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Management Consulting Today
and Tomorrow

This book provides a thorough examination of a variety of specialties

within the broad range of management consulting. A book of such
scope and depth could only be written by a large number of experts,
each from one of the many specialties related to management consult-
ing. Together, all 27 contributors take the reader through an industry
that is currently undergoing significant change. While covering all the
major practice areas of consulting, the book also offers new insights
into change processes and addresses compelling management issues
now facing consulting firms.

Larry Greiner is Professor of Management and Organization at the

University of Southern California.

Flemming Poulfelt is Professor of Management and Strategy, Vice

Dean at Copenhagen Business School, and Director of the CBS
Leadership Lab.
Management Consulting Today
and Tomorrow
Perspectives and Advice from 27 Leading
World Experts

Edited by
Larry Greiner
&
Flemming Poulfelt
First published 2005
by South-Western, part of the Thomson Corporation
This edition published in its original form
by Routledge
270 Madison Ave, New York, NY 10016
Simultaneously published in the UK
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Routledge is an imprint of the Taylor & Francis Group, an informa business
This edition published in the Taylor & Francis e-Library, 2009.
To purchase your own copy of this or any of Taylor & Francis or Routledge’s
collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.
© 2005 South-Western, part of the Thomson Corporation
© 2010 Taylor & Francis
All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or
by any electronic, mechanical, or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or retrieval system, without
permission in writing from the publishers.
Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and
are used only for identification and explanation without intent to infringe.
Library of Congress Cataloging in Publication Data
Greiner, Larry E.
Management consulting today and tomorrow : perspectives and advice from 20 leading world
experts / by Larry E. Greiner & Flemming Poulfelt.
p. cm.
Includes bibliographical references and index.
1. Business consultants. I. Poulfelt, Flemming. II. Title.
HD69.C6G733 2009
001–dc22
2008055610

ISBN 0-203-87507-9 Master e-book ISBN

ISBN 10: 0–415–80359–4 (hbk)

ISBN 10: 0–415–80358–6 (pbk)
ISBN 10: 0–203–87507–9 (ebk)

ISBN 13: 978–0–415–80359–5 (hbk)

ISBN 13: 978–0–415–80358–8 (pbk)
ISBN 13: 978–0–203–87507–0 (ebk)
 CONTENTS

Preface ix
Author Biographies xiii

Part 1 Consulting Industry, Skills and Professionalism

Introduction 1
Chapter 1 The Changing Global Consulting Industry 5
(Flemming Poulfelt, Copenhagen Business School,
Arvind Bhambri, USC and Larry Greiner, USC)
Chapter 2 Professionalism in Consulting 33
(David Maister)
Chapter 3 The Marketing and Selling of Consulting
Services 49
(Robert Duboff, Boston College and
Ernst & Young)

Part 2 Major Practice Areas in Consulting

Introduction 71
Chapter 4 Information Technology Consulting 75
(Richard Nolan, Harvard Business School and
Larry Bennigson, Harvard Interactive)
Chapter 5 Strategy and Organization Consulting 101
(Adrian J. Slywotzky, Mercer Management

v
vi • Contents

Consulting, and David Nadler, Mercer Delta

Organizational Consulting)
Chapter 6 The Marketing Consultant 127
(Robert Spekman, U. of Virginia, and
Philip Kotler, Northwestern U.)
Chapter 7 Operations Management Consulting 151
(Richard Chase and Ravi Kumar, USC)
Chapter 8 Human Resources Management: New
Consulting Opportunities 173
(Edward Lawler and Susan Mohrman, USC)

Part 3 Consulting in Different Contexts

Introduction 195
Chapter 9 Consulting to CEOs and Boards 199
(David Nadler, Mercer Delta
Organizational Consulting)
Chapter 10 Globalization Consulting 227
(Stephen Rhinesmith, CDR International)
Chapter 11 Public Sector Consultation 249
(Alan Glassman, California State University at
Northridge and Morley Winograd, USC)

Part 4 Implementation and Change

Introduction 275
Chapter 12 Intervention Strategies in Management
Consulting 279
(Tom Cummings, USC)
Chapter 13 Consulting to Integrate Mergers and
Acquisitions 303
(Anthony Buono, Bentley U.)
Chapter 14 On Becoming a Transformational Change
Agent 331
(Robert Quinn, U. of Michigan and
Shawn Quinn, Columbia U.)
 Contents • vii

Part 5 Managing and Growing the Consulting Firm

Introduction 355
Chapter 15 Managing Growth Stages in Consulting Firms 359
(Larry Greiner, USC and James Malernee,
Cornerstone Research)
Chapter 16 High-Performance Consulting Firms 387
(Jay Lorsch, Harvard Business School)
Chapter 17 Knowledge Management in Consulting 403
(Tom Davenport, Accenture and
Larry Prusak, IBM)

Part 6 Looking Ahead at Management Consulting

Introduction 433
Chapter 18 Will Consulting Go Online? 435
(Fiona Czerniawska, Arke Idea Consulting and
Kingston Business School)
Chapter 19 Research on Management Consulting 455
(Flemming Poulfelt, Copenhagen Business
School and Larry Greiner, USC)

Appendix: Recent Books on Management Consulting 475

Index 479
 PREFACE

This book provides an up-to-date evaluation of the many changes

taking place in the management consulting industry—it is wide in
scope of coverage and deep in its analysis and conclusions. The book
examines all of the major practice areas of consulting, including infor-
mation technology, marketing, operations, and human resources, and it
also provides new insights into change processes and addresses man-
agement issues facing consulting firms today.
Each chapter is written by a leading scholar/consultant expert in the
field. Quite simply, there is no other book on the market today that
takes such an advanced look at the complexity and variety of the man-
agement consulting profession, from its historical evolution, to current
issues, to its uncertain future. Every practicing and future consultant
will benefit from this book’s broad perspective, as well as its in-depth
treatment of specific consulting areas, trends and issues.
In 2005, we first published this manuscript under the title The
Contemporary Consultant; then readers told us that they assumed the
book was about individual consultants. However, this book is more
about management consulting as an industry in transition, giving great
coverage to the many facets of consulting addressed by world experts,
including their predictions about the future. So we have given it a new
title, Management Consulting Today and Tomorrow, that is more reflect-
ive of the contents, and are republishing it.
Most of the old fundamentals about how to consult and what to
consult about are now in a state of serious questioning and ultimate
transformation. These radical changes are being produced by a myriad

ix
x • Preface

of new forces in the consulting environment, including especially the

Internet, information technology and globalization. Client demands
are moving toward higher and different expectations, and the consult-
ant’s job is being revolutionized.
To be an effective consultant in this rapidly changing world, one
must be “out front” in both specialized knowledge and in perspective
for the wider world of the consulting industry. This book contributes
not only the “big picture” for viewing the leading edge in the consult-
ing industry today, but it takes the reader inside the changing aspects of
major practice areas, considers new contexts for consulting, identifies
emerging issues facing clients, offers new change concepts and interven-
tion methods, and covers the multiple challenges involved in managing
the growth and performance of consulting firms.
Foremost, the book is about the “mindset” of the contemporary
consultant—his and her ways of thinking, attitudes, skills and behavior.
Tomorrow’s consultants must be able to adjust to widely varying client
situations and issues across the globe, which will require that solutions
will be unique and increasingly interdisciplinary. The book’s readers
should include long experienced consultants, beginning consultants,
aspiring consultants, teachers of consultants, leaders of consulting firms,
solo practitioners, students of consulting, researchers on consultants,
and clients who want to become more savvy about the use of consultants.
But this is not a “how to do it” book—as there already are many such
specialized texts on the market, covering everything from proposal
writing to selling projects—these books are useful though understand-
ably narrow in their focus and standardized solutions. Rather, this is a
book with the goal of providing both breadth and depth about today’s
rapidly changing face of management consulting—evaluating from dif-
ferent vantage points where the industry is today, where has it been and
where it may be going. The profession is rich, complex and changing,
and it needs understanding from many angles.
To evaluate this evolving picture, we have called upon twenty-seven
authors, all leading experts with extensive experience in consulting, to
describe and explore each of their specialist areas, from past to future.
Every practicing consultant and firm needs the broader awareness and
deeper knowledge offered by these authors so they are prepared for
success in the coming new consulting environment.
Transformation best characterizes what is happening to the industry
of management consulting. Its traditional focus on the consultant as a
 Preface • xi

specialist diagnostician is being supplemented and often times replaced

by one of facilitator and implementer, even as seller of hardware
and software for mega corporations that own both consulting and
non-consulting businesses, such as IBM.
Much of this revolution is being caused by the impact of informa-
tion technology, leading to new opportunities, ranging from e-business,
to outsourcing, to the automation of corporate staff functions, and
to the use of online consulting tools. All of this is giving rise to chan-
ging definitions and debate about what is and is not management
consulting.
The genesis of this book began with the editors’ passion for the
consulting field and their concern that management consulting was
lacking in thoughtful critique. New consultants are entering the field
from business schools without sufficient preparation and perspective
about what consulting is really about. And many senior consultants are
continuing to practice unquestioned methods learned on the job in a
single firm.
When we first went about laying out this book, we identified six
major sections with several chapters within each section that needed to
be addressed. The sections ranged from assessing the industry as a
whole, to new developments in knowledge management, to alternative
intervention and change concepts, to the leadership and management
of consulting firms. However, we rapidly realized that no single author
could possibly write a book of such breadth and depth. So we turned to
leading experts from around the world who possessed wide knowledge
and consulting experience in each of the particular chapters we had
in mind.
As a way of attracting these experts, we invited them to a two-day
conference at the University of Southern California where they pre-
sented outlines of their proposed chapters. The other authors sat in the
audience and reacted with valuable feedback, learning a lot from each
other. Following the conference, the authors drafted their chapters, and
in many cases went on to draft three or four revisions as we, the editors,
made suggestions back to them. Several authors even went outside for a
critique by other consultants and scholars. Amazingly, everyone stayed
with the project and gave their best effort.
The result of this intensive preparation is, we hope, a stimulating
book that adequately identifies emergent consulting issues, anticipates
the changing expectations of clients, and contributes new models and
concepts for improving the consulting process and the management of
xii • Preface

consulting firms. Without this broadened awareness, future consultants

can easily fall victim to faddish “how to do it” methods and models or
the rigid ideologies of their particular firms, causing them to miss the
mark at the expense of clients and repeat work.
We want to thank our authors for their willingness to join with us
in this adventure by sharing their knowledge, wisdom and experience
with everyone who reads this book. Our families also constantly
reminded us about the joys of life beyond sitting in front of computers
and their glaring screens. Books of this type are clearly a team effort,
from authors to loved ones to publishers, and we are very grateful to all
of them.
Larry Greiner and Flemming Poulfelt
 AUTHOR BIOGRAPHIES

