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Lecture – Management Consulting: An

Introduction

© Andersen Consulting 2000 1 04/01/09


AGENDA

 Introduction/Expectations
 Example consultant company
 Consulting: Nature, Trends,
Careers
 Selected Methods (frameworks)
 Research (some basics)
 Graphics (from data to chart)

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ACCENTURE: MISSION AND VISION

Our Mission: Helping our clients create their future.

Our Vision: To become one of the world's leading


companies, bringing innovations to
improve the way the world works and
lives.

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ACCENTURE: CORE VALUES

• Quality Client Service – Understand and meet client


expectations 100 percent of the time.

• One Global Firm – Act to enhance the collective values of


the global partnership, while sustaining local culture.

• Integrity – Act with openness and honesty. Always.

• Stewardship – Think future oriented; act and invest to build


a stronger firm for tomorrow.

• Best People – Are highly competent and make a


commitment to excellence, teamwork, and the success of
our clients.

• Respect for the Individual – Treat each person as we


would like to be treated.
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ACCENTURE: IMPORTANT MILESTONES

1989 1997
• Andersen Consulting • Andersen Consulting creates a global
becomes a separate network of communications-focused
business unit from Arthur solution centers in an effort to set the
Andersen standard for speed and quality of
• $1.6 billion performance
• 21,400 employees • $6.6. Billion
• 53,000 employees
1991
• Horizon 2000 Initiative to 1998
develop mission and • $8.3 billion
strategic plan • 65,000 employees
• $2.3 billion
• 25,000 personnel 2000
• Joe Forehand becomes Managing Partner
1993 and introduces the 100 Day Plan
• Andersen Consulting issues • Andersen Consulting wins arbitration
its first annual report against Arthur Andersen
• $2.9 billion
• 27,000 employees 01.01.01
• Accenture, formerly known as Andersen
5 Consulting 04/01/09
ACCENTURE GLOBALLY

 Employees: over 65,000


 Countries: 48
 Revenue ‘99: 8,9 Billion USD
 Clients:
• The vast majority of Fortune 30 most
profitable global public companies
• Nearly 75% of Fortune 200 global
companies
• 100 of the most significant “Industry
Standard” Internet companies
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ACCENTURE: DEVELOPMENT OF REVENUES

(U.S. Billions)
$8,3
$6,647
$5,302
$4,224
$3,452
$2,876

1993 1994 1995 1996 1997 1998

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ACCENTURE: GLOBAL PERSONNEL GROWTH

65,134
53,426
44,801
38,027
32,711

1994 1995 1996 1997 1998


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ACCENTURE IN ASG

ASG –
Austria, Switzerland,
Germany
Hamburg

Berlin
Düsseldorf

Frankfurt
EMEAI
München

Americas Wien
Zürich
Asia/
Pacific
• 2,750 Employees
• 7 Offices
• Revenues: 1,24 Mrd. DM

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Global Competitive Overview

Strategy Organization Processes Information Business Process


Technology Management
(Outsourcing)
Andersen Consulting
IBM
Computer Sciences
EDS
McKinsey
Boston Consulting
Booz Allen
Digital Equipment
Cap Gemini Sogeti
UNISYS

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ACCENTURE: MARKET UNITS

Financial Services
• Banking
• Health Services
• Insurance
Products
• Automotive, Industrial Equipment, Travel & Transportation
• Consumer & Pharmaceutical Products
• Retail
Communications & High Tech
• Communications
• Electronics & High Tech
• Media & Entertainment
Resources
• Chemicals
• Energy & Natural Resources
• Utilities
Government

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ACCENTURE: SAMPLE CLIENT LIST

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AGENDA

 Introduction/Expectations
 Example consultant company
 Consulting: Nature, Trends,
Careers
 Selected Methods (frameworks)
 Research (some basics)
 Graphics (from data to chart)

13 04/01/09
NATURE, TRENDS, CAREERS

Nature and purpose of consulting

Recent trends and current challenges

Staff and career paths in consulting

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NATURE AND PURPOSE OF CONSULTING

Nature and Purpose of Consulting

• Definition of „Consulting“
• Brief look into history
• Different types of consulting
• Consulting market overview
• Consultant: Profession description
• Consulting strategies
• Short overview over the consulting process
• Reasons for clients to hire external consultants
• Guidelines for the client - consultant relationship

