Analysis of the Current Business Model
a. Customer Selection
Bridgespan’s selection of clients was primarily guided by its mission “to strengthen the ability of nonprofit organizations to achieve breakthrough results in addressing society’s most important challenges and opportunities.” (Grossman et al., 2010, p.1). In the pursuit of this goal, it came to realize that the selection criteria must address pertinent challenges that it faced in itself. These were the creation of a market that hitherto didn’t exist and the delivery of services that would make a difference. It therefore decided to look favorably on nonprofit organizations that “focused on issues related to disadvantaged populations, environmental well-being, and civic engagement” (Grossman et al., 2010, p.3) and target clients with significant social impact and capacity to act and effect change with a high probability of achieving the objectives. In addition it decided to focus on jobs that would yield new knowledge using available resources.
b. Value Proposition
Bridgespan was aware through prior research that although there were solo practitioners, there was no firm in the market that specialized in the delivery of Strategy Consulting to nonprofit organizations at a price that was affordable. It wanted to make a difference and although untested, the firm went into this area of specialty and offered data- driven strategy consultancy work to targeted clients.
c. Go-to- Market
One of the main reasons for the firm to adopt a policy of working with foundations to achieve its goal was that it had encountered the problem that nonprofit organizations were not as financially buoyant as their profit oriented counterparts and in order to reduce the time spent on sourcing funds for projects it was better to go into partnership deals with philanthropic organizations who would then connect the firm with organizations that met their selection criteria and at the same time provide funding for the consultancy work. Bridgespan therefore adopted a policy of philanthropic partnership that involved 60% of consultancy work directly to clients related to the philanthropic partner and 30% of consultancy work reserved for the partner’s work. (Grossman et al., 2010, p.4-5)
d. Delivery Model
In order to achieve the stated objectives it was necessary to organize Bridgespan as an independent nonprofit group with its own board of trustees. This was the best way to ensure that the goals were not compromised in any way, as it would be if it was part of the mother organization, Bain and Co. In addition it would enable the firm raise funds from the philanthropic community. A partnership with Bain was then executed with the aim of sourcing the expertise needed to undertake such specialized consultancy work in addition to the development of its own human resources for the delivery of the consultancy services.
e. Value Capture
The partnership agreement with Bain included terms would enable Bridgespan to deliver qualitative work to nonprofit organizations without charging economic rates. Under this accord, Bain would provide highly qualified and experienced consultants that would not have been accessible to new nonprofit organizations with limited resources and in addition would accept 25% to 40% reduction in remunerations during a six-month tour of duty with Bridgespan. In addition Bain would provide training and other development opportunities to the professional employees of Bridgespan. Bain also made a commitment of $1.5 towards the launching of the project. Finally, Bridgespan’s budget was also to be supported by donations from philanthropic organizations to cover “start-up costs, provide subsidies to its consulting work, and begin developing its own intellectual capital relevant to the nonprofit sector”. (Grossman et al., 2010, p.3)
The synergy between strategic consultancy and knowledge businesses for Bridgespan can best be appreciated by understanding the goals and the philosophical outlook of the firm. The firm is a nonprofit consultancy group with the goal of enhancing the capacity of nonprofit organizations to address the most important challenges plaguing the society and give opportunities to the underprivileged in the society. Bridgespan is more interested in the maximization of the impact their clients will make on the society and the results obtainable that are directly attributable to the services rendered to such clients. Unlike the traditional profit oriented cases in which success is measured by growth, the firm believes that the impact and the knowledge generated in the course of the work are the yardsticks applicable for measurement of its performance in the pursuit of the goals to which it is committed.
To this effect the firm embarked on the provision of data driven strategy consultancy services that would make a difference to the performance of nonprofit organizations. The services offered would combine “deep knowledge of the nonprofit sector with the best thinking on strategy, leadership, and effectiveness from the for-profit sector.” (Grossman et al., 2010, p.2) Bridgespan would also develop industry expertise in the process and build a “critical mass of work to influence the performance of the overall field, and accumulate knowledge that would be relevant to other organizations in the field.” (Grossman et al., 2010, p.3) Therefore, knowledge will play an important role in the maximization of impact of the strategic consultancy services.
