Management consultancy isall the rage, but providingthe right solutions is whatseparates the big boys fromthe pretenders.
THE management consultancy business is a tale of mystery and imagination.
Nobody seems to know quite what it is, let alone whether it delivers value for money. The consultants do their best to maintain the mystique? And yet hard-headed business people the world over are willing to spend millions on consultants’ advice.
That’s what The Economist wrote on a global survey of management consultancy almost a decade ago – a time when China was witnessing the early stages of the phenomenon.
China’s management consulting industry was largely born in the late 1980s, when some multinational firms, such as Boston Consulting Group (BCG), followed the footsteps of their multinational clients.
As in so many other areas, there was a boom.
The country’s consulting sector chalked up 50.3 billion yuan (US$6.3bil) in 2005, compared with 2.1 billion yuan (US$263mil) in 1997, when the country first conducted a national survey on the industry, according to the National Bureau of Statistics (NBS).
“The consulting industry is still in its early days in China, but like everything in China, it is growing very quickly,” says James Hemerling, BCG’s senior vice-president and managing director for its Greater China operations.
But the industry is fragmented, and as with auditing or human resources, faces a severe talent shortage.
By the end of last year, there were 45,000 consulting houses in China, of which only 140 were foreign firms, according to NBS figures.
The figures, though, can be misleading. “Many of those are workshops operated by two to three people,” says a partner at H&J Vanguard, one of the biggest domestic consulting firms.
Though dwarfed in numbers, the small pool of foreign firms is believed to dominate the market, industry players say, though there is no precise number on the extent.
“Multinational firms have grabbed almost all high-end customers and mega deals in China due to their well-established brands and, in some cases, clients’ gullibility,” says Zhang Jiangyan, CEO of Adfaith Management Consulting Inc, a leading domestic firm.
So why is management consultancy doing so well? The answer, as The Economist concluded in 1997, could well apply to China, and can be summed up in two words: complexity and uncertainty.
Complexity creates confusion; uncertainty creates fear; and both create a booming demand for outside advice.