Larry Bennigson is a senior fellow and senior vice president of

Harvard Business School Interactive. He oversees development, design,
and delivery of the school’s custom executive development programs
for individual companies. He has been president of the Scandinavian
Institutes for Administrative Research in the United States, a Managing
Partner of The MAC Group, and senior vice president of Gemini
Consulting. He is a board member of public companies and serves on
the Advisory Board of Toffler Associates, founded by Alvin and Heidi
Toffler, the futurists.

Arvind Bhambri is Associate Professor of Management and Organiza-

tion at the Marshall School, University of Southern California, where
he specializes in strategic change, competitive strategy, global business
development, and leadership. He is co-author of three books and more
than 30 articles and cases.

Anthony Buono is a Professor of Management and Sociology at

Bentley College. He has written and edited seven books, and is editor of
the Research in Management Consulting book series. Dr. Buono is past
Chair of the Academy of Management’s Management Consulting
Division. His research and consulting interests include the manage-
ment consulting industry, organizational change, and mergers and
acquisitions.

Richard Chase is Professor of Operations Management at the Marshall

School, University of Southern California. He has written and lectured
extensively on the subject of service design. His textbook, Operations

xiii
xiv • Author Biographies

Management For Competitive Advantage (with R. Jacobs and N.

Aquilano) 9th ed., has been among the most widely adopted textbooks
in the field for over 25 years.

Tom Cummings is Professor and Chair of the Department of

Management and Organization at the Marshall School of Business,
University of Southern California. He has authored/co-authored
19 books, and is currently Vice-President/Program Chair Elect of the
Academy of Management. His major research and consulting interests
include designing high-performing organizations and strategic change
management.

Fiona Czerniawska is the founder and managing director of Arkimeda,

a research firm focusing on strategic issues in the consulting industry.
She is also the Director of the UK Management Consultancies Associ-
ation’s Think Tank. Dr. Czerniawska is the author of numerous books
and articles on the consulting industry, including Management Consult-
ing: What Next?, Value-Based Consulting, and The Intelligent Client.

Tom Davenport holds the President’s Chair in Information Technol-

ogy and Management at Babson College, and is an Accenture Fellow.
He has also led research centers at Accenture, McKinsey, Ernst & Young,
and CSC Index. Dr. Davenport has co-authored or edited ten books
and numerous articles on business process reengineering, knowledge
management, and enterprise systems.

Robert Duboff is a Lecturer and Executive-in-Residence at The Carroll

School of Management at Boston College. He was a line consultant for
over two decades with Mercer Management Consulting, serving a client
base that featured professional service firms. He then served as Director
of Marketing for Ernst & Young.

Alan Glassman is Professor of Management and Director of

the Center for Management and Organization Development, California
State University, Northridge. He has served as Chair of the Managerial
Consultation Division of the Academy of Management and editor of
Consultation: An International Journal. He consults actively with muni-
cipal governments, the criminal justice system, and social services.

Larry Greiner is Professor of Management and Organization in the

Marshall School at the University of Southern California. Dr. Greiner
has served as Chairperson of the Managerial Consultation Division of
 Author Biographies • xv

the Academy of Management. He is the author of numerous books

and articles on organization growth, management consulting, and
strategic change, including Consulting to Management, with Robert
Metzger.

Philip Kotler is the S. C. Johnson Distinguished Professor of Inter-

national Marketing at the J. L. Kellogg Graduate School of Manage-
ment. He has been honored as one of the world’s leading marketing
thinkers. Dr. Kotler is the author of over one hundred articles and
25 books, including Marketing Management, Principles of Marketing,
Social Marketing, and The Marketing of Nations. His research covers
strategic marketing, consumer marketing, professional services market-
ing, and e-marketing.

Ravi Kumar is Professor of Information and Operations Management

in the Marshall School at the University of Southern California. He is
the author or co-author of many articles on operations management.
Dr. Kumar teaches courses on Operations Consulting and has con-
sulted with many global Fortune 100 companies in the U.S., Europe
and Asia.

Edward Lawler is Distinguished Professor of Business and Director of

the Center for Effective Organizations in the Marshall School at the
University of Southern California. His most recent books include: Cor-
porate Boards: New Strategies for Adding Value at the Top (Jossey-Bass,
2001), Organizing for High Performance (Jossey-Bass, 2001), Treat
People Right (Jossey-Bass, 2003), and Creating a Strategic Human
Resources Organization (Stanford Press, 2003).

Jay Lorsch is the Louis Kirstein Professor of Human Relations at the

Harvard Business School. He is the author of many articles and over a
dozen books, including Aligning the Stars (March 2002) and Pawns or
Potentates: The Reality of America’s Corporate Boards (1989). Dr. Lorsch
has been a consultant to many companies in the U.S. and abroad, and is
currently a Director of three companies.

David Maister consults to professional firms worldwide. He is the

author of numerous articles and books on professional service firms,
including Managing the Professional Service Firm (1993), True Profes-
sionalism (1997), The Trusted Advisor (2000), Practice What You Preach
(2001), and First Among Equals (2002).
xvi • Author Biographies

James Malernee co-founded Cornerstone Research, a litigation

research and consulting firm, in 1989. Dr. Malernee is CEO of the firm
and heads its New York City office. Prior to that, Dr. Malernee was a
Senior Vice-President of The MAC Group, a general management con-
sulting firm. He has taught finance at the University of Texas at Austin
and business strategy at the Stanford Graduate School of Business.

Susan Mohrman is senior research scientist at the Center for Effective

Organizations in the Marshall School at the University of Southern
California. She researches and writes in the areas of organizational
design and effectiveness, knowledge and technology management, and
the human resources function. She is the co-author of three books and
several articles, and consults to a number of organizations on team-
based management.

David Nadler is Chairman of Mercer Delta Consulting, a management

consulting firm. Dr. Nadler consults at the CEO level, specializing in the
areas of large-scale organization change, executive leadership, and cor-
porate governance. He has written numerous articles and book chap-
ters, and has authored and/or edited fourteen books. He is a member of
the Academy of Management and was elected a Fellow of the American
Psychological Association.

Richard Nolan is the William Barclay Harding Professor of Manage-

ment of Technology, at the Harvard Business School. Previously, he was
Chairman of Nolan, Norton & Co. from 1977 to 1992. His research and
consulting interests include business transformation and information
technology. His latest book is Dot Vertigo, Wiley and Sons (2001),
which reports his case-based research on management lessons from
both dot com companies and industrial age companies when incorpor-
ating the Internet into their operations.

Flemming Poulfelt is Professor of Management and Strategy and Vice

Dean at Copenhagen Business School in Denmark. His research and
consulting focuses on strategic management, knowledge management
and management consulting. He is the author of numerous books and
articles on professional services firms and management consulting. He
is a past Chair of the Management Consulting Division of the Academy
of Management, and has served on various corporate boards.

Larry Prusak is a researcher and consultant living in Lexington, Mass.

Over the past 25 years, He has worked for five major management
 Author Biographies • xvii

consulting firms in a variety of roles. His most recent books include:

What’s the Big Idea (2003), co-authored with Tom Davenport, and In
Good Company (2001), co-authored with Don Cohen.

Robert Quinn holds the Margaret Elliot Tracy Collegiate Professor-

ship at the University of Michigan. Dr. Quinn’s research and teaching
interests focus on organization effectiveness and leadership. He
has written several articles and books, including Letters to Garrett
(Jossey-Bass, 2002), A Company of Leaders (Jossey-Bass, 2001), and
Change the World (Jossey-Bass, 2000). He has consulted with nearly
100 of the Fortune 500.

Shawn Quinn is a full time consultant and project manager at Creativity-

at-Work. He specializes in designing and facilitating organizational
change processes, with particular emphasis on aligning vision, strategy,
technology and human systems. He holds a Masters degree in Organ-
izational Psychology from Columbia University.

Stephen Rhinesmith is a Partner in CDR International and focuses

on global business strategy implementation and human resource
development. Dr. Rhinesmith has served as a consultant to many
Fortune 100 corporations on the development of global competencies
and corporate cultures. His recent book, A Manager’s Guide to Global-
ization, is used in management and leadership development programs
throughout the world.

