Management Consultancy Firm in Post-2015 Era

 

This post represents a generic proposal written back in summer last year, and shared with a number of management consultancies which specialize in the international development assistance (with certain tailoring made in each case, to address the specific features of the recipient firm). The aim was to initiate a discussion on the future direction of management consultancy and to join forces in developing new approaches and products. I am posting it here because I am still interested in working on this. Of particular interest are the ideas related to programme/project design (such as modular designs) and evaluation (such as deliberative approach and simplified methods of conducting  RCTs and other experimental designs).

Summary

The purpose of this paper is to outline a strategic direction for management consultancy firms (especially those operating in the field of international development assistance) to strengthen their market position, financial standing, and client and partner relations. It recommends undertaking more aggressive marketing strategy—to position the firm stronger in the mainstream of international official aid and to go beyond aid working directly with public and private clients in developing countries—through developing and offering a set of new, innovative, technology based products and services; diversifying the development practice areas; and building networks and strategic partnerships for knowledge management.

Market trends

Development’s direct assistance is in transition. On the one hand, donors have announced quite an ambitious plan for the post-2015 development agenda, with financing rising ‘from billions to trillions.’ On the other hand, the share of official direct assistance (ODA) in the total receipts by developing countries (including ODA, other official and private financing) is declining and this trend is set to persist: some 28 developing countries, with a total population of 2 billion, won’t be ODA eligible by 2030.

Significance of non-traditional aid donors is increasing. This concerns both the level of financing and the new forms of cooperation they offer to developing countries. The contribution of non-OECD DAC countries to ODA has grown almost seven-fold in money terms, while its share in total ODA to developing countries increased from 1.8% in 2009 to 9.2% in 2013. Generally, private sources of international development financing—from philanthropy to FDI—would offer new forms of partnerships with the implementing partners, international and local consultancies and engineering companies.

Priorities—regional and by national income—are changing. Overall regional allocation priorities by donors are shifting towards middle income countries in Asia. In 2009-2013 ODA to Lower Middle Income Countries has grown more than eight-fold. In the same period, total allocation from all sources to the Far East Asia has more than doubled and its share in the grand total receipts by developing countries has increased from 13% to 22%. The current trend will persist, with two-thirds of Sub-Saharan Africa projected to receive less aid in 2017 than in 2014.

Shift from social to economic development. Although social sphere remains the biggest theme of bilateral donors’ ODA commitments in short term, economic development is getting more prominence in comparison with human development assistance. An increase in the number of goals from eight MDGs to 17 SDGs is partly a result of including economic growth and infrastructure themes. From 2009 to 2013, ODA allocations to Low Income Countries and Lower Middle Income Countries increased for economic infrastructure and services by half, while decreased for social infrastructure and services. Private investment in developing countries for the last decade has gone primarily to energy and telecommunications (combined 78%), while transport accounted for average 20%, and water & sanitation for 2%. This trend is observed in lending by the World Bank and regional development banks too.

Stakeholder analysis

Aid relations between donors and recipient countries are changing. Developing countries are becoming less dependent on aid as they are getting broader range of development assistance choices from diverse financial sources. The decreasing ability of donors to influence the recipient countries through aid is seen in the emphasis on the donor alignment with recipient policies (Paris Declaration 2005, Busan 2011). Increased South-South cooperation and the pragmatism it is built upon also contribute to the shift from aid conditionality to local ownership. For example, China’s African Policy (2006) is guided by four principles which are all about equality and mutual benefit.

Customer expectations point to innovative approaches. The spread of global value chains, the increasing importance of knowledge based capital, and rapid technological progress point to the emergence of a ‘new production revolution’ (OECD 2015). The capital share of developing countries in the internet economy is expected to increase to more than 50% by 2025. The recipients in developing countries are becoming more sophisticated in terms of technology, and therefore they require innovative solutions and new technology based goods and services. This means that international consultancies must draw on various forms of innovation, from new products to new marketing methods, organizational practices and external relations.

Competitors are investing in technology. A recent survey conducted by Accenture, among more than 2,000 business and technology executives across nine countries and 10 industries has revealed that 62% are investing in digital technologies, and 35% are comprehensively investing in digital as part of their overall business strategy. Being digital is no luxury anymore; this is about being competitive in 21st century.

