The Key To Competitive Advantage: Operational Excellence

Consulting firms across all micro-vertical segments are feeling the impact of increasing competition, a stagnant Western economy, tighter margins and the changing expectations of customers, partners and employees. As a result, almost a quarter (24%) reporting a decline in revenue – according to a recent global IDC study. Against this backdrop, firms have revealed that increasing revenue is clearly the top priority for the year ahead.

Some relief will be afforded to the consulting sector as overseas work grows rapidly and the UK pulls out of a recession. However, consulting firms will still need to seize every opportunity if they want to return to steady growth and success. This includes improving profit margins, ranked as the second priority for consulting firms according to the IDC survey, as well as increasing revenue – both must go hand in hand.

The survey of 280 global consulting firms pinpoints “operational excellence” as the cornerstone to a successful strategy that will see firms gain competitive advantage, increase revenue and hence, profit margins. Michael Fauscette, Group Vice President, Software Business Solutions, IDC, explains that firms are searching in the right direction: “Competitive advantage can come from a superior strategy like having a novel go-to-market approach, but most often comes from operational excellence.”

Operational excellence also rarely comes from people simply trying harder at their jobs – this can result in the business running very fast, just to stand still. True operational excellence for consulting firms is a result of deep visibility into key performance metrics (KPIs) and the ability to manage critical business processes like resource management, project execution, proposal development, client lifecycle, contracts and all financial transactions.

Michael Fauscette explains further: “A business cannot grow if it can’t win new business. It can’t win new business if the CRM system in place does not support the business’s needs.”

Yet, despite this need for visibility, the IDC study found that many consulting firms do not have a clear view of business performance and execution against set KPIs, with many admitting they could not answer questions asked on this topic. The study found that this was a result of the firm’s inability to report back against measurable metrics for their specific industry needs. The most important metrics for consulting firms to measure against, and consequently have insight into, were identified as revenue, profit margin and profitability per project.

Moreover, the report found that many of the respondents were using a number of disparate and “home grown” business systems that did not support the needs of their project-based business. By using systems that are a poor functional fit for the business, firms are left with siloed information channels and without an overall picture of how projects are performing.

In many cases this scenario leaves firms to guess or estimate how the business is performing and in doing so, they risk a limited ability to spot underlying problems and take corrective action. This can result in inefficiencies and unsatisfied customers, let alone the cost to the business in the long term.

Purpose-built IT systems that track execution against KPIs are core to achieving much needed visibility for consulting firms. Unlike one-size-fits-all IT systems that need heavy customisation and configuration, purpose-built IT systems mine, connect and aggregate data based on industry specific business processes and KPIs.

This offers real-time business insight and clear, relevant, actionable information, putting firms in a much stronger position to track and manage their entire project portfolio. It also enables the consulting firms to make informed strategic business decisions and achieve efficiencies based on delivering the most profitable engagements.

Firms must manage operational efficiency across the project portfolio and against every measurable KPI if they want to succeed. Competitive advantage will be borne out of deep visibility into business performance and actionable insights.

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Neil Davidson is UK MD at Deltek, a global provider of enterprise software and information solutions for professional services firms. An experienced ERP professional, Neil has spent over 12 years in client facing roles for Deltek and prior to its acquisition, Maconomy, as Sales Director and Services Director. He holds an LLB in Law from Nottingham University, and a diploma in Strategy from the Scandinavian Institute of Management.