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DEFINITION OF CONSULTING

Definition of Consulting
• „To give expert advice or provide expert counsel.“ (IKS)
• „Consulting provides value by diagnosing, strategizing, designing, constructing,
integrating, operating, or implementing solutions. Consulting utilizes relevant
knowledge, based on integrity and objectivity, in both expert and advisory roles.“
(Consulting Services Team)

• „Consulting is whatever a consultant does." (Cambridge Computer Services)

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CONSULTING HISTORY (1/2)

Brief look into history


• 1532 Macchiavelli‘s „Il Principe“
• 1886 Foundation of the „analytical testlab“ by Arthur D. Little
• 1895 „A piece rate system“ by F. Taylor
• 1909 Foundation of Arthur D. Little, Inc.
• 1911 „The principles of scientific management“ by F. Taylor
• 1911 „Motion Study“ by F. Gilbreth
• 1912 „Consulting Firms“ by F. Gilbreth
• 1914 E. Booz sets up Business Research Services
• 1925 J.O. McKinsey starts his Consulting firm
• 1934 Urwick, Orr & Partners: Management ist lehr- und lernbar
• 1939 Peter Drucker „The end of economic man“
• 1947 Foundation of the Travistock Institute

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CONSULTING HISTORY (2/2)

Brief look into history


• 1949 Robert Wiener „Cybernetics“
• 1950 Marvin Bower becomes CEO of Mc Kinsey and starts with
the expansion
• 1951 First Deming-Avard for Quality in Japan
• 1954 Foundation of the BDU
• 1954 Peter Drucker: „The practise of management“
• 1957 Argyris: „Personality and Organization“
• 1959 Herzberg, Mausner, Snyderman: „The motivation to work“
• 1960 Mc Gregor: „The human side of enterprise“, Maslow: „Motivation
and Personality“
• 1963 Foundation of Boston Consulting Group
• 1965 Foundation of the first two Business Universities in Great Britain

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EVOLUTION OF CONSULTING FOCUS

Quality Management
Lean Management
Re-engineering
ERP projects
Web Technology
E-Commerce
CRM
M-Commerce
Strategy

1980 1985 1990 1995 2000 2005

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TYPES OF CONSULTING

Different types of management consulting


 Strategy
• Advice and counsel about corporate-level or business-unit strategies
 Operations Management
• Figuring out how to improve the efficiency or productivity of how a
business works
 Human Resources
• Compensation and benefits advice, attracting, motivating, and
retaining high quality employees
 Information Technology
• Design, implement, test and roll-out new IT or install and operate
massive packaged software "solutions“.

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STRATEGY VS. IT- CONSULTING

Worldwide Professional Services Market

$600
$85
$500 18% annual
growth
$400
Pure Strategy
$300
$45 IT-related Service
$475
$200
$250
$100
$5
$25
$0
$billions 1990 1999 2003
Source: Dataquest
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GERMAN CONSULTING MARKET OVERVIEW

German Consulting market overview


1998: 62.500 Management-, Personnel- and IT-Consultants (BDU e.V.)
13.200 Consulting Companies
Total revenues: 18,8 bn. DM (BDU e.V.)

1999: 64.500 Management-, Personnel- and IT- Consultants (BDU e.V.)


14.300 Consulting Companies
Total revenues: 21,3 bn. DM (BDU e.V.)

O&HP
5% Strategy
26%

IT
46%
Process
23%

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TOP 20 CONSULTING COMPANIES WORLDWIDE

Revenues in Mio $ Total Staff


Firm 1998 1997 1998
1 Andersen Consulting 8.307 6.647 65.134
2 PriceWaterhouseCoopers 6.000 4.286 46.500
3 Ernst & Young Consulting 3.970 2.950 19.050
4 CSC 3.500 3.000 n/a
5 Deloitte Consulting 3.240 2.310 19.559
6 KPMG Consulting 3.000 2.300 15.249
7 Mc Kinsey & Company 2.500 2.200 n/a
8 Mercer Consulting Group 1.543 1.338 11.034
9 Arthur Andersen 1.367 952 9.196
10 A.T. Kearney 1.234 1.061 4.646
11 Towers Perrin 1.230 1.120 n/a
12 Booz-Allen & Hamilton 1.204 1.075 8.800
13 American Management Systems 1.057 872 8.200
14 Gemini Consulting 1.044 900 2.300
15 Hewitt Associates 880 709 9.700
16 DMR Consulting 853 700 9.100
17 Boston Consulting Group 730 655 n/a
18 Watson Wyatt Worldwide 720 672 5.100
19 Bain & Company 630 551 2.200
20 Aon Consulting Worldwide 615 553 5.500

