Knowing the Client’s Business

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    One of the critical keys to success for consulting is for a consultant to become familiar with their client’s business.  This can be a somewhat Knowing your  in consultingambiguous concept that many consultants – both young and old – have trouble grasping and performing with any efficiency.  This week we will discuss the importance of knowing the client’s business and the best way for a consultant to go about it.

    1. What do you mean when you say that the consultant should know the client’s business?
      1. It’s much like hiring someone with experience.  When a company hires a new employee, they want someone with experience in that industry that might have some different perspectives and so that they can hopefully have a shorter period of time that they’ll have to train the new employee.
      2. When a firm brings in a team of consultants, they don’t want to pay the high hourly rates to teach them about their business.  They want the firm to be able to start providing value right away.
      3. Also, if a consulting firm has experience in the client’s industry, they can provide value by sharing the industry’s best practices with the client.  It allows the firm to give the client some new perspectives on their industry that they might not have had.
      4. Now, not every consultant may have a lot of deep experience in every client’s business, but by studying up on it and becoming what I call a “quick study” on their business, they can ramp up and become knowledgeable enough to satisfy the client.
      5. Let me give you an example.  I once had a client that was in the insurance industry.  If you’ve ever done any work in that industry, you know that it’s a very complex business, with all of the different lines of business, exception processing and government regulations.
      6. The company I worked for at the time had a consultant in a lead role that didn’t know much about the client’s business and didn’t make much effort to come up on it.  In fact, this person showed no interest in the way our client did their business.
      7. The client was a bit offended – and rightfully so – they eventually asked the firm to remove this person from the project.  We replaced the person with another person who immediately showed interest in the company.
      8. The client liked this and was happy again.  One thing to point out is that the client wasn’t necessarily demanding that we staff our project with people deep in their industry.  But they did want people who showed an interest in their industry and wanted to learn about it.
      9. You also might be knowledgeable in the client’s industry, but still not know the unique way that that client works in the industry.  You don’t want to go in acting like you know everything hoping to impress them with your industry knowledge.  If you know their industry well enough, they’ll realize that without you going out of your way to show them.
    2. If you’re an expert in a certain area like information technology, why is it important to know a client’s business?
      1. Being an expert in an area like IT is a good thing.  But if you also have some deep knowledge in an industry, you have valuable knowledge on how to apply your IT knowledge in that industry.
      2. As a consultant, you can be good if you have a lot of experience in an area like IT or marketing.  You can also be good if you know a specific industry like retail or insurance.
      3. But you can be a great consultant if you have deep experience in one or more of those areas with one or more industries.
      4. Think of it this way.  Let’s say you want to hire an accountant to do your taxes.  You could just do an internet search and select the first CPA you find in your area.
      5. You could end up with one that does taxes mostly for very high income people that are close to retirement.
      6. But let’s say you’re middle class with a mortgage and kids that you want to send to college someday.
      7. The CPA that focuses on high-income people may do a fine job for you.  But he may not be as familiar with the tax laws that can benefit you the most.
      8. On the other hand, if you find a CPA that focuses on people in your income level and financial situation, you have someone with deep experience in a skill – a tax accountant – and someone who knows your business – people in your income range with similar financial goals.
      9. So I always recommend consultants to be deep in a skill, but I also think they should be able to apply that skill with some deep industry knowledge.  Combining the two is a great approach for adding value to your clients.
    3. So is it best to specialize in an industry?
      1. There are trade-offs.  If you focus only on one industry you can have a tendency to limit yourself.
      2. But I’ve seen people who broaden their industry knowledge by focusing on say, insurance and financial services.  These are related industries and knowing both keeps a consultant from being pigeon-holed.
      3. Other combinations I’ve seen are having a focus on health care and insurance or manufacturing and distribution, since most manufacturers need to know distribution as well.
      4. So in general, it’s good to have some industry specialization.  But the caveat is – and I know this sounds like an oxymoron – you want to make sure that your industry specialization is broad enough.
      5. That’s the best way to play the tradeoff.
      6. It can also be a benefit to have knowledge of a completely different industry to provide prospective.  In 1993, IBM hired Louis Gerstner as their CEO.  He previously was the CEO at Nabisco Foods.  Those are completely different industries, but he brought a unique outsider’s perspective to IBM and transformed it from a hardware company to one of the most respected professional services firms in the world.
      7. So while I encourage people to develop a deep knowledge of an industry in order to know what’s going on in it, I also see a lot of benefit with having an outside perspective to facilitate more creative ideas and an alternative point of view.
    4. Does every business in an industry work the same?