Adrian J. Slywotzky is Vice President and member of the Board of

Directors of Mercer Management Consulting, Inc., where his responsi-
bilities include leading the development of the firm’s intellectual cap-
ital. Mr. Slywotzky is the co-author of How to Grow When Markets
Don’t (2003), How Digital Is Your Business (2000), Profit Patterns
(1999), and The Profit Zone (1998).

Robert Spekman is the Tayloe Murphy Professor of Business

Administration at The Darden School. He is a recognized authority on
business-to-business marketing and strategic alliances. He has edited/
written seven books and has authored (co-authored) over 80 articles
and papers. Among his consulting clients are many Fortune 100
companies.

Morley Winograd is a Managing Principal of Governmentum Part-

ners, L.L.C., Executive Director of the Center for Telecommunications
xviii • Author Biographies

Management, and Associate Professor of Clinical at the Marshall

School of Business at the University of Southern California. He served
as Senior Policy Advisor to Vice President Gore and Director of the
National Partnership for Reinventing Government. He is the co-author,
with Dudley Buffa, of Taking Control: Politics in the Information Age
(Holt: 96).
 Part 1
Consulting Industry, Skills and
Professionalism

Chapter 1
The Changing Global Consulting Industry
(Flemming Poulfelt, Copenhagen Business School, Arvind Bhambri, USC, and
Larry Greiner, USC)

Chapter 2
Professionalism in Consulting
(David Maister)

Chapter 3
The Marketing and Selling of Consulting Services
(Robert Duboff, Boston College and Ernst & Young)

INTRODUCTION
Management consulting has long been in the fast lane of an expansive
and straight track that has never seemed to circle back on itself. In
Chapter 1, “The Changing Global Consulting Industry,” it makes clear
that the business of consulting has grown faster than most other busi-
nesses, not only from increased demand by clients, but also from the
innovative capabilities of numerous consulting firms as they developed
new services. At the end of the last century, the world economy was
booming. Everything was moving fast and upwards, seemingly unstop-
pable. An economic tailwind was apparent as the consulting business
rode its tidal wave of success.
However, trees rarely grow into the sky—not even for the consulting

1
2 • Part 1 Consulting Industry, Skills and Professionalism

industry. In late 2001, a sudden downturn for the industry occurred

when a number of negative forces, beginning with the 9/11 tragedy
and the Enron debacle, deeply impacted the economies of the world.
Chapter 1 describes these changes and how the industry responded
with cost cutting, layoffs, and deficits. But beneath these quick fixes, the
chapter also points out that a number of transformational forces are
still deeply at work within the industry, producing new challenges for
firms and for consultants. The industry itself will be transformed over
the coming decade.
Major changes stemming from the Internet and information tech-
nology are likely to significantly alter the face of consulting for the
long term. The outsourcing of IT services is changing the economic
and strategic face of many consulting firms. In addition, clients have
become more sophisticated, now expecting their consultants to col-
laborate rather than to stand apart as lone objective evaluators. Strategic
responses from consulting firms and their consultants to these many
changes will determine their mutual fate in the years ahead.
But changes in services, economics, and skills will likely not be
enough. The improprieties in its audit and consulting divisions that
lead to the demise of Arthur Andersen has brought to the forefront the
importance of professionalism and ethical conduct in management
consulting. Chapter 2’s focus, “Professionalism in Consulting,” recog-
nizes that the lack of professionalism by a few consultants is able to
bring down a whole firm and place a taint on the entire industry. This
chapter attempts to define professionalism and how it should be incul-
cated by firms into the psyches of consultants. The concept of profes-
sionalism, in the author’s view, is an ambiguous one that refers to a
wide range of skills, attitudes, values, and behavior. He points out that
professionalism is a state of mind embedded in the consultant’s indi-
vidual behavior, and thus is not easily regulated by codes of ethics and
industry rules.
The key message of Chapter 2 is that professionalism is nothing a
consultant can claim for himself or herself; rather, it’s an adjective that
one hopes that clients and colleagues will apply to each other’s
behavior. Professionalism, in essence, has to be earned through one’s
daily behavior by taking the “high road” to results.
The marketing and competitive positioning of a consulting firm
affects not only the success of the firm but its degree of professionalism
and even the future of the industry. In Chapter 3, “The Marketing and
Selling of Consulting Services,” the author makes clear that without
 Part 1 Consulting Industry, Skills and Professionalism • 3

successful marketing, no consulting revenue is forthcoming. The

chapter emphasizes that successful consulting requires both effective
marketing and exceptional sales skills; one cannot exist without the
other. Consulting is a subjective service that is purchased by wary
clients who need both persuasion and reassurance when making large
expenditures for consulting projects in the millions of dollars. The ethics
of consulting marketing require that clients be lead to expect a service
that can be delivered as promised. Chapter 3 discusses various other
issues in marketing and sales, such as the role of market research,
compensation and rewards, relationship marketing, public relations,
sponsorship, and ethical marketing. Although consulting has become
more mature as a business, the underlying theme of the chapter is that
professional marketing and sales are still in their youth searching for
maturity.
Taken together, these three chapters provide an important orienta-
tion to a dynamic industry, the complex issues facing it and the required
skills that consultants, both neophytes and those with long experience,
will need to acquire if they are to succeed. While there are many prob-
lems to overcome, the opportunities remain bright. Consulting is an
industry making a significant impact far beyond its size, not only for
improving the performance of clients but also in developing new know-
ledge about business and in improving the state of the global economy.
 1
THE CHANGING GLOBAL CONSULTING
INDUSTRY
Flemming Poulfelt, Larry Greiner, and Arvind Bhambri

For over four decades leading up to 2000 and the new millennium,
the management consulting industry experienced explosive and con-
tinuous growth, approximating an increase of 15 to 20 percent per year.
Profit margins also increased dramatically, due to larger projects, better
leverage ratios between partners and staff, and diversification into
new services, such as outsourcing. Total revenues of the global industry
are now moving toward $150 billion, and the worldwide number of
consultants is close to one million, including both those who work in
large and small firms, as well as solo practitioners. Few other industries
in history have experienced such sustained growth and financial success
for so long a period of time.
This impressive record of growth and financial success is only an
indication of the consulting industry’s deeper and wider impact around
the world. Over the years, the industry’s many firms and consultants
have made significant worldwide contributions to management know-
how and, in so doing, have greatly advanced the cause of professional-
ism in management. They have also improved the performance of
thousands of companies and public agencies, leading to significant
economic growth in many industrialized countries. In addition, man-
agement consulting has helped greatly to advance the quality of educa-
tion in business schools, and it has become a major employer for
graduating MBAs and an elite training ground for many of today’s
CEOs and senior executives.

5
6 • Part 1 Consulting Industry, Skills and Professionalism

Yet, despite all its success, the consulting industry is today in a state
of continuing economic transformation, insecurity, and heightened
uncertainty about its future. This is a troubling but challenging condi-
tion that, as it evolves, will likely serve to redefine future winners and
losers and eventually the industry’s overall structure and direction.

The Big Shock

The year 2000 began with a major wakeup call for the consulting
industry, beginning noticeably in the second half of 2000 and, in all
likelihood, continuing well into 2004. First, there was the dot.com bust,
followed by the fall of the telecom industry. Then came the 9/11 dis-
aster, continued terrorism threats, and economic recession, all of which
took a big toll on sales and morale within consulting firms. Occurring
almost simultaneously was the Enron debacle and the self-inflicted
demise of Arthur Andersen, leading to broader negative consequences
for many accounting firms and their consulting operations. The net
fallout from these events, many of which were uncontrollable, resulted
in a big slowdown in growth for many consulting firms. Numerous
potential clients hesitated to buy consulting services, and began
requesting lower fees. Clearly, the rapid growth era of the 1990s
was over.
Notwithstanding the downturn in the early 2000s, several bright
spots have either survived or recently emerged. Most notable are new
projects in customer relationship management (CRM), systems inte-
gration and massive information systems for government, cost-saving
HR technologies, plus expanding overseas markets in Asia, as well as
a heavy demand for outsourcing solutions to help clients reduce
their costs.
Still, if we eliminate outsourcing from most of the revenue calcula-
tions (we consider it to be a service but not actual management consult-
ing), the growth rate for the industry throughout the early 2000s is
likely less than 10 percent and for many firms possibly even negative.

Signs of Industry Transformation

How have consulting firms responded to these serious threats and
challenges brought in by the new millennium, and which are still con-
tinuing? There is obviously no single uniform response, but the main
pattern has been one of shake-up, downsizing, consolidation, layoffs,
hiring freezes, and even the bankruptcy of the once-venerable Arthur
D. Little. Many of the large firms, whether in information technology
 Chapter 1 The Changing Global Consulting Industry • 7

or general management, have suffered because of their dependence on

large contracts to cover expensive global infrastructures and armies of
highly paid consultants.
In 2002, Deloitte Consulting asked senior executives to take a 10
percent pay cut. Even the blue chip general management firms, such as
McKinsey and BCG, were forced to make capital calls on partners,
while Bain borrowed from a private investor, and Booz Allen Hamilton
reduced its partners by one-fourth in its private sector consulting
division. Divestments have also occurred at BCG and Bain, which shed
their venture businesses. Several large firms are for sale at valuations
less than one-third of their value during the 1990s.
At this point in history, the industry is facing a single overriding
question: Is it undergoing a significant transformation and long-term
directional shift or just a mid-course correction and then back to busi-
ness as usual? If we believe the former to be true, then the current cost
reductions and temporary down sizings by firms will not suffice.
Under the transformation scenario, consulting firms will have to
change their existing strategies and restructure their practices in order
to survive. No doubt one can argue both sides of this question, but
we believe the odds are clearly on the side of fundamental and trans-
formational change.