In fact the firm believes that the key to the potential maximization of the impact of the strategic consultancy services lies in the “creation and distribution of knowledge about nonprofit management ideas and practices.” On the other hand, Bridgespan’s policy relating to the selection of the type of clients and the type of consultancy work to be pursued ensures that new knowledge is generated during the course of the research and client engagements effectively establishing a synergy between consultancy and knowledge businesses.
Bridgespan was quite aware that the focus on impact meant that the synergistic relationship between the consultancy and knowledge arms of the organization had to be strengthened. As mentioned earlier, Bridgespan was organized as a non-profit consultancy group as a means of delivering effective and qualitative services in line with the emphasis on impact. The Consultancy Business Services were delivered along those lines and in order to achieve maximum impact, the Knowledge Business will have to share the same goals and aspirations and that means being equally non-profit under the same Board of Trustees.
To enhance the delivery capabilities Bridgestone therefore decided to place both on an equal footing by allocating equal percentages in the budget for both functions and sharing relevant delivery capabilities. In so doing adequate resources were made available to enable the codification of the experiences and knowledge gained in the course of the strategic consultancy services.
Apart from the budget, the delivery capabilities from the consulting arm of the business that could be shared included the constitution of the consulting teams that were engaged in each and every project. At least one member of each consulting team could be used to facilitate the work of the knowledge department by capturing data that could generate new knowledge. In addition, the resources used by the consulting teams for their assignments included many telecommunications gadgets and systems that engage and interact with clients in cyberspace. The Internet facilities and the Bridgespan Intranet system are good examples. However, not all resources can be shared. The Knowledge arm, for instance, will want to collaborate with third party entities in the pursuit and dissemination of knowledge. This will require dedicated systems that will be independent of the in-house consulting teams. In addition, the Knowledge department will have to recruit experts in Information Technology that will be engaged not only in the backroom but also in the planning activities of the knowledge business.
The Development of New Capacities
From the beginning, Bridgespan had a strategy of maximum impact and as the client base expanded, it gained more insights into the needs of the clients. It became evident, judging from the diversity of the backgrounds of top executives and the numerous paths to the top in organizations, that there was a great demand for executive education and that the most clients needed assistance in the development of their top executives to enhance their capacity to assume higher responsibilities in the hierarchy of the organizations.
The Bridgespan group decided to start an Executive Education Business that will be tailored to meet the needs of its diverse clients. In order to be effective however, Bridgespan will have to initiate custom-designed programs that will teach promising executives the art of obtaining relevant information and making business decisions by challenging basic assumptions, analyzing strategic initiatives on receiving valuable input from research work, and translating new knowledge acquired into tangible actions that will result in positive gains for the organization.
This is a complex operation that requires both a prior panoramic and comprehensive review of the details involved in the Executive Education Business to be able to draw up an inventory list of the capabilities and resources that will be needed to successfully plant the enterprise. In the first place, Bridgestone will have to work closely with clients to identify their requirements and map out program strategies and objectives to address them and align them with the main strategies of the organization.
So Bridgespan must develop a capacity to do thorough and flexible Assessment Methodology. This will require employing dedicated professional staff that will have adequate relevant experience in the field. The training consultants so employed must be able to design programs that are custom made for each client and flexible enough to accommodate a diversity in situations that each client is in. The program design must include all the latest ideas and techniques in the Executive Education Business and must be of equal standards, if not better, with the leaders in the Industry to sustain the interest of the clients and increase the chances of obtaining increased numbers of returning clients.
The programs should also include the use of the latest applied learning techniques. Hence Bridgespan will have to build capacity to achieve this by acquiring the latest electronic and media resources that will include both hardware and software. There will be a need for a high level of interaction between clients and training consultants. This interaction will have to be both in the physical and virtual domains. Bridgespan must therefore acquire classrooms in addition to the other telecommunications facilities that will enhance teacher-student interactions.
There are three distinguishable models prevalent in the Executive Education Business. The first type focuses on the maintenance of the status quo and the design takes into consideration the current strategic objectives of the organization with a view to continuity in the efforts of the organization to achieve these. The second type attempts to develop top executives in their abilities to manage changes in the operational methods to a better one while keeping the strategic vision in focus. The third model of Executive Education programs prepares top executives for changes in the strategic outlook of their respective organizations. Bridgespan’s focus is on impact and its clientele is comprised mostly of non- profit organizations that are new in the market and in addition they have visions that will not change for a considerable length of time to come. It will therefore be engaged mostly with the first two models described above.