      1. I hope not – and I know that’s a rhetorical question.  But every company – hopefully – has their own unique strategic approach that gives them a competitive advantage.  Think of companies that you deal with on a day-to-day basis that are competitors in the same space.
      2. Each one may be similar, but they appeal to a slightly different market segment or have a different approach to how they serve their clients.
      3. Now, that may not be the case and that may be why they need a consultant.  A strategy consultant may need to come in and tell them that the target market they’re going for isn’t unique enough and help them develop a new positioning strategy.
      4. But knowing an industry and knowing a company’s business within that industry are two different things.
      5. Before you go to a client, it’s important to know the industry – or industries – that they work within, but to also know how that company executes their business in that industry.
      6. As a consultant, if you’ve worked in that industry before, presumably with the client’s competitors, you can provide them with your knowledge of the industry and some perspective on how another company in that space did things.
      7. You need to be careful not to paint that experience as a recommendation.  If you’re consulting for company A and you’ve worked with Company B, their competitor, you can’t just come in and say, “What you’re doing is all wrong.  Company B does it this way and you’ve got to change to that way.”
      8. As humorous as that sounds, I’ve seen that happen many times.  It’s important to figure out a way to share your knowledge without sounding like you’re trying to change the client’s way of doing things with that of their competitor.
      9. But companies do like to hear what their competitors are doing, just to get the perspective.  And it shows them that you have some industry knowledge to give as just that – perspective.
      10. The next key is to spend some energy learning their way, whether you agree with it or not.  You can begin making change recommendations later.  You want to learn their strategy and tactics in order to be able to give them the right advice.
      11. That’s why a lot of companies hire former employees that have gone on to be independent consultants.  They know that the consultant knows their business.
      12. But it’s also why a company will hire a consulting firm over and over again for different projects.
      13. They know that the consultants have the experience of working there and know how they do business.  There is much less learning curve and they can hit the ground running on a new project.
    5. How can you know their business before getting into the company?
      1. There is only so much you can know, but there is so much information available now days.  It’s much better than it was in the pre-internet era.
      2. First off, you can study the firm’s website.  That will lead you to their public image with bios of their executives and a summary of their business.
      3. You also can usually get a link to their annual report if they’re a public company.  That gives you access a fair amount of information including financials.
      4. You can also Google the company and find out a lot of other information about them that they haven’t necessarily published.  Now just one caveat about that, you can’t believe everything you read on their own website or what’s available out there on the internet
      5. You have to take everything with a grain of salt and make your own decision on what you want to believe and what you want to do a little more research on.
      6. Another thing I do is a search on LinkedIn to see if I have any contacts in my first or second level of contacts that have some connection with the company.
      7. If you have a large enough network, you’ll be amazed at how often you find someone who works there or used to work there that can give you some insight for the cost of a cup of coffee.
    6. Do you have any examples of consultants that developed knowledge of the client’s business?
      1. I can give you a couple of examples of deep knowledge of a client’s business.
      2. I know an independent consultant that had over 30 years of experience at a retail company.  He had some very deep and valuable knowledge, but it was only with one company.
      3. Contrast that with a consultant that has maybe only 8 or 10 years of consulting experience in the retail industry.  That consultant may not be as deep in knowledge, but may have worked on 3 or 4 projects at different companies within that industry.  This consultant will most likely have much broader experience in the industry, offer some different perspectives and provide better all-around advice to the client.
      4. And the more the consultant learns about the current client’s business, the more they can apply the knowledge they have of other businesses in the industry to allow them to compare and contrast the different approaches.
    7. Final Thoughts?
      1. Imagine hiring a financial adviser to help you manage your investments and they didn’t take any interest in your long-term goals.  They didn’t care when you want to retire or how you want to live when you retire.  They just invest your money like they do for everyone else.
      2. In financial advising, every story is at least slightly different.  Some people have kids they want to send to college, some people plan on living a simple retirement, others want to build a new house in Florida and live the high life.
      3. If the advisor doesn’t find this information out, you may not be able to retire the way you want to.
      4. The same applies to a consultant. They need to understand the client’s strategy, culture and standard business practices to give them the best service they can.
      5. It’s important to know the industry, but you can’t just assume you know their business if you’re just familiar with the industry.

    Next week’s topic: Professional behavior in consulting

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    One thought on “Knowing the Client’s Business

    1. Thanks for the information. It is important to know about business of the client before consulting him anything about the finance. It will help you to take more sound decisions in light of the client’s benefit/

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