Competitors enter strategic partnerships. While development consultancy can invest in R&D to extend its own technology base, it can also partner with firms having other specialisations to benefit from their knowledge. Networking—to initiate, maintain and utilize relationships with various external partners—is becoming crucial for business development. Management experts believe that the need to share knowledge will become so critical that in the future collaboration among networks of partner companies will become the defining mode of work.

Business development strategy

Dimension 1: Diversifying the practice areas. This can be achieved by strengthening the firm’s own pool of experts and building strategic partnerships for knowledge management with other firms. Practice areas may include: Social infrastructure and services (water & sanitation; education; health); Rural economic development  & environment (agriculture; natural resource management & disaster preparedness); Urban planning, private sector development (business enabling environment & regulatory reform; local economic development (LED); support to entrepreneurship, start-up businesses and MSMEs);  Economic growth and infrastructure (policy and regulatory reform; design and implementation assistance for industrialization, energy efficiency, telecommunications and transport programs and projects); Democratic governance (rule of law; anti-corruption; centre of government coordination and public administration horizontal systems; decentralization; citizen participation).

Dimension 2: Developing and selling digital products. The next generation goods and services are linked with the integrated digital platforms. The experience of digital businesses is relevant to international development: technology places the end user at the centre of interaction; digital business model focuses on selling results. The range of digital products may include: e-learning products (e.g. business studies course for entrepreneurs); e-resources (e.g. resource book and toolkit with templates for infrastructure projects, LED strategy development); public sector e-governance (e.g. geographic information systems (GIS), management information systems (MIS), M&E systems, trade portals & single window systems); apps with access to public sector information (e.g. geographic, economic & business, traffic & transport, meteorology & environment, legal system, social, natural resources).

Dimension 3: Offering digital services. New hardware and interface solutions are extending the possibilities of business interaction as in-house so with clients, while software intelligence allows businesses to achieve advanced levels of operational efficiency. This opens new horizons for remote management and service delivery. Technology based services of the firm to the clients in developing countries may include: e-marketing; customer networking; online advice, mentoring, coaching; financial technology; cyber security. Moreover, it allows working directly with recipients, public and private, offering them assistance in the development and implementation of ‘smart’ industrial policies, helping build technology base in recipient countries (e.g. technology labs, physical and virtual business incubators, business centres, and science & technology parks, innovation centres).

Dimension 4: Networking. Coordinating various internet based networks of customers and practitioners is considered as one powerful marketing tool and is increasingly used by international organisations and businesses. Topics may include:  Internet and technology policy (e.g. policy instruments to address such issues as shortage of technical skills, lack of housing for young specialists, supportive visa regime for talented migrants, flexible tax system); Business support infrastructure (e.g. how to run a successful business incubator, business centre, university-industry partnership); Financial infrastructure to support MSMEs and start-ups (e.g. micro credits, special loan and leasing schemes, credit guarantee facilities); Energy efficiency (e.g. policy instruments; power sector regulations; power sector integration, ownership & privatisation; resource mobilization). This dimension may also include setting regional hubs for training and networking activities (e.g. in Amman for Middle East & North Africa, in Nairobi for Sub-Saharan Africa, in Delhi for Central & South Asia, in Sydney for South-East Asia and Pacific, in Caracas for Latin America and the Caribbean, and in Warsaw for Eastern Europe).

The time needed to implement the change

The initial review, consultations and drafting normally takes about three months. The implementation may be long and difficult though, involving internal and external consultations, decisions by shareholders, planning, internal policy and organisational changes, resources, training, testing, marketing and design. Experience shows that it can take a year or more before the process begins to bear fruit, and as long as two to three years to complete the transition (in a mid-size organisation). Most challenging part of this endeavour is not in developing strategies and introducing new procedures, but making change in the organisational culture—this normally does not happen overnight and by itself, but takes years and demands continuous commitment of top executives, support from mid-managers, and encouragement, explanation and demonstration of benefits to stakeholders and the staff members.

July, 2015

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