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TOP 30 CONSULTING COMPANIES IN GERMANY
Revenues in Mio Total Staff
Firm 1999 1998 1999 1998
1 CSC Ploenzke AG, Kiedrich 1251 974 3986 3172
2 Andersen Consulting Unternehmensberatung GmbH, Sulzbach 1240 804 2401 2127
3 McKinsey 730 650 1420 1300
4 Roland Berger & Partner GmbH, München 680 574 1341 1204
5 gedas GmbH, Berlin 648 405 2994 1969
6 KPMG Consulting GmbH, Frankfurt 524 400 1380 1023
7 PriceWaterhouseCoopers Unternehmensberatung GmbH, Frankfurt 481 340 1800 1300
8 Plaut -Gruppe, Ismaning 460 340 1800 1300
9 Ernst & Young Consulting GmbH, Stuttgart 441 308 1456 1103
10 A.T. Kearney GmbH, Düsseldorf 395 246 590 442
11 Softlab GmbH, München 360 320 1398 1270
12 Gemini 360 320 600 544
13 The Boston Consulting Group 360 310 490 425
14 Sercon 334 265 1650 1250
15 Mummert + Partner Unternehmensberatung AG, Hamburg 330 264 1050 875
16 Origin 295 243 950 822
17 pdv Unternehmensberatung GmbH, Hamburg 253 213 1030 880
18 Materna GmbH, Dortmund 252 148 730 590
19 CMG Deutschland GmbH, Eschborn 243 114 855 550
20 PSI AG, Berlin 242 186 949 751
21 Atos GmbH, Stuttgart 235 230 1050 908
22 msg Systeme GmbH, Ismaning/München 220 184 950 850
23 Schumann Unternehmensberatung AG, Köln 218 201 820 760
24 Deloitte Consulting GmbH/ DTT, Düsseldorf 215 163 706 476
25 ESG GmbH, München 211 203 800 800
26 Arthur D. Little International, Inc., Wiesbaden 210 183 372 350
27 Booz o Allen & Hamilton, Düsseldorf 205 167 300 300
28 sd&m AG, München 190 157 658 552
29 Marketing Corporation, Bad Homburg 181 156 361 325
30 Heyde AG, Bad Nauheim 180 76 670 358

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Source: Lünendonk Consultancy + Research GbR, Hamburg
WHERE DO YOU WANT TO GO TODAY?

A scene from Lewis Carroll's "Alice's Adventures In Wonderland", when Alice asks the
Cheshire cat for directions, speaks volumes about planning where an organization wants
to be in the future.
"Would you tell me, please, which way I ought to go from here?" asks Alice.
"That depends a good deal on where you want to get to," said the Cat.
"I don't much care where." said Alice.
"Then, it doesn't matter which way you go." said the Cat.

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REASONS TO HIRE EXTERNAL CONSULTANTS (1/2)

Reasons for clients to hire external consultants (1):

• Existing companies are not ready for the pace globalization and vanishing market
barriers they face -> need Consultants with broad market / industry knowledge
• Increasing M&A activities -> High complexity of transactions and tasks related to
Post Merger Integration
• Challenges of the high tech environment: employees are wholly occupied with daily
work and don’t have the time to think about innovations
• Changing working environment necessitate creative and up-to-date HR
Management
• Deregulation enabled new companies to enter the market. In order to position and
compete against former monopolists they need industry related consulting experience
(+other way round, ex-monopolists try to defend themselves against new market
entries using the knowledge of external companies)

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REASONS TO HIRE EXTERNAL CONSULTANTS (2/2)

Reasons for clients to hire external consultants (2):

• Consultants have access to information on a truly global basis (Knowledge


Exchange)
• Widespread acceptance of using consultants to gain outside expertise.
• Rapid technological change.
• Movement to enterprise wide solutions.
• Lack of in-house expertise in Processes, technologies, industry best practices, and
project management.