A High Level Model
The Executive Education Business is a highly competitive one. There are numerous first class Universities like Harvard that lead the way apart from the giant corporate businesses that offer similar services. For Bridgespan to survive, it will have to develop a model that presents to its clients a course delivery system that matches such standards. A good model currently in practice by most large and successful Executive Education organizations and which is recommended has the following shape.
The participants who are top executives, usually with college degrees, are assigned with a senior consultant who is designated as an advisor rather than a teacher. He plays the key role of facilitating the effective development of the participant and assists in professional learning by guiding and coaching the client. In order to develop the participants skill in the practical subjects of decision making, corporate planning, critical analysis and communication, the Advisor sometimes takes on the role of devil’s advocate to oppose the thinking of the participant and on some other occasions he or she will concur during debates about topical issues. This, it is hoped, will strengthen the ability to employ critical thinking in arriving making decisions.
The courses should be designed to include lectures from industry leaders and academicians. Seminars as well as the presentation of print materials like lecture notes, books and relevant publications including films and other visual aids must be integral parts of the course. These materials must be carefully chosen to present the right perspective for each participant. They must include readings that provide practical experiences that are relevant in corporate planning environment.
The participant will be tested by a practical assignment that will include case studies of real life situations similar to his or her own environment.
Since each course will be custom made, the course delivery method will vary according to the needs of each participant. However 4 steps will be clearly identified and agreed upon during negotiation stage. These are
1. Customization Details: The Advisor and the participant must understand each other and agree on the scope and focus of the program which should include the project that will be used for assessment.
2. Knowledge Transfer: This will be delivered by the use of standard essential concepts that bear direct relevance to the scenario of the participant’s home organization.
3. Creation of Knowledge is to be achieved by carrying out an assignment that involves a real –world situation.
4. Feedback: The progress of the participant will be monitored to provide feedback to Advisor. Feedback is also important from the point of view of the participant
Three Economic Metrics
The profitability and the economics of the model described above will be great influenced by the ability of Bridgespan to control the main metrics that impact on the performance of the executive education business. The first thing to be concerned about is the total operating costs per participant. This will include both the variable cost and the fixed cost apportioned to each course. The fixed cost include items like rent of classroom, depreciation of fixed assets directly attributable to the Executive education business like projectors and salaries of support staff, while the variable cost will include the professional fees calculated on the basis of the number of hours spent on each participant by the Advisor and the cost of course development.
The number of participants served per annum is the next metric that will make a difference. Management of Bridgespan will have to use its Sales department to generate enough contracts that will make the business break even.
The third most important metric is the price charged per participant. If Bridgespan is to run the business on the basis of self sufficiency as opposed to being supported by philanthropic organizations, it must charge economic prices that will at least cover the full cost of providing the service to the participants.
The Relevance of the Eden McCallum Model
McKinsey, Eden McCallum and IPA are models that are applicable depending on the strategic outlook of the company. In the model above, focus was placed on flexibility in the design of the model. It was envisaged that there will be a wide variety of clients with many different types of scenario to contend with. Courses will be designed to meet with individual needs of participant. In such a case the McCallum model of doing business in the Executive Education Business seems most appropriate and likely to offer Bridgespan the most powerful insights to improve in the market.
A close look at the characteristics of the Eden McCallum model reveals the following useful information that will help Bridgespan.
1. The firm eliminated the cost of idle time when consultants were not directly engaged with participants by hiring freelance consultants thereby reducing on total administrative costs.
In fact a lot of non-core activities like the production of documents and online booking services were outsourced to cheaper labor markets.
2. Eden McCallum invested only on technologies that were very basic but sufficient in capacity to track clients and generate spreadsheets for the growth of the database system.
