Medium-sized companies are much more reluctant to work with external consultants than large corporations. The reason is particularly noteworthy: While large corporations use the services of consultants at a very early stage, i.e. for problem identification, consultants in medium-sized companies are usually hired to solve previously identified [1].
Moreover, consultants in medium-sized companies are generally less in demand than in large corporations and among public-sector clients. In addition to a lack of expertise, fear of disclosing sensitive company information, bad experiences and fundamental rejection play a significant role [2]. Surprisingly, the expected costs are not among the top five reasons, but should be relevant as part of a cost-benefit analysis.
However, especially in difficult times, external advisors can make a significant contribution to maintaining the competitiveness or even the continuation of the company. For example, a tough, cost-oriented restructuring is usually not part of the daily routine of a medium-sized company, but it can become unavoidable in order to save the business. The same applies to securing supplies and developing new suppliers.
Medium-sized businesses and management consultants
With a turnover of almost EUR 35 billion and more than 15,000 companies, the German consulting market is one of the largest in the world [3]. Since the professional title of management consultant is not yet protected in Germany, there are also some black sheep in between. This is evidenced by the comparatively high dissatisfaction of clients with the performance of consultants (38%) [4].
Several regularly published rankings may provide orientation. For example, the business magazine brand eins and the statistics portal Statista produce annual leaderboards according to industry and field of work. Together with the Wissenschaftlichen Gesellschaft für Management und Beratung and, the editors of manager magazin compile an annual overview of the “top consultants” aimed to help small and medium-sized companies in particular to select the right consultant. WirtschaftsWoche, which is part of the Handelsblatt Group, has the Bundesverband Deutscher Unternehmensberater as a partner and awards the “Best of Consulting” prize, among others in the segment “medium-sized businesses”.
The management consultants also know about the relevance of medium-sized businesses for their services.This is because, on the one hand, more than 50% of the turnover is generated in this segment [4] – but on the other hand, it is also due to the growing influence of purchasing on the sourcing and selection process at large corporations. While almost all large DAX-listed companies have their own teams for the procurement of consulting services, the selection of consultants is still a “matter for the boss” in many SMEs. The maturity level of procurement of consulting services is still very low for companies below an annual demand threshold of 25 million EUR [5].
While large companies are fully committed to technology in procurement, digital instruments for service provider preselection, preparation of project specifications, competitive project sourcing and performance monitoring are hardly used in medium-sized companies [5].
Potentials of digitalization
Medium-sized companies are often convinced that they are able to recognize, describe and also solve problems very well themselves. At the same time, they appreciate the problem-solving competence of their consultants and rely on external service providers when a faster project implementation is desired, when there is not enough in-house capacity for implementation or when a neutral assessment of internal issues is desired [6].
Conventional consulting mandates can be roughly divided into three phases:
- Analysis | Identifying and describing problems and issues
- Design | Deriving possible solutions for problem solving
- Implementation | Implementing pre-defined measures
Thus, the digitalization of classical consulting activities of phases 1 & 2 comes in useful to medium-sized companies. Using the appropriate technology, they can already identify, analyse and describe problems themselves and develop solutions. For the implementation of measures, the necessary consulting expertise can then be sought and used in a very targeted manner. And because consulting is then more implementation- and thus result-oriented, it can also be better compensated fully or partially based on success. Following the motto “no result, no money”.
The digitization of individual classic consulting activities, especially in analysis, bears immense potentials. Three examples of young German technology companies illustrate this further:
- According to Gartner, CELONIS offers the market-leading Process Mining solution. The software of the Munich-based company makes millions of consulting hours in process analysis obsolete every year. Afterwards, management consultants use the data generated by the software to improve processes such as order processing.
- With SCOUTBEE, companies find alternative suppliers worldwide and identify risks in the supply chain. The company located in Hausen near Würzburg has created a unique artificial intelligence to shorten supplier discovery cycles. Through the targeted use of experts, companies can then strengthen existing supplier networks and develop new suppliers.
- CANEI.digital offers a solution fully tailored to the needs of medium-sized companies. With their software the company from Herdecke offers intelligent KPI analytics and automated financial planning. Both are classic consulting topics that are now fully digitized. To implement measures generated by the algorithms, companies can then approach experts in a targeted manner.
As you can see, technological innovation in Germany regularly comes from outside the big metropolises, like many medium-sized companies.
In addition to the above-mentioned studies, there is also technological support in the selection of suitable consultants. On the one hand, companies like COMATCH, HAUFE ADVISORY and FREELANCER.DE offer platforms for the selection of suitable consultants, on the other hand APADUA’s specialized software suite supports businesses to hire the right consulting firms for their specific problems.
Conclusion
Whatever decision you are faced with as a medium-sized business, it can be worthwhile to seek external advice. If you proceed in a targeted and professional manner when identifying problems, selecting partners and monitoring performance, the combination of artificial and biological intelligence offers you many opportunities to secure your own economic success. And if you rely more on local start-ups, your data will not only remain in Germany, you will also strengthen our economy.
Discuss with us!
What are your thoughts on the consulting industry?
What potential does the digitalization of consulting services hold?
Companies mentioned
CELONIS | Process Mining
SCOUTBEE | Supplier Search and Risk Management
CANEI.digital | Digital Controller
COMATCH | Online Freelancer Network
HAUFE ADVISORY | Online Freelancer Network
FREELANCER.DE | Online Freelancer Network
APADUA | Find, hire and monitor consultants digitally
Sources
[1] DIKMU 2007, [2] IFM 2010, [3] BDU 2019, [4] WGMB 2018, [5] APADUA 2020, [6] ZBW 2010