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BENEFITS OF USING CONSULTANTS

• Subject matter expert: A consultant will save time and money by arriving to a
solution to the client‘s needs at a faster pace because of past extensive knowledge
and experience in dealing with other business owners.

• Objective point of view: A consultant will bring a refreshing outside point of view
to the client‘s company, which will pin-point existing problems or reach faster
solutions.

• Educate, inform: A good consultant will educate and inform the client as the task
is completed.

• Share information about industry and competition: This is essential to reaching


company goals.

• Assist with strategic planning which will help reach company goals faster and
easier.

• Offer innovative ideas

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WORK AND LIFESTYLE CHARACTERISTICS

• Work at client site


• Work in team environment
• Work with a variety of clients across industries
• Assess client business and technical challenges
• Develop solutions to move client forward
• Extensive traveling
• Enriching learning experience
• Cyclical overtime
• Travel
• Variety of responsibilities
• Work with technology

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TOP 10 WAYS TO KNOW YOU ARE DATING AN
CONSULTANT

10. Referred to the first month of your relationship as a "diagnostic period."

9. Talks to the waiter about process flow when dinner arrives late.

8. Referred to the yield of the tomato plants in your home garden as "deliverables"

7. Congratulates your parents for successful value creation.

6. Tries to call room-service from the bedroom.

5. Ends any argument by saying, "let's talk about this off-line."

4. Celebrates anniversary by conducting a performance review.

3. Can't be trusted with the car - too accustomed to beating up rentals.

2. Valentine's Day card has bullet points.

1. Refers to lovemaking as a "win-win."

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NATURE, TRENDS, CAREERS

Nature and purpose of consulting

Recent trends and current challenges

Staff and career paths in consulting

31 04/01/09
RECENT TRENDS AND CURRENT CHALLENGES

• Changing customer expectations


• Increasing market power of the TOP consulting companies
• Effective usage of information technology
• Split Tax/Auditing - Consulting
• Strategic Alliances and Start-up Partnerships
• New suppliers enter the consulting market
• Expansion of the well known consulting companies
• IT consulting by traditional consulting companies
• Get & retain the right people
• How to face the current challenges

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CHANGING CUSTOMER EXPECTATIONS –
SOME STATEMENTS
"CTOs and other e-business strategists do not want to hear me tell them I can help
Web-enable their business. That is not enough. They want to know how I can help them
transform their business."
-- Chuck Burns, global senior vice president, services,
KPMG

"CTOs have more choices than ever before when it comes to selecting a consultant.
We go into bids now where we may compete against one of the giant, Big Five firms ...
and even, in some cases, an advertising or marketing agency."
-- Scott Lochridge, principal, strategy solutions group,
DiaLogos

"The days of black magic are over, Consultants can no longer get away with just writing
a white paper for the client and saying, 'OK, now you do what I say.' ”
-- Jose Campos, president of Rapidinnovation

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CHANGING CUSTOMER EXPECTATIONS

• Customer expect real added value


• Standard Implementations are decreasing while individual end-to-end solution
become much more important
• Unsuccessful ERP implementations in the 90s made the customer more
aware of risks and challenges --> Customer are much more sensitive to what
they get for their money
• Results in new payment schemes like:
• Fixed price (especially done by smaller / start-up companies)
• Risk and reward sharing
• Equity payment
• Payment in terms of %-age of actual value added
• On time delivery clauses in contract

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INCREASING MARKET POWER OF THE TOP 20
CONSULTING COMPANIES

Facts
• 40 TOP Consulting Companies increased their market share in Germany from
42 to 45 %
• Average growth rate of the TOP Player: ~ 19,5 %/p.a.
• Smaller Consulting companies: ~ 4,0 %/p.a.
• Acquisitions of smaller and mid-sized consulting firms by the larger companies
in order to diversify their market offer
• Planned partly IPO of KPMG, Arthur D. Little, Andersen Consulting also
investigating
• Increasing market power and influence through ventures, e.g.
- AC Venture
- McKinsey’s “New Venture”
- Roland Berger & bmp

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SPLIT TAX/AUDITING – REASONS AND CONSEQUENCES

Reasons
• U.S. Security and Exchange Commission:
Critical if Consulting Companies advice clients that are audited by the same company
• Higher margins and growth rates in consulting
• Inability for consulting part to raise money by going public as long as they are part of
auditing companies