3. Gardner & Eccles states that: “The fees for an Eden McCallum consultant were about half to one-third of what a client would pay for an equivalently experienced consultant at one of the big strategy firms like Bain, Boston Consulting Group (BCG), or McKinsey. (See Exhibit 3 for cost comparisons.) Consultants received roughly two-thirds of their charged per diem rates, with the remainder going to Eden McCallum” (Gardner & Eccles, p.4)
This low cost model is particularly relevant to Bridgespan’s clientele base because most of the organizations that it was committed to serve in its strategic mission were non-profit entities that were just starting up. Most of them had problems in raising funds for projects and that was why Bridgespan decided on strategic arrangements with philanthropic organizations to save time in the process.
4. The bulk of its engagements were tailored work.
Eden McCallum concentrated on a relationship-based model in which the core part of propositions made to clients included the offer of projects that not only engaged the participant intellectually but also offered the desired flexibility in design to utilize the consultant in such a way that his or her skills and experience will be most useful in attending to the needs of the participant.
5. The firm also created a long term relationships with freelance consultants by taking positive steps to understand the drivers of productivity amongst hired personnel thus sustaining a pool of readily available freelancers.
6. At Eden McCallum creativity was not limited only to the contents of the course but also to client services. Clients were able to choose not only the size and composition of the team they would want for each project but could also dictate the timing of the projects. (Gardner & Eccles, p.8)
7. Minimal central office personnel were maintained in order to beat the major consulting firms on cost. Gardner & Eccles describe how this was achieved using the client- facing Consultant and client-facing Partner method. (Gardner & Eccles, p.10)
Finally it must be remembered that the Eden McCallum firm also employed the synergistic effects existing between the various arms of the organization to the benefit of the Executive Education Model.
Part III Short-Answer Questions from the Readings
Attributes of management consulting projects differ according to the class of projects. Basically there are three broad divisions and these are identified as Brain, Grey and Procedure projects. (Alcacer & Rivkin, 2008, p.1). The Brains Projects are characterized by their uniqueness and may involve new concepts and ideas that require skill and intelligence to attend to. It is a project that needs solutions that are dedicated to the peculiar circumstances of the client. This type of project is usually handled by senior consultants and offers little or no opportunity for junior consultants to attend to. A good example is a client with a new approach to business that has not been tested before. The Grey hair projects require experience and concern issues that are similar to what the consultant has probably dealt with in the past even though the client may be unfamiliar with the type of problems presented. They are general in nature but require the detail analysis to be handled by senior consultants. The knowledge bank can used to predict steps in the project which can then be handed to junior consultants for execution. The third type, the Procedure projects are such that the problems involved are usually general in nature and the details are well known to consultants. Solutions that have been documented and proven are readily available and the task can be programmed and handed to junior consultants.
Exhibit 2 lists other attributes to include sales pitch, training and marketing apart from the character of the client problem and the opportunity for leveraging mentioned above.
All commercial business entities are usually concerned about profitability however the nature of each business is the primary agent that determines the set of drivers that will maximize profitability. The revenue generated must grow faster than operational and administrative costs in order to sustain the business. In the case of a large management consulting firm, the revenue generated comes mainly from the income generated from providing different types of consultancy services to different types of clients. So in order to maximize profits the firm has to develop a strategy that will be an optimal mix that features the development of expertise in particular sectors and the type of clients to serve in such sectors. The management of the firm must also decide on the right mix between international and local commitments by looking at the expected returns as it relates to fixed and variable costs of setting up operations both within and outside the country. Generally, operating costs for management consultancy assignments are directly proportional to the number and type of tasks undertaken hence the profitability will depend on the rate of increase of this variable in comparism with the revenue generated.
Also the internal organization of the management consulting firm is a critical factor in the profitability of the organization. The company must pay particular attention to the profit generated for the company by each partner and must monitor the profitability performance of each consulting team by proper management of the number of hours consultants spend on client work. The profitability will depend on the leverage and the professional fees for each consultant. The structure of the consulting teams is undoubtedly one of the most important drivers of profitability. These figures must be carefully offset against the billable hours to obtain maximum profit without compromising the quality of work
India offered a great opportunity for Grail Research, a member of the Monitor Group whose Chairman, Mark Fuller, was enthusiastic about tapping into the Indian market for Strategic Consultancy and Research because he thought major opportunities awaited the Monitor Group in India. Fuller and his team knew that India offered a vast, educated, ambitious workforce at relatively low wages. However there was a flipside to the coin. One of the major characteristics of the Indian scenario that weighed heavily against the idea was the high rate of labor turnover which resulted in frequent leadership crisis and also affected institutional memory.
