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Why boutique firms are outperforming their large mainstream counterparts

Why boutique firms are outperforming their large mainstream counterparts

Opinion

Ashar BTI

Ashar BTI

3 Jun 2019, 15:58 — 8 min read

Background: A boutique firm is a small firm that provides sepcialised services for a niche segment of the market. Although these firms may lack resources as compared to their larger counterparts, they aim to serve their clients by providing them solutions tailor-made to their needs.These firms are most common in the investment banking sector or investment management and are rapidly gaining popularity over the bigger and more well-known firms. Ashar Siddiqui of Business Technology Innovation shares six reasons why.

Trends in business consultancy firms are changing. Boutique business consultancy firms are outperforming their mainstream counterparts with little to no overhead fees. Clients are favoring their specialisations over general consultants. Established large firms existing since the past two to three decades with their core competencies in tax, audit and strategic management, or Business Process Re-Engineering (BPR) are venturing into areas of family business advisory services, sales and distribution and strategy formulation. This clearly indicates the threat they see in disruption of their domain by the boutique consultancy firms. A shift in choice of selection of consultancy firms by large companies is worth watching in the next one to three years.

The point of entry or opportunities created for these startup or boutique consultancy firms result from the following 6 scenarios:

1. Depressed economy

Dearth of new investments in an economic zone and tightening of parallel economies by intervention of law enforcement agencies has given rise to the conception that this is not the ideal economy to kick-start a startup consulting firm or business opportunity for boutique consultancy firms. On the contrary, this is the appropriate environment where existing businesses look for solutions that are affordable, tailor-made at a competitive fee. Established big players are already tried and tested and pumping in high fees to the same set and dominating the consultancy space does not make sense in drain of liquidity with unsatisfactory outcomes. Boutique firms are managed and operated by either industry successful stalwarts with experience of professionally running business entities or have  left employment with a large consultancy firm to form their own! Retaining the services of these professionals makes greater sense than a large firm who are going to deploy the very same think tanks as their employers to carve out solutions through strategy for the entities seeking expert advisory services.

Established large firms existing since the past two to three decades with their core competencies in tax, audit and strategic management, or Business Process Re-Engineering (BPR) are venturing into areas of family business advisory services, sales and distribution and strategy formulation. This clearly indicates the threat they see in disruption of their domain by boutique consultancy firms.


2. Stagnancy in volume and value sales

The stagnancy is shrinking bottomline sales despite increased top line sales. Just like we take a second opinion for an ailment being diagnosed as a serious one, requiring long term expensive line of medical treatment. Similarly, seeking second opinion of experts through prudence gained from professionals employed at senior leadership roles in multi-sector industry segments at a reasonable fees is a wise decision. Research/studies conducted on rapid turnaround in financial health of organisations revealed that these businesses had adopted non-conventional methods in terms of redesigning the business model retaining experienced think tanks through boutique consultancy firms rather than those riding on past glories of evolving from a boutique consultancy firm to global brand names in their industry.

The reason being, focus by the startup consultancy firm, single-mindedly working on the project and first-hand observation, followed by strategy formulation for the turnaround and monitoring closely the execution of the strategy as a one single think tank/entity. The large advisory companies have a reporting structure where in observations are discussed in plush board rooms, whereas battles are won in the battle field, which is the market place called ‘Gemba’ in Kaizen terminology.

3. Replacing the top heavy organisation structures

A lean and crisp senior management structure is the need of the hour for companies who have felt the gradual shift in market share from 2013 till date. Who needs five people giving them contradictory instructions that are often mutually exclusive? I could list a dozen other types of complexity that businesses grapple with every day. The idea of having a management team full of experts in every aspect of business sounds great though not feasible always. Alternatively, outsourcing expertise increases the success ratio, reduces planning time thereby resulting in flaw less execution of strategy roll out. Traditionally large corporations with more management than employees have gotten bad reputations and lost out on great employees.

4. Operation management

When employees have multiple bosses that any given employee answers to, there is a need to make sure the communication flow is functional. Otherwise there is far too much room for error and employee retention becomes a problem. This is where the boutique consultancy firms diagnoses the issue promptly and addresses the problem from the root with timely corrective action plans put in place.

5. Management connection gap

The disconnect between the senior management, functional heads and the customer leads to management connection gap. Management itself is as much an art as it is a skill. Being good at a job does not necessarily make an individual a good manager. The problem that businesses often run in to is that a new manager is so wrapped up in finding their management balance that they lose control on what the employees do. When enterprises have too many managers this effect is amplified to the extent that decisions are taken regularly without the end task taken in to consideration. Even without a top heavy management structure, this can be a problem. The job done six months ago may have been a different dynamic than the one your employees are doing today. ‘Closing the gap’ will result into meaningful management decisions.

6. Imparting skills training

Skills training, both soft skills (SS) as well as job specific skills (JSS) is of paramount importance and this is where the emerging consultants can identify, train and make a business successful by imparting the right balance of both across the Human Resources vertical. Too often, the focus is skewed towards either one of the two. Performance gaps are often realised in individuals where the right soft skills are not applied for discharging the job requirement. Failure of departmental heads and senior management in Root Cause Analysis (RCA) result in business failures and high employee turnover through retrenchment or resignations. Outsourced consultants are better placed in identifying these gaps and mapping the RCA with solutions through corrective action plans (CAP).

 

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Image courtesy: Shutterstock.com

 

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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker. 

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