Deeper Re-Structuring Direction

The future is usually revealed in underlying historical trends rather
than superficial symptoms, and to us the underlying trends emerging
in client needs and industry economics point toward major trans-
formative changes in the industry. SEC pressures have prompted the
divestment of consulting divisions from the accounting firms. The
computer hardware firms, notably IBM and HP, as well as information
technology services companies like EDS and Cap Gemini are building
substantial consulting practices, and nonconsulting companies are
acquiring consulting firms. Witness Marsh-McLennan’s earlier success-
ful acquisition strategy, which began over a decade ago with William M.
Mercer, followed by Temple, Barker & Sloane, Delta Consulting,
National Economic Research Associates (NERA), and Lippincott
and Margulies. In Europe, Atos recently acquired KPMG’s UK and
Netherlands consulting groups (now known as Atos KPMG) focusing
on IT-related activities. Just what cash-rich Microsoft is likely to do is
uncertain, but we predict it will eventually diversify out of lower
margin software into higher margin IT consulting and outsourcing.
8 • Part 1 Consulting Industry, Skills and Professionalism

In our opinion, the future competitive life for the consulting indus-
try will not only become different but highly challenging, especially
for large consulting firms and their consultants. At the same time, we
think that small and medium-sized firms will be less affected by the
competitive wars occurring among the “big boys,” provided these
small firms are able to niche their specialized services and give highly
personalized attention to local clients.

Consulting Insights
Trianz, Inc.—Succeeding in the New Era
During this discontinuous shift in the consulting industry, Trianz
is a consulting firm that has achieved triple digit growth to
become a respected player in its information technology niche.
Trianz helps clients to reinvent business processes across the entire
value chain using the Internet as the medium for achieving
leverage in the chain. Trianz provides a full-service outsourcing
infrastructure in the United States and India, supported by a team
of professional consultants capable in strategic and value chain
analysis.

To begin our assessment of the industry’s future, we must first estab-

lish an historical perspective for the industry. In doing so, we will
identify earlier trends and issues that still face firms and consultants
today. As we move along, we will point out what are likely to be the
changing needs of clients, and how consulting firms will have to change
their strategies to meet these needs. Without this broadened perspec-
tive, consulting firms can easily misjudge where they are in the unfolding
dynamics of the industry. Hanging on to past practices and strategies
will likely become a recipe for future disaster.

HISTORY IN BRIEF
In a 1998 article in the Journal of Management Consulting, Staffan
Canback made an interesting observation with reference to the experi-
ence curve in consulting services. He wrote, “If the experience curve
applies in consulting services, then it may be noteworthy that approxi-
mately 80 percent of all consulting experience was generated in the
last seventeen years, and only 20 percent in the period from 1886
(when Arthur D. Little started the first consulting firm) to 1980.”1 With
 Chapter 1 The Changing Global Consulting Industry • 9

further accumulated experience since Canback’s article, we can reason-

ably conclude that, in this 115+ year-old industry, more than 90 percent
of all experience has been generated in the last 20 years.
What are the factors that stimulated growth in the 1980s and 1990s
and made the industry fundamentally different in both quantity and
quality from the preceding years? What can we conclude about this
growth that may influence client needs and consulting practices over
the next few decades? As Exhibit 1.1 shows, changing business issues
and opportunities facing clients have led to new management tech-
niques and concepts, which in turn have changed the offerings of
consulting firms.

Before 1950
Prior to 1950, most consulting firms focused on efficiency and technical
issues in manufacturing. The first consulting firm was Arthur D. Little
(ADL) founded in 1886 (and filed for bankruptcy protection in
2002). ADL grew out of a research laboratory, and it continued to
maintain links with its technical roots for several decades, long after
its management consulting accounted for a majority of its revenues.
ADL’s ascendancy occurred in the maturing period of scientific man-
agement, whose origins go back to Frederick Taylor2 and Henri Fayol3
in the early 1990s.
In the first half of the 20th century, most of the consulting firms were
founded either with specific customer opportunities in hand, such as
Booz Allen Hamilton with the U.S. government, or with a specific
functional specialization, such as Towers Perrin in compensation and
human resources. For the most part, this early imprinting led to a
lasting impact on both firms. Thus, even today Booz Allen continues to
retain significant federal business, and Towers Perrin is still known for
its major presence in human resources consulting.
Following World War II, the focus of management consulting turned
to designing, improving, and systematizing the internal functioning
of client organizations and the marketing of products. Specific emphasis
was given to designing divisional structures, formal budgeting, per-
formance evaluation, strategic planning systems, goal setting, compen-
sation schemes, and other such performance improvement techniques.
Advertising and sales force management were major issues in marketing.
Most consulting firms chose to specialize only in a narrow range of
needs as expressed by clients.
10 • Part 1 Consulting Industry, Skills and Professionalism

Exhibit 1.1 The Historical Development of Consulting

Phases Time Firms Management

Issues

1. Origins of Before Fayol, Taylor Birth of

consulting 1900 scientific
management
2. The engineering 1900– Arthur D. Little Scientific
epoch 1925 management,
work design
3. Birth of personnel 1925– Hay, Towers Human
and HR Perrin relations,
compensation
4. Emergence of the 1930 McKinsey, Booz General
generalist Allen, PA management
approach
5. Internationalization/ 1950 Cresap Operations
reentrance of management
engineering (OR, OM)
6. Rise of computer 1960 The Big 8 Performance
consultants, Accounting Firms measurement,
conglomerates electronic data
processing,
portfolio
management
7. Business strategy 1970 BCG, Bain Planning,
organization
structure,
marketing,
competitive
advantage
8. Restructuring and 1980 March & Excellence,
effectiveness McLennan, culture, M&A,
Saatchi & globalization
Saatchi, KPMG,
Ernst & Young
9. Information 1990 Accenture, PwC, Internet
technology and Monitor, IBM leadership,
reengineering Consulting change, Y2K,
Services BPR, ERP
10. E-Business and 2000 Cap Gemini/E&Y, Outsourcing,
value chain IBM Global transformation,
Services networks,
alliances
 Chapter 1 The Changing Global Consulting Industry • 11

In the 1960s, a dramatic and discontinuous shift occurred in the

scope and complexity of management consulting. Client companies
were growing rapidly through diversification and creating the first con-
glomerates, and the novelty of international competition was fast
becoming a reality. In this changing environment, companies asked
consultants for help on pressing strategic questions about which busi-
ness they should be in and how they should internationalize themselves.
This was the stage where the elite strategy consulting firms, such as
BCG, became household names.

1960–1980
McKinsey & Co. had existed as a generalist firm for almost four decades
(since 1925) when Bruce Henderson founded the Boston Consulting
Group (BCG) in 1963. Henderson pioneered the marketable idea of
strategy consulting based on expert analysis of a client’s competitive
situation. BCG differentiated itself through promoting new strategy
concepts, notably the Experience Curve and the Growth/Share Matrix.
The accelerating popularity of these concepts began to establish the
credibility of consulting firms as developers of intellectual capital and
lead to a two-way, synergistic relationship between business schools
and consulting firms. The top strategy consulting firms became the
first job choice of MBAs, an advantageous recruiting position that
certain elite firms like McKinsey and BCG continue to maintain to
this day.
During the 1960s nontraditional players began to enter the consult-
ing industry, but often with mixed results. A negative example was
Citibank acquiring Cresap, McCormack & Paget, and then divesting
it to preserve the consulting firm’s independence. Eventually, Towers
Perrin acquired Cresap. The high visibility of top strategy consulting
firms in the 1960s also attracted attention from the Big 8 accounting
firms, which had long established auditing and tax relationships
with many large Fortune 500 companies. Without exception, these
accounting firms all launched management consulting services, which
promised higher fees and margins than yielded by their auditing ser-
vices. For the most part, the consulting divisions of the accounting
firms were not able to penetrate the elite strategy market. However,
with a larger employee base and lower fees than the strategy bou-
tiques, they gravitated toward operations consulting and information
technology.
12 • Part 1 Consulting Industry, Skills and Professionalism

