Food for thought: It's what you know that matters

Being a training provider to many consulting practices we are privileged to get to know them behind the scenes. One of the questions we ask on selling skills courses is, "What distinguishes you from your competitors?"

The answer, interestingly, is usually the same from all practices and of this ilk "we are easier to do business with!"

So where does competitive advantage truly lie?

"People are our greatest asset" is a mantra in company reports, and in economic terms debatably the only asset of a consulting practice. But do they give rise to competitive advantage?

The current merry-go-round of job changes in the consulting world would imply not. Check the backgrounds of consultants in any firm and you will find many with previous experience in other practices. Of course there will be stars who create their own practice within a practice, but this is still not the basis of competitive advantage.

Historically, it was who you know rather than what you know that determined access to projects and, of course, an excellent network is essential for commercial success. But while this might get you on the tender list, it does not necessarily secure the sale. Increasingly, purchasing departments are involved in the buying decision and applying rules based criteria. A good relationship is helpful - for example, it can be useful in gathering intelligence to formulate a proposal accurately meeting the clients' needs - but it will rarely be the sole criterion of selection.

As for price competition, there are certainly differences in fee rate according to the size of practice. The Management Consultancy Information Service does an annual survey, which in 2005 showed that the average daily fee rate for large practices was 50% greater than than for small practices. But buyers may be considering a scale of project and level of risk that might exclude smaller practices.

Penna research for the IMC last year concluded that two of the most important factors affecting the choice of consultancy were sector experience and functional experience - i.e. what you know. Collecting, storing and disseminating knowledge has always been important in a consultancy practice. Now it's official that it's what you know that matters.

Calvert Markham