Grail Research was not spared from this problem for it lost one of the strongest Indian Managers in the fluid labor market. In addition the high rising cost of labor did not match the productivity of local staff. The firm also suffered from the lack of adequate business structure comparable with that obtainable in the United States or Europe. This, coupled with the traffic chaos and frequent power outages were a nightmare for local managers.
The difference in time zones and high cost of communication also took a high toll on the firm. Even the cultural difference was also a downside of the decision to offshore the research team in India because it took some effort to understand the philosophical outlook of the workers. As Colin Gounden explained, “My model is that India is total chaos. You have to over-engineer everything just to get normal work done. You need your own drivers, backup power supplies, facility managers, and guest rooms, or you’ll never be able to do world-class work. You have to take the everyday burdens off associates so they can do their work well.” (Alcacer & Rivkin, 2008, p.8)
PART IV Short Essay
The management of a consultancy firm is a complex issue that requires flexibility in approach and a simple yes or no answer is inadequate to the question of which model is best to adopt. Consulting firms have to balance several factors to arrive at an optimal choice of which organizational structure to adopt. What they will not want is to burden the top executives that are critical to the achievement of the stated goals and objectives of the firm with time-consuming functions that are routine in nature and can be allocated to personnel in support departments. The most successful consulting firms are those that organize their human and material resources in a manner that gives a high probability of achieving the goals and objectives of the organization and in addition ensure effective growth and profitability. The mission statement and the strategic plans are therefore the primary objects of consideration in the creation of a management structure for the firm. In addition the size and distribution of the firm’s operations will dictate the convenient structure to adopt.
That notwithstanding, it must be realized that management consulting firms operate in highly competitive environments. They have to contend with competition both in the quality of the output of work and in sourcing of the professional staff to deliver the results. Therefore the firms face special challenges of maintaining high standards of work and at the same time maintaining a cream of the best professional staff that must be motivated and not frustrated in any way. Therefore, the structure adopted must encourage creativity and flexibility and reduce inefficiencies. An environment in which Partners are able to exercise their skills, intelligence and experience and in addition are able to transmit these down the lines by tutoring and guiding professional consultants under their care without being bogged down by administrative details which include sales, will most likely result in the delivery of high standards of work leading to recognition and higher value of the firm in the business community. This is turn is likely to translate into profitability and growth.
All things being equal, a large firm that has a contract management department featuring experts that are charged with sales is more likely to obtain faster growth rate and better profitability figures than a similar consultancy firm that combines the functions of sales with consultancy project management in a Partner. The contract management department will relieve the Partner of the burden of sourcing and executing contracts with clients including compliance reviews. On other advantage of this is that the Partner’s time is more valuably utilized and the total hours that would have been used on the sales and execution of contracts will be transferred to staff at a much lower rate of pay thus increasing the per- partner profits and enhancing profitability.
IPA applied this concept by recruiting Field Sales Representatives who were college graduates with a few years experience. These were members of the Business Coordination Unit that was responsible for sales and marketing. The amount of work they did within a short time was in no way comparable with what a Partner with other critical responsibilities would have achieved. (Nanda et al., 2004, p.7) This led to faster growth rate and a reputation of which management was very proud of.
McKinsey, Bain and BCG are well advised to separate Sales from Management consultancy services on the assumption that profitability and higher growth rates feature high in the objectives and strategic plans of the firms. In fact this is in line with the philosophy of specialization of skills that has propelled capitalist economies to do much better than the communist societies.
Gardner, H. & Eccles, R.G., 2008, “Eden McCallum”, Boston: Harvard Business School Publishing.
Grossman A., Greckol-Herliich, N. & Ross, C., 2010,“The Bridgespan Group: Chapter 2”, Boston: Harvard Business School Publishing
Alcacer, J. & Rivkin, J. W., 2008, “Monitors Opportunities in India( A)”, Boston Harvard Business: School Publishing
Alcacer J & Rivkin J W., 2008, “Monitors Opportunities in India( B)”, Boston: Harvard Business School Publishing
Nanda A, Delong, T & Mullick M., 2004 “International Profits Associates”, Boston: Harvard Business School Publishing