1980–2000
By the end of 1980, the stage was set for the golden era of management
consulting, which evolved around information technology and global
expansion. Consulting firms grew in the 1980s and 1990s through both
organic means by developing new practices in-house and also rapidly
by mergers and acquisitions. This was also the era of global growth for
U.S. consulting firms as they moved out around the world to capture
over 80 percent of the world consulting market.
At the same time, the accounting firms made many mergers and
acquisitions in order to achieve greater scale and leverage in their audit-
ing and consulting practices. Thus, we saw PMI (Peat Marwick Inter-
national) merge with KMG (Klynveld Main Goerdeler) in 1987 to
become KPMG; Deloitte merged with Touche Ross in 1989 and turned
into Deloitte & Touche; Ernst & Whiney with Arthur Young in 1989 to
become Ernst & Young; and Price Waterhouse with Coopers & Lybrand
in 1998 turning into PricewaterhouseCoopers. In addition, numerous
small- and medium-sized consultancies were acquired by larger firms
during this same period, such as the French company Sogetti in 1991
acquiring both the MAC Group, which was founded as a faculty-based
general management consulting firm, and United Research, an oper-
ations consulting firm. These latter acquisitions were merged to form
the core of Gemini Consulting.
Attracted by the consulting industry’s growth and high profitability,
several nontraditional companies also attempted to enter the industry
through high profile acquisitions. Saatchi & Saatchi was one of the
first companies to articulate the concept of “one-stop-shopping” for
professional services. Their acquisitions included Petersen in litigation
consulting and Hay in human resources and compensation consulting,
along with other companies in market research and financial services.
The results of Saatchi’s acquisition strategy proved disastrous; most of
the acquired consulting firms were later sold back to their original
sellers for a fraction of the price paid just a few years earlier. Marsh &
McLennan, from insurance, was more successful in moving into con-
sulting with the acquisition of Mercer and several other professional
services firms.
By the 1990s, the main driver for acquisitions appeared to shift toward
providing integrated IT solutions under one roof, which in turn led
to EDS acquiring A. T. Kearney and to CSC acquiring Index. These
combinations were not deterred even though some consulting acquisi-
tions by nonconsulting firms resulted in serious incompatibilities. By
 Chapter 1 The Changing Global Consulting Industry • 13

far the largest growth during this period occurred among the informa-
tion system providers. Driven by the increasing interdependence of
information technology and strategy, these firms helped clients to
formulate an information strategy, and then to design and install
the appropriate IT infrastructure; all of which is further discussed in
Chapter 4, Information Technology Consulting.
During the late 1990s, many of the IT consultancies diversified into
out sourcing, which subsequently became a major growth driver. As
clients began outsourcing their entire IT departments to consultants,
it attracted hardware and software firms like IBM and EDS. In the
marketing of outsourcing, the consultant’s value-added proposition
is that of shifting assets to the consultant so the client’s balance sheet
is improved, and the client can focus on its core business.
Firms in the IT segment included IBM Global Services, which is
now the largest consulting firm in the world, Electronic Data Systems
(EDS), Accenture, Deloitte Consulting, and Cap Gemini Ernst & Young
(CGE&Y). Their primary consulting focus, other than outsourcing, is
on providing a wide range of IT services, including: 1) the assessment
of a client’s IT infrastructure; 2) the development of appropriate systems
and software; 3) the integration of incompatible technology; 4) the
redesign of business processes; 5) the purchase and installation of
appropriate hardware; and 6) change management and training of
employees. Among the many services provided by these firms, strategy
analysis is a relatively small segment, and even it is usually conducted
with an IT emphasis.

2000 into the Storm

As Exhibit 1.2 shows, in 2001–2002, the ten largest consulting firms
recorded approximately $52 billion in revenues (about 42 percent of
the total market), up from less than $2 billion in 1980. This suggests an
industry that is increasingly dominated by a few large firms, primarily
IT-oriented firms. Only two generalist firms, McKinsey and Mercer
Consulting, appear in the top ten in revenues. The IT firms remain at
the top even if we discount their revenues by 20 to 40 percent derived
from outsourcing.
If we break down total revenues into separate practice areas, Exhibit
1.3 reveals that, in 2001–2002, the ten largest consulting firms
accounted for approximately $9.8 billion in revenue for the strategy
practice area; the ten largest information technology practices for
$27.6 billion; the ten largest human resources consulting practices for
14 • Part 1 Consulting Industry, Skills and Professionalism

Exhibit 1.2 The 10 Largest Global Management Consulting Firms,

2001–2002

Revenues Number of Estimated

(US$/b) Consultants Market
Share (%)

IBM $10.8 50,000 8.6

Accenture 9.5 63,000 7.6
Cap Gemini Ernst & 5.9 31,500 4.7
Young
Deloitte Consulting 5.6 26,000 4.5
PricewaterhouseCoopers 5.5 32,000 4.4
Consulting
CSC 3.6 15,500 2.9
McKinsey & Co. 3.3 8,400 2.6
EDS (inc. A. T. Kearny) 2.9 8,900 2.3
KPMG Consulting 2.7 7,500 2.1
Mercer Consulting Group 2.2 11,700 1.8
Total $52.0 254,500 41.5

Source: Management Consultant International, June 2002

$9.2 billion; and the ten largest operations consulting practices for $9.9
billion. As one can see, the IT segment is about three times larger than
each of the remaining services, all of which are at about the same level.
Interestingly, in Exhibit 1.3, twenty-two different firms compose the
top ten across the four practice areas, which indicates some degree of
cross-specialization, since the table would require forty firms if it was
“pure” specialization with no overlap across practice areas. However,
only two firms, Accenture and PwC (now IBM) have been successful in
broadly diversifying themselves across all four categories, although we
suspect that much of this coverage is closely related to IT activities.
As for profitability, the economics clearly favor the strategy consult-
ing firms over the IT consultants. The top strategy consulting firms
average about $450,000 in revenues per consultant per year, which
compares to approximately $200,000 in IT-based consultancies. The
profits per strategy consultant are considerably higher than in IT firms.
Although Accenture is approximately eight times bigger than McKinsey
in total number of employees, it is only three times larger in total
revenues. However, the IT firms clearly lead in total revenues and total
profits because of their much greater size.
Exhibit 1.3 The Top Ten Revenue Firms in Four Practice Areas

Strategy 2001 IT 2001 HR 2001 Operations 2001

1. Deloitte Consulting $1.7 IBM $8.6 Mercer Consulting $1.9 Accenture $2.5
Group
2. McKinsey & Co. 1.6 PwC 3.2 Accenture 1.2 CGE&Y 1.4
3. Accenture 1.4 Deloitte 2.8 D&T—Human 1.2 PwC 1.1
Capital
4. BCG 0.9 Accenture 2.6 Towers Perrin 1.1 IBM 1.1
5. CGE&Y 0.9 EDS 2.6 Watson Wyatt 1.0 McKinsey & 0.9
Co.
6. CSC 0.8 CSC 2.1 Aon Consulting 0.9 Deloitte Consulting 0.8
7. PwC 0.7 KPMG 1.8 PwC 0.5 CSC 0.7
8. Bain & Co. 0.7 CGE&Y 1.6 Hewitt Associates 0.5 EDS/A. T. Kearney 0.6
9. Booz Allen 0.6 Atos 1.2 Buck Consultants 0.5 Booz Allen Hamilton 0.5
Hamilton
10. EDS/A. T. Kearney 0.5 T-Systems 1.1 Andersen 0.4 Getronics 0.3
TOTAL $9.8 $27.6 $9.2 $9.9

All numbers are in billion dollars

Source: Consultant News, 2002
16 • Part 1 Consulting Industry, Skills and Professionalism

Exhibit 1.3 also suggests that human resources consulting is a highly

specialized field where the IT firms are not so dominating. However,
this practice area is also more IT-focused in its development (see
Chapter 8 on Human Resources Consulting). Apparently, the fastest
growing part of human resources consulting lies not in its historical
work on HR strategy and compensation but in arranging for the out-
sourcing of a client’s back-office HR functions. In these arrangements,
some or all of a client’s entire payroll, benefits, and training programs
are transferred to an outsourcing partner.

ENDURING TRENDS AND CLIENT NEEDS

The current period of industry turmoil provides an opportunity for
consulting firms to examine the underlying forces shaping the future
needs of clients. Being able to meet these needs will determine the
consulting winners in the future. Firms need to avoid the easy assump-
tion that their growth is assured by client growth. Today, many clients
aren’t growing, or they are turning away from consultants to rely on
their own staff professionals for help. So it is important to begin with
prospective clients to see what is on their minds—this is where all
consulting firms should start their analyses as they reexamine their
future business strategies.
We detect five major trends affecting client needs, all of which arose
over the past decade and are likely to continue into the future. Consult-
ing firms must tune their service offerings to these trends.

1. Keeping up with the pace of change. All industries have increasingly

had to cope with ever shortening product life cycles. Although some
industries, such as personal computers and consumer electronics, have
long operated with cycles of less than a year, even traditional, long
life-cycle companies like aircraft engines and airplane manufacturers
are now greatly reducing their cycle times for competitive reasons. In
addition, many potential clients are facing other threatening shifts that
limit long-term thinking, such as new nontraditional competitors,
deregulation, and technological shifts—all of which create uncertainty
and cause companies to rethink their strategic positions and reinvent
themselves more frequently.
Discontinuous change requires new strategic concepts, which is the
province of strategy consultants. Not surprisingly, new and proprietary
strategy concepts and tools have become a major basis for achieving
differentiation among the offerings of consulting firms (see Chapter 5,
 Chapter 1 The Changing Global Consulting Industry • 17

Strategy and Organization Consulting). In the future, consulting firms

that focus their strategies and skills on helping clients with issues of
speed to market, whether it is in operations or in marketing, will likely
receive a favorable audience.

2. Continuously reducing costs. Operational efficiency and cost contain-

ment have become necessary for corporate survival (see Chapter 7,
Operations Management Consulting). As a result, companies are ser-
iously reevaluating their mix of operating activities, and many are
deciding to outsource activities that are not part of their core com-
petency. For the most part, these outsourced functions include back-
office departments concerned with logistics, data processing, human
resources transactions, and sometimes even the complete manufactur-
ing of products.
This trend toward reconfiguring a company’s value chain is leading
to considerable growth in consulting. Consultants are undertaking
large projects to help companies assess and reengineer their activity
mix, assisting them in deciding what their core competencies are, and
what activities should be out sourced. In addition, consulting firms are
becoming primary outsourcing and infrastructure providers to their
clients. This is opening up an entirely new and sizeable revenue stream
with a reliable cash flow, in contrast to a tradition of sporadic payments
by clients.

