Line of Business

Consultants Study. During the crisis, many companies optimized their processes and reduced costs with assistance from major consultancies. Today, industry knowledge is primarily in demand – and that’s where small specialists often have more to offer

Text: Matthias Lambrecht

No business name on the door; company headquarters are a few offices in a business center in Cologne; the bosses sometimes wear jeans and colored T-shirts under an open dress shirt. At Stratley Consultancy, they don‘t bother much about the usual fuss of the consulting industry. “For us, prestigious premises are not so important“, says the partner Till Knorr who, with his co-founders, has rallied around him a particular type of consultant: ”Those joining us aren’t interested so much in a career or power; they rather want to work on substance and contents above all. Our people are more interested in working with top managers on problem solutions for globally active corporate groups than managing 20 people in consulting“, says the partner Walter Bürger-Kley.

Stratley’s clients like that style – although they are, without exception, from the conservative chemical industry. The consultancy is entirely focused on this sector of the industry and, within a few years, had acquired the reputation of being able to take on the really big competitors. “Most internationally operating chemical groups from Germany meanwhile are our clients“, says Knorr.

How good the firm’s reputation really is has been documented by the most recent comparison study by the Wissenschaftliche Gesellschaft für Management und Beratung (WGMB – Academic Society for Management and Consulting) exclusively available to Capital, the trade journal. The team around Professor Dietmar Fink from Bonn evaluated the experiences of 481 German top managers with management consultancies. The results were clear: With experts from the chemical industry, Stratley holds the top position – ahead of globally leading players such as McKinsey or Boston Consulting.
Stratley’s idea of focusing entirely on one industrial sector had been very farsighted. When major groups or small and medium-sized enterprises seek external advice, they will chose specialists ever more frequently. “This time, knowledge of the market and industry sector had been up front in the evaluation by consultancy clients“, says Fink. “That plays into the hands of specialists.“ When during the global recession, process optimizations and cost reductions had been a priority, there is now a greater demand for more forward-oriented strategic consulting – for example, to adjust to technological innovations or regulatory interventions. “Many companies are uncertain as to how things will develop in their sector.“

Every three years, Fink and his team publish the results of their consultants tests in which clients evaluate competences and approaches in various specialized areas. In past years already, the Bonn-based institute had identified hidden champions enjoying, in their special fields, a higher reputation than the established major players on the German market.

Ranking ahead of the industry giants were, this time again, for instance the Düsseldorf -based Kerkhoff Consultancy specializing in purchasing and procurement and the marketing and sales specialists from Homburg & Partner.

What was more important in the current tests versus those of the previous years was the consultants‘ knowledge of the industrial sector and their ability to detect market developments early on. No wonder that, this time, industry sector specialists made it all the way to the top. The Munich-based consultancy Solon was able to convince the managers from media and telecommunications groups. Cepton – also established in Munich by former Roland Berger consultants in 2006 – has been successful in the pharmaceutical industry. And The Advisory House with about 80 consultants for the energy sector is way up front not only in terms of quality. Measured by team size, the Zurich-based consultancy also operates on the level of the sector leaders in Germany, Austria and Switzerland.

All hidden champions have partners and consultants who had started their careers in the major companies. For five years, Dirk Mulzer handled utility companies at Accenture before he founded, in 2003, The Advisory House with a handful of industry experts. “We all wanted to work just for the energy industry exclusively“, he explains the step to independence. No longer part of a big organization but rather closer to the client. “We act and think entrepreneurially and we are committed foremost to our clients and to ourselves. Unlike some of the big-name players, the challenger does not have any overly rigid requirements. Allowed is what will help the client. “We understand ourselves as a melting pot of different cultures of thinking – in qualitative terms, conceptionally, and in implementation“, explains Marc-Felix Otto who, as a partner, is responsible for the business in Germany and had come from McKinsey to The Advisory House .

At 28 years of age, Martin Weiss had once been the youngest project manager at McKinsey in Germany. But at the start of a new era in the mid-90s with the digitalization of the media and telecommunications sector, there was no keeping the young consultant at the renowned shop. With a few of his former fellow students from Harvard who had also landed with major consultancies, he decided: “We have to get into that!“

Solon’s start in 1996 was risky. But the young founders made up with enthusiasm what they lacked in experience. The drop-out consultants were able to get in with a bit of luck and due to the general perplexity and indeterminateness in media and telecommunications groups: “We were on a mission and, as founders, we were working with CEOs who believed in us”, says Weiss. “That kind of a start was possible only in this situation where a new industry emerged.“

Solon provided consulting for the first digital TV station DF1 which was later integrated in Premiere; and Solon accompanied the mobile services provider Debitel all the way to its going public. Meanwhile, Weiss and his 60 colleagues are among the most sought-after consultants of European cable network operators; their clients include media groups like Burda and Ringier.

Weiss is meanwhile sitting with 15 likeminded consultants in the London office which had been opened up in 2009. From its conference room, he looks onto the workshops of Savile Row tailors who clothe the London City bankers. From here, Weiss cultivates his contacts to the financial investors headquartered along the Thames. “Here, you’ll find out about the next major deal when you go to lunch“, he says. Nine of ten of the world’s largest private equity funds seek advice from Solon‘s experts before they will go on a shopping spree in the media and telecommunications industry. And of course, they no longer get consulting from passionate youngsters but rather from experts having moved for years in the industry. “Nobody here will understand Solon as a ‘flow-through heater’ for his or her own career“, says Weiss. “The average length of company service is significantly longer than with major strategy consultancies.”

