How Effective Demand Management Will Shield You From Mistakes?
A few years ago, Joseph T. Hallinan wrote an amazing book called “Why We Make Mistakes,” which became a huge hit. It explained in a precise and entertaining manner how human it is to be wrong, and the examples from various industries and life were plentiful and astounding. He didn’t specifically write about Consulting, but this is what we’d like to discuss in this post.
So let’s get started!
“The real currency of life is not money; it’s time.” – Joseph T. Hallinan
That’s one of the most memorable quotes from the book. And while time is universally considered the most valuable thing, money is maybe the second.
Budget vs. Value: Assessing the written proposals is the first step to selecting your consultant for the project. Take the time to review all the proposals, grade them, and identify the most promising ones.
1-Getting Better Value & Real Discount-
Many Procurement Executives put a lot of time and effort into price negotiation and daily rates for Consulting Services. They leave the negotiation table with a 5% discount, with the feeling of having accomplished their duty. But is it so really?
Consulting Firms know the game well. They build a 5% discount into their pricing. And if you are asking for a more significant discount, they can simply descope or staff down their project.
Descoping will hurt the real value you are getting from the project, and staffing down will likely cause delays in execution.
And getting lower on the list of priorities of your Consulting providers? It doesn’t sound right.
If you want to make significant savings, you need to take control of the tap; not reduce the size of the bucket. But still, 47% of companies don’t use demand management or a make-or-buy strategy for Consulting Services.
And that’s a big mistake we like you to avoid.
2. Misconceptions about Demand Management –
Consulting is a strategic lever to accelerate the execution of your strategy. However, the pressure on operational budgets won’t go away. And Consulting, apart from restructuring projects, is still allocated to OPEX.
Demand management allows the teams to make the difference between the “must have” and the “nice to have.” You can keep your money for what is really important.
3. The Necessity of a Transformation Roadmap –
Once your strategy is clear and shared within your Company, you need to build the Transformation Roadmap, or in other words, the IKEA notice to execute your strategy.
Breakdown the work to be done and identify the main workstreams, as well as the skills and objectives associated. These workstreams should be led as stand-alone projects with or without external support.
4. Why Prioritize Your Projects –
You have a list of projects to be launched to execute your strategy, but you know that you cannot do them all at the same time.
Define an analysis grid to sort your projects to determine which ones are more important. Impact vs. budget is often a good start, but nothing prevents you from being more creative in your criteria. Try to identify projects that are enablers for other projects with higher priority.
5. Leverage Make-vs-Buy –
This is where the understanding of the skills associated with each project kicks in. You may not have all the resources in-house, and may not be able to mobilize all of them for your projects.
For each one of the projects, identify what can/should be done in-house, and what can/should be outsourced.
Don’t forget to include a rough evaluation of the budget.
6. Draw the Line & Stay Within the Budget –
The reality of the situation is that you will not be able to handle all the projects this year. In order to keep control of your expenses (or the tap), you have to define what you will spend on consulting for the period, based on where you stand in your transformation (usually from 0.5% to 3% of the revenues).
As a general rule, try to start with those that will generate immediate savings to fuel the additional projects. Another simple principle is to identify projects that will maximize the impact on a given time horizon and will accelerate the benefits.
Besides, you need to define what part of the budget will be allocated to strategic projects, and what part will be left at the discretion of managers.
7. Start with the High-Priority Project –
The basic principles in Demand Management require to decide what projects will be outsourced in the next years. Start with the high-priority/high-impact projects.
Once you have reached 2/3 of your targeted budget, have a closer look at the projects still in your portfolio. Do you have projects with lesser priority or impact, but an immediate return on investment? Or projects enabling other projects with higher-priority? They might be your next priority.
8. No Budget Left For Unfinished Strategic Projects?
After you allocate your budget, you might end up with projects that are still highly-strategic.
You have several options: you can adjust your budget for this year to integrate them into your portfolio. You can reconsider other strategic projects, and reassess the strategic value. You can also reduce the “Use directly” budget to include one or two strategic projects.
9. The Questions to Get You on the Right Path-
When setting your priorities, it’s essential to ask the right questions.
Demand Management has to be rooted in a robust decision-making process that allows maintaining the strategic direction of the Company while controlling the costs.
- The strategic value of the project
- Is this project an enabler for another strategic project?
- What is the expected impact of the project?
- How much are we willing to pay for this project?
- What is the best timing for this project?
- Will you need these skills for other projects in the next 3 years?
- The externalization value
- Are the skills involved in the project, core for your Company?
- Do we improve the business case if we accelerate the project?
- Do we have the skills and resources available internally?
- Do we have the necessary skills and resources to supervise the project?
- Are there companies that can provide that service?
- Is there sensitive IP or information involved in the project?
Following the tips suggested above, you should be able to position your projects on a simple decision matrix. And this way, successfully implement demand management for the consulting category.
If you are planning to launch a new project,
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We can offer you also a fresh point of view to make your next project a success
Hélène Laffitte is the CEO of Consulting Quest, a Global Performance-Driven Consulting Platform and author of “Smart Consulting Sourcing”, a step by step guide to getting the best ROI from your consulting. With a blend of experience in Procurement and Consulting, Hélène is passionate about helping Companies create more value through Consulting.