3. Accelerating product and market development. As companies face

maturing markets and intense competition in their home bases, they
are actively seeking new products and redesigning old ones. In this
effort, tradition-bound companies often lack creativity within their
organization cultures, and so they look to consultants for outside
help. This requires consultants to study customers’ needs and compet-
ing products and to work closely with a client’s R&D, marketing
and product designers, as illustrated in Chapter 6, The Marketing
Consultant.
In addition, there are now major international openings in non-
traditional markets, including China, India, and Eastern Europe.
With limited experience in these markets and abundant horror stories
of failed ventures, client companies are seeking assistance from con-
sultants with offices abroad. Not surprisingly, McKinsey’s office in
India became its fastest growing, most profitable office in the late
1990s.
18 • Part 1 Consulting Industry, Skills and Professionalism

4. Coping with discontinuous technology shifts. Many experts argue

that science and technology are driving the economics of business
and product development. Moving from central mainframes to client-
servers and distributed computing, from intra-networks to EDI and
then to Web-based collaboration, many companies have found that
information technology is not just an implementation tool but a key
driver of business strategy. Most companies have learned painfully that
the impact of information technology has been pervasive throughout
society, causing them to rethink strategically the state of their product
lines, asset utilization, and likely future markets.
This need has in turn reopened debates such as “What should be
owned versus outsourced?” and “Where in the value chain should we
add value?” Indeed, companies like Dell have become industry leaders
because of their ability to outsource almost their entire value chain, and
thereby construct a new business model based on tight coordination
with outsiders. On the other hand, Nokia outsources very little of its
operations relative to its competition, and yet it remains successful
through the extensive use of IT for coordinating internal production
and logistics.
The emergence of industry leaders with nontraditional business
models, such as Dell, has made it a business imperative for companies
to reexamine the fundamentals of their business models. For example,
entrenched competitors like General Motors and Ford have come
together to form a joint venture, Covisint, to create and manage com-
mon e-commerce platforms for procurement. Similarly, the largest
consumer packaged goods companies have joined to form Transora. In
both cases, a major portion of the initial budget of these new ventures
went to consulting firms who helped to set up the joint venture.

5. Meeting the global imperative. As we shall see in Chapter 10, Global-

ization Consulting, consulting firms of all sizes, in order to prosper in
the future, are positioning themselves to handle the globalization of
industries and companies. Large consulting firms will need to locate
themselves overseas at many sites, and smaller ones will have to join
with larger consulting firms to assist clients in addressing issues of
globalization. Consultants have long recognized that their clients will
require at some point a global presence and perspective. However,
many consulting firms choose to globalize only after following an exist-
ing client overseas. More proactive consulting firms have decided
to internationalize before their clients so as to exploit new markets
 Chapter 1 The Changing Global Consulting Industry • 19

abroad. For example, a U.S. firm choosing Japan can begin to serve
back-home clients but also local companies in Japan. Research also
supports a commonly held belief among large potential clients that
consulting firms must be international in order to qualify as a leading-
edge player.
Moving abroad may also be a matter of survival. In a 1990 report
from ACME, it was noted that North American consulting firms had
experienced a continuing drop in revenues attributable to domestic
operations to 81 percent of total revenues, with predictions of a further
drop to 67 percent in 2000.4 Similar shifts have been observed in
Europe. According to Consultants News in 2002, the breakdown of
total worldwide consulting revenues is as follows: 56.6 percent North
America, 34.5 percent Europe, Latin America 1.4 percent, Asia Pacific
5.6 percent and rest of world 2 percent.5 These numbers indicate that,
although consulting is popularly regarded as a global industry, 90 per-
cent of the market remains concentrated in North America and Europe.
Interestingly, Asia trails far behind with only 5.6 percent, which not only
indicates an opportunity, but also a difficult challenge to penetrate.
All fifty leading global consultancies now occupy offices spread
around the world. A majority have expanded abroad through mergers,
acquisitions, joint ventures, and alliances. Today, many firms are
focusing on Asia, especially China (see Consulting Firms in China).
However, some have also closed offices or operations during this same
period due to the recession and an inability to manage operations in a
different culture. For example, both CSC Index and Gemini closed
down in Japan after several years of frustration and lack of success.

RESPONSES OF CONSULTING FIRMS TO

MARKET TRENDS
In this section, we give our opinions about how consulting firms are
adjusting to the new competitive world facing them. These adjustments
represent the transformation currently taking place in the consulting
industry.

Consulting Insights
Consulting Firms in China
Is China the next big growth market? In 2002, BearingPoint was
the largest international consulting practice in China with about
20 • Part 1 Consulting Industry, Skills and Professionalism

350 consultants in four offices, and two more soon to open. Its
main clients include Beijing Airport Group, China Construction
Bank, Samsung, BMW, and China Mobile. The consulting market
in China is growing about 50 percent per year. Other firms
present include: McKinsey with 180 consultants and $20 million
revenue, A. T. Kearney with 70 consultants and $6 million, and
Accenture with 160 consultants and $4 million. Also present are
Mercer, Monitor, BCG and Roland Berger. The largest domestic
firm is HANPU (51 percent owned by China’s Legend Computers)
in IT consulting with 400 consultants. Clients of these firms
include multinationals trying to become profitable in China, large
SOEs (state-owned enterprises) required by government and
WTO entry to restructure to become private and profitable
(telecom, aerospace, energy, banking), and government ministries
attempting to become more effective and less bureaucratic.
Key issues include strategy (planning, implementation, change),
marketing (branding, advertising, channels), and operations
management (organization, goal setting, incentives, control sys-
tems). Barriers include a lack of understanding among Chinese
managers about value and use of consultants. International con-
sulting firms face difficulty in understanding Chinese enterprises
and government and being price competitive. Local Chinese con-
sulting firms, numbering only three over ninety consultants, lack
sophistication and credibility but possess strong local knowledge.

From detached experts to involved partner. Traditionally, consulting

firms have promoted themselves as experts who possess superior
analytic capabilities and tools. Thus, a BCG consultant would apply its
Growth-Share Matrix in a way that a client company’s staff could not
do. Moreover, the client’s competitors were at a presumed disadvantage
because they did not have access to the consultant’s model and talent
in using it. Over time, however, clients have gradually become disil-
lusioned with the difficulties, if not impossibility, of implementing
many of their consultant’s abstract conclusions and recommendations.
In response, more and more consultants are becoming involved in
implementation and change management. These topics will be further
explored in Chapters 12, 13, and 14 (Intervention Strategies in Manage-
ment Consulting, Consulting to Integrate Mergers and Acquisitions, and
On Becoming a Transformational Change Agent).
 Chapter 1 The Changing Global Consulting Industry • 21

The value of a consulting engagement has moved from an emphasis

on expert analysis to greater involvement in a client’s operations, so as
to directly influence the results. Consequently, the role of the consul-
tant is changing from one that relies on expert knowledge to one of
collaborating with clients to implement action plans. Some consulting
firms even stake their fees and advertising on promised results. Bain,
for example, tracks the increase in the share prices of its clients and is
known to proclaim, “Our clients outperform the market 3 to 1.”
Several large IT firms measure their success on the basis of successful
implementation of new information systems. And McKinsey now
considers itself successful if it has built in-house client capabilities to
solve its own problems the next time around. It remains a moot
question as to how far firms should go with the depth of their involve-
ment and promises to clients before possibly losing their objectivity.
Clearly, safeguards have to be built, and the litigious consequences also
weighed.

From advisory services to outsourcing revenues. A press release from

Top-Consultant.com on October 20, 2002, highlights where the growth
opportunities are in today’s consulting environment when they state:
The thousands of consultants that have faced redundancy in the
last 12 months would be bemused to hear the industry fared well
in 2001. The reality is that traditional consulting suffered while
a strategic push into outsourcing has allowed consultancies to
cushion the fall.”
In the same report, Top-Consultant notes:
. . . the U.K. consulting sector enjoyed revenue growth of 17% in
2001, according to figures released this week by the Management
Consultancies Association (MCA). However, this favorable picture
was largely thanks to 50% growth in outsourcing revenues. . . .
This last quote highlights the fact that underlying the recent growth
of the consulting industry is the outsourcing market. In 2001–2002, the
six largest consulting firms in terms of total revenues were all firms
with strong positions in outsourcing, e.g., IBM, Accenture, PwC,
Deloitte Consulting, EDS, and CSC. All types of noncore activities are
being considered by clients for outsourcing, from supplier manage-
ment to routine human resources transactions such as signing up for
benefit plans. Many efficiencies can be achieved, as well as self-service
through Web-enabled systems.
22 • Part 1 Consulting Industry, Skills and Professionalism

However, this growth in outsourcing is not without its issues of

concern. Clients can lose control over certain operations, leaving them-
selves vulnerable to the quality of the outsourcing firm. For the consult-
ing firms, there is the potential conflict of interest question: How can
IT consulting firms provide objective consulting at the same time they
are actively managing major business functions for the same clients?
Some industry critics have recommended that once a client becomes an
outsourcing client, all consulting should cease for that client.

From conservative professionals to aggressive marketers. As consulting

firms move to increase their competitiveness, they are making big
investments in marketing to differentiate themselves, including brand-
ing efforts, increased advertising, dedicated sales forces, innovative
incentive contracts, books with gurus, free seminars, and even low
priced consulting as a loss leader (see Chapter 3, The Marketing
and Selling of Consulting Services). Direct advertising, once a “no-no,” is
now fairly commonplace; Accenture, for example, spends in excess of
$50 million on advertising.
Consulting firms are also turning to indirect forms of marketing,
using investments in intellectual capital as a strategic differentiator.
Many of the leading firms have funded so-called centers of excellence,
as well as research in collaboration with academic scholars to produce
books and frameworks to enhance the firm’s reputation for intellectual
leadership. Large firms now offer their own quarterly journals, elec-
tronic newsletters, newsy Web sites and other publications.