Consequences
• Consulting companies can and will go public (e.g. KPMG)
• No more legal restrictions for consulting companies to advice other companies
• Differentiation process will accelerate (increasing marketing activities)
• Repositioning needs

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SPLIT TAX/AUDITING - CONSULTING

Examples
• Andersen Consulting vs. Arthur Andersen:
Arbitration Decision in order to allow Andersen Consulting to split from Arthur Andersen
• KPMG:
• IPO of KPMG Consulting Business
• Cisco took 20% stake
• Another 20% for the accounting part
• Hewlett Packard interested to buy PriceWaterhouseCoopers’ Management and IT
Consulting part
• Cap Gemini to buy consulting piece of Ernst & Young
• A.T. Kearney and EDS

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STRATEGIC ALLIANCES OF ACCENTURE

38 04/01/09
ALLIANCES AND PARTNERSHIPS: SOME EXAMPLES

• Cap Gemini: - Siebel Systems


- IBM
- Sun Microsystems
- Microsoft
• KPMG: - Compaq
- Cisco
- Microsoft
- JD Edwards
• CSC: - Peoplesoft
- Broadvision
- IBM
- Lucent
- Nokia
• EDS: - Sun Microsystems
- SAP
- Oracle
- Cisco

39 04/01/09
NEW COMPETITORS ENTER THE CONSULTANT MARKET

New Suppliers enter the consulting market


• Hardware manufacturers
- HP already increased their number of in-house consultants to 6.000
+ potential PriceWaterhouseCoopers part

• Internet service providers, e.g. Pixelpark buying the Swedish Consulting


firm “Cell Network / Mandator”

• Building „Inhouse-Consulting capabilities“

- Siemens (Siemens Business Services providing ERP, CRM


implementations)
- SAP System
- Deutsche Telekom buying majority stake in Debis Systemhaus

• Financial Institutions and Telecommunication companies

40 04/01/09
EXPANSION OF WELL KNOWN CONSULTING
COMPANIES

• Expansion of the TOP consulting companies through M&A, alliances,


ventures and strategic partnerships.
• Chance to expand business and opening new markets
• After M&A, differentiation becomes critical, therefore high advertising
budgets
• IPO Strategies:
• Raise money for eCommerce strategy
• Venture Capital funds
• To attract people (competitive salaries and payment structures)

• Examples:

• Cap Gemini acquiring Ernst & Young

• Cap Gemini buying SD&M

• CSC Ploenzke to buy KPMG France

41 04/01/09
IT CONSULTING AT THE ESTABLISHED
CONSULTING COMPANIES

• As eCommerce is acknowledge to be one of the key business drivers, also


the traditional consulting companies try to get into it
• Strategy companies like Booz Allen Hamilton etc. to launch eCommerce
centers and venture capital firms
• By buying smaller companies and partnering they are able to provide a full
implementation service, e.g. Bain alliance with i2 and Oracle
• McKinsey has been accused having overslept the e-Commerce age; now
trying to work on that subject through increasing alliances & ventures in the
eBusiness
• After split from Andersen Consulting, Arthur Andersen will get more into IT
consulting

42 04/01/09
GET AND RETAIN THE RIGHT PEOPLE

• IPO in order to attract personnel


• Until backdrop of Dot.Coms and the stock market, tendency of leading
personnel to leave traditional companies to join Start-ups:
• Cambridge Technology lost over the last year many top managers (i.e.
Founder and CEO, CFO, General counsel, Head of its E-Business unit,
Managing director of the Cambridge Technology Capital venture fund)
mostly to small high-tech companies.
• Dean Hawkins, former CFO of Adidas to become CFO @ boo.com
• Joe Galli, Vice President Black & Decker to join Amazon.com as
member of the board
• Heiner Rutt, chairman @ Boston Consulting Group to become president
at Proxicom
• IBM Germany has about 3.000 open IT positions for 2001, Hewlett-Packard
to look for 500 IT specialists, PricewaterhouseCoopers 300 and Siemens
1.500, Andersen Consulting with 1.100 open positions in ASG.