The small firms have a rather simple success formula: Experienced consultants who will burn for their particular industry, who are able to discuss things at eye level with corporate management boards and not only elaborate and develop problem solutions but can also implement these solutions with the client’s management. There is just one difficulty: The contract must be awarded to them. “It’s just brutally difficult to prevail and push through with companies who don’t know us yet“, confesses Stratley partner Bürger-Kley. By now, corporate groups regularly put their projects out for tender – and a decision for one of the internationally renowned companies is always a safe bet in this case. “We simply don’t have the resources of those giants who are able to score with their global networks.”

But managements of major groups are increasingly more willing to hire smaller specialists. “Many former consultants are meanwhile working in the industry, and they have good judgment. There is a greater potential now that challengers of major consultancies will be given a chance“, says Eva Manger-Wiemann from Zürich’s meta-consultancy Cardea which assists enterprises with tender invitations and the selection of consultants.

Many of the major corporate groups are anyway no longer interested in classical consultancy subjects. By now, they are using their own in-house experts and intelligent software programs for cost control and the optimization of production processes. “Today, top managers of major group companies are looking for people with a lot of understanding for the industry who will get involved in substantive discussions and also venture to be in opposition and contradiction”, says Michael Müller, partner at Cepton.

Müller used to be responsible for Roland Berger‘s global pharmaceutical business and then worked for Accenture for a few years before founding, in 2006, with two other former Berger employees the consultancy specializing in major pharmaceutical companies and manufacturers of medical devices. The Cepton partners rely on experts who are able to show already some years of experience in the industry – either as a manager or a consultant. “Many clients are no longer content to have a group of young people busily scurrying about their enterprise for two months”, says Müller, “instead, they want consultants to critically scrutinize their own employees’ knowledge and enrichment by external expertise.”

Warning shot for established companies

Major consultancies will have their partners fly in from all over the world to give their bids more weight and prominence in tender invitations – in contrast, hidden champions exclusively rely on consultants who will also take over the project work in the end. “We are able to tell our clients: Look, these are the people you’ll also see again on location”, explains Müller.

Cepton provides methodical approaches and coordinates the collaboration among various departments in the client’s enterprise. “In a good project, we have a ratio of 100 man-days from us to about 300 man-days from the client”, says Müller. “That’s how consultancy will be more effective, and there will be a higher acceptance of our work in the enterprise.”

If this were to work out for the clients, pressure on major consultancies would increase to become more attuned to their specialized challengers in competition. “They all must sharpen their profile and prove why they are better than others – even the big ones“, says meta consultant [Ms.] Manger-Wiemann.

The established consultancies already received one warning shot: In the current WGMB comparison, the interviewed managers selected OC&C as the best consultancy for strategy development – ahead of Boston Consulting, McKinsey, Bain and Roland Berger. “That’s an exceptional result“, says Professor Fink. “And probably the worst that could have happened to the major players.” After all, that’s the industry‘s showcase field of expertise.

In recent years, OC&C has grown from the merger of a British and a German consultancy to a company with worldwide 500 employees and 65 partners. The strategists are set up broader than the hidden champions with a purely industrial sector focus. However, they also have three clear focal points: commerce and consumer goods; media and telecommunications; as well as construction and the real estate industry.

Moreover, the company acquired a good reputation among financial investors and is one of the leading European consultancies for takeovers and mergers. “Regarding requests for deals, we regularly have to decline because we have already been hired for the other side”, says OC&C partner Chehab Wahby.

Despite its size, OC&C still puts their consultants‘ personalities in the foreground. “You can hide behind a strong brand“, says Wahby. “But we can’t do that, and accordingly important are the personal qualities of our people.” And they seem to fit. Auditing companies wanting to get into the business with the strategic consultancy already approached OC&C because there is more to be earned with them.

Offers have so far been in vain. “Many partners from major consultancies have come to us because there had been too many people there who told them how to do their job”, says partner Georg Janssen. “If OC&C were sold, we would quickly lose the bulk of our partners.“

Study – How the ranking comes about
A total of 481 top managers of major groups and of small and medium-sized enterprises were interviewed for the evaluation

Candidates It’s not possible to apply for the Hidden Champions Study. The companies analyzed are selected by an expert committee of market analysts, meta-consultants and consultancy clients and scrutinized by Professor Dietmar Fink with his team of the Wissenschaftliche Gesellschaft für Management und Beratung (WGMB).

Deciders Regarding their experience with management consultancies, top managers from German companies were interviewed, with company sales of more than EUR 500 million respectively. The statements from 481 executives were incorporated in the WGMB assessment.

Method Companies had to meet three conditions to qualify as hidden champions: They should not be known to more than 15 percent of those interviewed without any hints given. The percentage of their clients which also work together with the three established consultancies – McKinsey, Roland Berger and Boston Consulting – must be at least 50 percent in the sample analyzed. Finally, their competence in a special discipline must be rated higher by the companies‘ executives than that of the major consultancies.