge, but it quickly became part of the language. The 1993 book, ``Re-engineering The Corporation,'' has sold more than 1.5 million copies and has been reprinted in 14 languages. According to Champy, it is the best-selling business book in Japan. Hammer has since left CSC to consult on his own.
Hammer and Champy defined re-engineering as radical change - basically starting over with a clean sheet of paper. With so much new technology available, the two argued, companies have the opportunity to be dramatically more efficient.
Rival consultants grumble that there is nothing much new about re-engineering. They insist they have been giving the same advice using different words. ``It's just marketing,'' sniffed one consultant about Index's work.
It may be marketing, but it is successful marketing. Index's sales have climbed from $30 million to $200 million in the past six years; a related company that handles computer system redesign has done just as well. CSC now has 1,000 people in and around Boston, making it one of the largest consulting firms in the region.
Re-engineering caught the business world's imagination, in part, because its timing was perfect. During the recession and the slow recovery that followed, companies were looking for ways to boost profits by cutting expenses. Now that good times have returned, the mood has shifted.
The hot word now in consulting is ``growth.'' At some point, you have to be bigger if you want to succeed. Mercer Management Consulting in Lexington, Mass., for instance, is showing clients research on what distinguishes fast-growing companies from their slower-growing competitors. ``Companies can't save their way to prosperity,'' said James Down, an executive at Mercer.
Implicit in the growth theme is the notion that re-engineering may be an idea whose time has passed or at least peaked.
Champy isn't buying it. ``There is always a risk that when business is better, companies won't want to do the hard work,'' he said. ``But companies that fail to see the need to change dramatically are in deep trouble.''
Still, Index, fearful of being typecast as a one-product company, is out looking for the ``Son of Re-engineering.'' The company hopes it will be ``value discipline,'' an idea being pushed in a soon-to-be published book by Michael Treacy, a consultant who works closely with Index. Treacy studied 80 successful companies and broke them down into three categories of leadership: best price, best product and best total solution. The message is simple: If you want to be a winner, you have to decide which category you belong in and act accordingly.
``Re-engineering is about how to run the race,'' said Treacy. ``This is about choosing which race to run in.''
It is easy to be skeptical about consulting's ``new ideas,'' many of which sound like old ideas wrapped in fancy packaging. Like fashion, consulting lends itself to fads. Even some consultants will admit as much.
``When you peel it all back, the issues are always the same,'' said Charles LaMantia, president of Arthur D. Little. ``Where do you invest? How do you improve? How do you grow?'' But in the next breath, LaMantia insists that the world has changed. ``I meet with a lot of CEOs,'' he said. ``I can't think of anyone whose business isn't tougher than it used to be.''
For now, tough times for business mean good times for consultants.
by CNB