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"WINNING THE WAR FOR TALENT"

• Focus 30. August 1999

1. DaimlerChrysler
2. Lufthansa
Key factors of
3. McKinsey
success
4. BMW Image
Attractive 5. KPMG Interesting tasks
employees Personal development
6. Boston Consulting
Balanced life style
7. Deutsche Bank
International
8. Siemens atmosphere
9. SAP
10. Accenture

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HOW TO FACE THE CURRENT CHALLENGES

• New strategies
• Branding Campaigns
• Personnel development concepts
• Efficient Knowledge Management
• Accurate Planning
• Change as Chance
• Synchronize the key success
factors:
- people
- process
- strategy
- technology

45 04/01/09
NATURE, TRENDS, CAREERS

Nature and purpose of consulting

Recent trends and current challenges

Staff and career paths in consulting

46 04/01/09
STAFF AND CAREER PATHS

Accenture McKinsey

Partner Director

Associate Partner Principle

Manager Associate Principle

Consultant Project Manager

Analyst Consultant

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ROLES AND RESPONSIBILITIES: EXAMPLES

Analyst
Consultant

 Proposals  Lead work teams


 Forecasting  Facilitate Team-Meetings
 Develop and execute client  Systems design
training
 Client presentations
 Client interviews
 Lead subprojects
 Programming
 Systems Documentation
 Participates in problem solving
 Recommends and implements
solutions
 Defines user requirements
 Researches new and existing
technology
 Provides production support
 Tests software
 Reviews work of peers

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ROLES AND RESPONSIBILITIES (CTD.)

Partner

 Interface with client senior management


 Lead client meetings
Manager  Develop new business
 Lead client meetings  Develop management team
 Manage projects  Shape and impact the Firm
 Lead and develop project team  Attain Ownership in the Firm

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CONSULTING: ALWAYS STAY REALISTICALLY

A consultant, manager and a partner from a Consulting company are walking


through a park on their way to lunch when they find an antique oil lamp.
They rub it and a Genie comes out in a puff of smoke. The Genie says, "I
usually only grant three wishes, so I'll give each of you just one.

"Me first! Me first!" says the consultant. "I want to be in the Bahamas,
driving a speedboat, without a care in the world." Poof! she's gone.

In astonishment, "Me next! Me next!' says the manager, "I want to be in


Hawaii, relaxing on the beach with my personal masseuse, an endless supply
of pina coladas and the love of my life." Poof! He's gone.

"You're next," the Genie says to the partner. The partner says, "I want
those two back in the office after lunch."

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PERSONS TO SUPPORT YOUR PERSONAL CAREER

 Personal Mentor
 Peer Group
 Annual Reviews (upward/downward/sideward)
 Partner Group
 Practice Leaders

51 04/01/09
SOME ATTRIBUTES FOR GOOD CONSULTANTS

• Ambition to permanently learn


• Determination to succeed
• Strong communication skills
• Motivation
• Flexibility
• Agility
• Approachable
• Proactive
• Innovative
• Results-oriented
• Self Confident
• Entrepreneurial thinking

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BENEFITS AND CHALLENGES OF CONSULTING

Benefits of Consulting
• Learning new industries
• Earning more income
• Flexible contract lengths
• Possible full time opportunities
• Less office politics
• Learning new technical skills
• Meeting new people

Challenges of Consulting
• Not being a "full-timer"
• Possible additional travel or commute time

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PROJECT WORK PLAN: ONE EXAMPLE
FOR A THREE-MONTH PROJECT EXAMPLE

ALTE FOLIE VERWENDEN

54 04/01/09
YOU KNOW THAT YOU HAVE BEEN TOO LONG A
CONSULTANT WHEN …

1. you feel naked without a laptop hanging from your left shoulder;
2. you start thinking that life in the US Navy Submarine Corps would give you
more time at home;
3. you are upset when you come home on Friday night and the lights aren't on,
the bed isn't turned down, and there are no chocolates on your pillow;
4. "vacationing" is spending an entire weekend in your own home;
5. you have seen more movies at 35,000 feet than you have at your local movie
theater
6. before starting the car, you insist on telling everyone where the emergency
exits are;
7. before stopping the car, you insist that everyone stay seated until the fasten
seatbelts sign is off;
8. instant coffee tastes good;
9. you've been staying in the same hotel, you instinctively call it "home";
10. you say "Whoopee! Half day!" when you leave at 10:00PM;

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