From go-it-alone firms to networks. The management consulting

industry is slowly developing from stand-alone firms to new organiza-
tional forms involving the combination of firms into networks and
alliances. The most serious are the alliances between IT consulting
firms and their vendors. Accenture with Hewlett-Packard, and SAP
with several big IT consultancies are just two examples. All outsourcing
contracts clearly involve outside partners where control and commit-
ment remain somewhat tenuous.
Another type of nonoutsourcing network is a “loose” one represent-
ing various combinations of partners such as locally owned franchises
operating under one brand name, while others promote themselves as a
large “alliance” in order to appear bigger in the eyes of potential clients.
Most networks are unstable over the long term, so some firms have
moved to acquire their former partners, such as IBM Global Services
 Chapter 1 The Changing Global Consulting Industry • 23

buying PwC Consulting in 2002. Learning how to manage oneself and

the other partners in an alliance is a new challenge where a collaborative
give and take attitude must be the norm.

From private firms to public ownership. The question of what legal

form is the most suitable ownership structure—private partnership or
public ownership—has been on the agenda of firms for many years.
Mostly, consulting firms, especially the general management ones, have
long believed in the partnership model. Some earlier attempts to go
public have been failures. For example, Booz Allen endured a disastrous
period as a publicly owned company in the 1970s. PA Consulting Group
went public in the late 1970s, but in the early 1990s, they were close to
bankruptcy. Also the Swedish firm, Indevo, in its public offering during
the 1980s fell short of its expected outcome from being listed.
One explanation for these negative experiences is offered by
Rodenhauser in his newsletter Inside Consulting: “The bottom line of
going public is that it only works with good management, sustainable
business enterprise systems and scalable pricing models for those
systems. Very few firms can measure up to all three factors.”6
Today, several publicly listed consulting firms are selling well below
their offering prices. Ernst & Young has sold its consulting business to
CAP Gemini, which is quoted on the Paris Stock Exchange, but not
fairing well in market value. KPMG Consulting in the U.S. is now
listed on the New York Stock Exchange and has changed its name to
BearingPoint, Inc., but it is also down by more than half from its
opening IPO price.
Just what will happen in the future is problematic, with much
depending on the stock market. Consulting firms would like access to
capital that a public listing can bring; it also provides a way to put a
clear valuation on the firm, enabling them to reward partners and
eventually cash them out. A significant deterrent, though, is the poten-
tial for an erratic stock market, as well as continuous pressure from
financial analysts for quarterly improvement.
We doubt that the large private general management firms will
eventually go public, but most of the IT firms will, if not already,
because their capital requirements for outsourcing equipment are much
larger than private partnerships can provide. Small- and medium-sized
firms don’t have the same option of going public unless they are
acquired by larger, publicly owned companies.
24 • Part 1 Consulting Industry, Skills and Professionalism

As for the effects on the firms that go public, many questions remain
unanswered. There will be governance questions, conflict-of-interest
questions, and public scrutiny questions. We do believe that those firms
that go public will be driven by market pressure to grow faster in
revenues and profits and to expand their operations further into non-
consulting services. And what will be the effects on the “partnership
mentality” and traditional spirit of collegiality when the stock market
drops precipitously and a partner’s net worth is depleted?

From single projects to long-term relationships. In the 1960s and

1970s, consulting was typically thought of as a single, discrete project
where the consultants arrived, performed their study, made their
recommendations and left, moving on to the next interesting client. It
was Bain that pioneered the art of relationship consulting when
they promised exclusivity to a client, rejecting projects from other
companies in the same industry. Then the IT companies, with their
very large multi-million dollar projects, began to set up offices within
clients, staying as long as five years and perhaps longer if they assumed
an outsourcing contract.
Today, the general norm in many consulting firms is to strive for
long-term relationships with clients—estimates are that at least 60 per-
cent of current consulting revenues originate from existing or former
clients. The benefits for the consultant are that it reduces marketing
costs and startup time in getting acquainted, and the benefits for the
client are that they are dealing with a known quantity. The essential
elements of trust and credibility are already established.
Despite the potential for conflicts of interest and even litigation if
projects go wrong, we believe that consulting firms will continue to
pursue long-term relationships with clients, and they will develop new
services and products to assure the continuation of this relationship.

From “loose” confederations to “tight” professional leadership. Given

the current market slowdown and the intensity of competition, con-
sulting firms are increasingly being challenged to manage themselves
more effectively and professionally. In particular, those firms that are
publicly listed are also feeling strong pressure from analysts and boards
to increase their performance. Previously, many consulting firms were
managed more as a loose confederation of partners, led by a Managing
Partner who was often elected, either formally or informally by popu-
larity and political power. Many of the “best practice” attributes that
 Chapter 1 The Changing Global Consulting Industry • 25

these firms recommended to clients—clear focused strategy, well-

aligned organization structure, pay for performance, etc.—were fre-
quently lacking within the consulting firm itself.
For the many Managing Partners with “laissez-faire” styles, it was
rather easy to manage loosely, so long as growth was abundant, thereby
providing for high compensation, while hiding lots of mistakes. As a
close observer, J. A. Moynihan of PA Consulting commented, “Most
consulting firms are very badly managed. They wouldn’t survive a day
if they had to compete with GE or whomever.”7
Today we find more firms carefully scrutinizing the selection of their
future CEOs. They want “take charge” leaders who are well-schooled in
professional management and who know how to motivate and move
firms in a coherent strategic direction. For these new leaders, difficult
choices await them on their strategic agenda, including making acquisi-
tions, developing innovative marketing programs, going public, form-
ing alliances, creating Web opportunities, and developing the intel-
lectual capital of the firm. In addition, performance standards need to
become clearer and rewards more closely tied to performance. These
new leaders must come out of their offices to articulate the firm’s
future strategy and encourage a unified effort in implementation,
which is further discussed in Chapter 15, Managing Growth Stages in
Consulting Firms and in Chapter 16, High-Performance Consulting Firms.

INDUSTRY RESTRUCTURING
The emerging profile among consulting firms is one of large, multi-
service businesses using aggressive consumer marketing techniques,
forming alliances, and displaying a willingness to enter nonconsulting
businesses. Most of these firms’ new services, such as outsourcing,
require large infusions of capital investment and substantial sales
volume in order to achieve scale and efficient operations. This trend,
therefore, suggests fundamental implications for the emerging struc-
ture of the industry, which in many ways is witnessing the creation
of mega-enterprises where management consulting may only become a
subsidiary division of a multi-service holding company.
In a provocative book titled The Rule of Three, Sheth and Sisodia
propose an intriguing thesis on industry maturity, supported by case
studies from many industries, arguing that “naturally occurring com-
petitive forces, if allowed to operate without excessive government
intervention, will create consistent structures across nearly all mature
26 • Part 1 Consulting Industry, Skills and Professionalism

markets.”8 They conclude that every industry will inevitably form a

core, or inner circle, of three major players who are full-line generalists,
surrounded by niche companies that are product or market specialists.
They also caution that professional services firms have been slow to
reach a level of structural maturity because the combination of owner-
ship and management in professional services creates “emotional
attachment and inhibits purely efficiency-driven economic decision-
making.”
We believe that the time is coming when the “Rule of Three” will
likely emerge in the consulting industry, composed most probably of
IBM, Accenture, and one of either CGE&Y or Deloitte Consulting. The
big gorilla here is IBM after its recent growth in Global Services and its
acquisition of PwC for only $3.5 billion. The goals of these firms are
directed toward achieving large scale market dominance, and already
they are the biggest in total revenues.
Other technology hardware firms, such as HP, Cisco, and Oracle, are
likely to increase their acquisitions of smaller consulting firms once
their stock prices recover and they are able to use their market value
for acquisitions. The equipment makers and software providers, like
HP and Microsoft, realize that consulting services are a necessary com-
plement to the sales of their other products. For these firms, consulting
might be used as a “loss leader” in hopes of landing bigger dollar
contracts in hardware and outsourcing.
We suspect that the general management consulting firms, though
far behind in the acquisition game, will also consolidate, with McKinsey,
Mercer Consulting Group, and Booz Allen likely becoming the major
players, swallowing up the likes of BCG, Monitor, Bain, and Towers
Perrin.
The net result over the next ten years may be an industry that divides
itself into two different industries composed of “infrastructure pro-
viders,” such as IBM and Accenture, and “problem solvers,” such as
McKinsey and Mercer. Each segment might have three dominant play-
ers surrounded by a number of market and/or product specialists.
Thinking further out, will General Management merge with IT? The
increasing trend among clients is toward internalizing their intellectual
value-added activities while outsourcing back-end systems, and assets
suggest that the consulting industry may become one large market with
three core IT/Infrastructure companies in the center and all other firms
acting as specialists around the periphery.
 Chapter 1 The Changing Global Consulting Industry • 27

For the future, there are not only emerging opportunities but also
profound questions to be raised about the current direction of the
consulting industry. Clearly, a major transformation is occurring, not
only in the industry but within firms. This will result in major changes
that create not only challenging identity questions for firms but
perhaps a split in the industry between firms that are problem solvers
and those that are service providers.

ROLE RESTRUCTURING
Until recently, the use of knowledge and tools for advanced analysis was
very much the captive domain of consulting firms and business
schools. Thus, it was assumed that BCG understood the experience
curve better than others; that Monitor understood the value chain
more than others; and that Strategos led in their understanding of core
competencies. However, experienced MBAs and former consultants
now permeate all levels and functions of client organizations. Thus,
management knowledge and techniques are widely disseminated and
available, especially analytical concepts, techniques, and best practices.
These changes have altered the relative balance of expertise and
power between consultants and clients. Increasingly, clients are using
consultants to supplement their own thinking rather than to supplant
it. We believe that clients will do less intellectual outsourcing (i.e.,
strategic planning) while continuing to increase operations out-
sourcing (i.e., infrastructure and back-office) over the next decade. This
bodes well for the IT folks, but not so well for the general management
consultants. Many clients will increasingly become reluctant to turn
over intellectual control to consultants; instead, they will want to stay
heavily involved in the analytical and implementation process, to the
point where the consultant needs to become more a facilitator than an
expert diagnostician.
Another role change is occurring in the traditional definition of a
professional consultant as a specialist observer giving independent and
expert advice. Deviating from this definition are the IT-oriented firms,
which are developing a broad array of nonconsulting services, such as
outsourcing, facilities management, interim turnaround management,
and IT software and hardware tools. Because of profit pressures, many
consulting firms seem willing to take on new services, products, and
ventures that may or may not have much to do with consulting.
As a result, industry critics are asking if consulting firms have forgot-
ten their heritage as independent observers who restrain themselves
28 • Part 1 Consulting Industry, Skills and Professionalism

from over involvement in those management situations where there

can be conflicts of interest. This concern obviously applies to the
IT-oriented consulting firms; however, we note this retort by a senior
executive at IBM Global Services, “We are not independent—but we
are objective. What we do is in our customer’s best interest.”
Thus, today’s consultants are taking on a broad set of diverse roles
and agendas—acting as sparring partners in connection with strategic
development, as recruiters of new CEOs, as advisors in merger cases,
as facilitators in management development, as arbitrators in settling
alliance conflicts, as consultants to government, and as managers and
operators of IT outsourcing operations. Some of these specialized roles
and issues are discussed in Chapter 9, Consulting to CEOs and Boards,
and Chapter 11, Public Sector Consultation.

MORE QUESTIONS THAN ANSWERS

Historically, the consulting industry has been an influential player in
shaping the evolution of a variety of industries and public agencies. In
doing so, it has provided useful intellectual frameworks for rethinking
business strategies; it has helped to design innovative organizations,
systems, and processes; and it has been a translator of academic
concepts into techniques for industries to use. Now, it is becoming
a partner in streamlining its value-chains through the design and
management of outsourced functions, information infrastructure, and
physical assets. As consultants provide these new services, the consult-
ing industry is being transformed into a business of enormous size and
global scale with a wide array of services.
This transformation process raises many serious questions for reflec-
tion and debate within consulting firms and the profession at large.

Consulting vs. Nonconsulting

We need to ask what constitutes and should be defined as management
consulting in the future? For example, is outsourcing a consulting func-
tion? On the surface, it is not, but one might argue that it is a form of
implementation resulting from an earlier consulting study. We prefer
the more traditional definition that consulting involves the independ-
ent study of a client issue, and often times with assistance in implemen-
tation, but not with taking over the managerial function. We do not
object to consulting firms building other divisions that do out-
sourcing and other businesses, but the “firewall” needs to be stronger
 Chapter 1 The Changing Global Consulting Industry • 29

than what existed previously in accounting firms between auditing and

consulting.
We predict this issue of potential conflict will gain considerable
public scrutiny and attention in the future, and that consulting firms
will have to do more to indicate separation of their problem solving
and infrastructure support services, such as legally setting up separate
companies, probably under different boards and perhaps with restric-
tions on the amount of combined consulting and nonconsulting
services that can be performed for a single client. If firms don’t make
headway on this issue, there is likely to be legislation.
This brings us to a related issue concerning the tendency of many
consulting firms to aggregate their nonconsulting revenues into their
total consulting revenues. We believe this practice misleads the public,
competitors, and potential clients. Professional associations and trade
publications concerned with the consulting industry, as well as finan-
cial analysts and FASB, can perform a valuable service by asking for
financial reports that make a clear distinction between consulting and
nonconsulting revenues and profits.

Ethics vs. Pressure for Results

Consulting firms in the future are likely to face public challenges to
their credibility, ethics, and governance. We, therefore, need to ask what
are the appropriate standards of professionalism that consultants
should adhere to in their relationships with clients? This is a difficult
challenge considering that consulting is a highly competitive industry
with little or no barriers to entry. Most industry-wide attempts at
certifying consultants have been weak at best. We prefer that firms
themselves take charge of this issue through their selection and training
methods. A few firms already do an outstanding job of extensive train-
ing in ethics, but this training should be mandatory for all consultants
across all firms. Clear written policies are necessary, and performance
reviews should include the degree of professionalism exhibited by con-
sultants on projects. In addition, responsibility for monitoring a firm’s
professionalism should be assigned to a key partner at the highest level
of the organization. Any signs of an individual breaching firm policies
should result in immediate termination.

Education vs. On the Job

Most consultants really learn to be consultants on the job, which is not
saying much for a profession that earns its living from being on the
30 • Part 1 Consulting Industry, Skills and Professionalism

leading edge. Despite business schools being the spawning ground for
most consultants, few schools provide explicit training in consultant
skills, and they continually overlook issues of professionalism and eth-
ics (see Chapter 2, Professionalism in Consulting). These schools need
first to understand that training managers in the functional disciplines
is not by itself sufficient preparation for consulting, which requires
many other skills ranging from proposal writing to interviewing
methods, to reducing complex analyses to communicable insights,
and to persuading reluctant clients to make difficult changes. Every
MBA program should sponsor at least one course on consulting, and
hopefully consulting firms will be supportive and involved in this
effort. Also, business schools (and even consulting firms) have been
slow to support research on consulting and consultants. We still know
very little about the actual behavior of “good” consultants on the
job and why certain projects succeed or fail; these issues are further
discussed in Chapter 19, Research on Management Consulting.
Links between universities and consulting firms will no doubt
intensify as consultants search for new frameworks for viewing client
problems, and for new techniques that facilitate change and implemen-
tation. There will also be extensive contact on the computing science
side as information technology advances. In addition, some firms will
develop exclusive agreements with “gurus” from the universities to
advise them internally, as well as showing them off in their marketing
and before clients. More books and articles are likely to be written
by consultants and internal staff working in well-funded R&D
departments, as illustrated in Chapter 17, Knowledge Management in
Consulting.

Analysis vs. Facilitation Billing

The essence of consulting firms rests in their intellectual capital, which
is reflected in their branded conceptual frameworks, proprietary soft-
ware, and skills of their consultants. However, many clients have
become much more sophisticated in their management knowledge and
skills, making them competitive with their consultants, if not resistant
to consulting help. It is, therefore, likely that consulting firms will
need to develop new skills at facilitating behavioral processes where the
consultants act more as facilitators than as expert problem solvers.
Because these facilitative efforts will involve less consultant time,
this will change the traditional billing formula based on hours and
days. A strategic planning engagement that previously took hundreds
 Chapter 1 The Changing Global Consulting Industry • 31

of hours might now take only one hundred hours in holding a series of
retreats. Another example that is already reducing time as a billing
factor is online forms of consulting, as discussed in Chapter 18, Will
Consulting Go Online? Clearly, new billing concepts will have to evolve,
and we predict these will be based on some subjective judgment of the
value of results to be derived for the client.

Diversity vs. Homogeneity

To date, many large consulting firms are international in their oper-
ations, yet they still retain much of their home-country character
in their internal cultures. Given that many pundits predict that this
current century will be the Asia/China/India century and not the
American or Western century, what will this mean for consulting firms
and their consultant skills? A much more diverse consulting workforce
will be needed.
Perhaps in conflict with this future market direction toward the
Far East is the movement of many large Western consulting firms,
especially the IT-oriented ones, toward standardized services. How can
they strike a balance between standardized versus customized services
in order to meet the needs of diverse clients? This question raises the
issue of whether Fordism (assembly line consulting) will take over or will
the industry develop new concepts that allow for individualized types
of services with a personal consulting touch? Our hunch is that the
business strategies of IT-oriented firms will focus on selling to large
multinationals with homogeneous needs across all their operations;
global general management firms with greater flexibility will opt to
establish relationships with or acquire local or regional specialty firms
that can tailor-make strategies to regional clients. Small “boutique”
consulting firms with specialized practices limited to single countries
will likely become acquisition targets by larger firms acting to diversify
their services. Small local and regional consulting firms will continue to
take on smaller clients nearby, and they will emphasize personal service
and lower fees.
These complex and potentially divisive issues will preoccupy tomor-
row’s consulting firm managements, if not already today’s leadership.
Their strategic responses will determine who will survive in the new
millennium. As Charles Darwin pointed out about 150 years ago, “It is
not the strongest of the species that survives, not the most intelligent,
but the one most responsive to change.” This book addresses many of
the key change issues facing these firms.
Other documents randomly have
different content
"The minute he come into the door I knew there was something the
matter of him," said the sailor, "for I had never seen him look so
queer and wild before; but how he ever made out to pull the wool
over my eyes and Bob's as he done by the ridikilis tale he told us, is
something I can't now get through my head. Nuther can Bob, and
we've talked about it a hunderd times or more. Seems now that
we'd oughter known it wasn't so, but we didn't. 'Boys,' says he,
mighty soft and palavering like, but all the while acting as though
there wasn't nothing wrong, 'I want you to do something for me.
Two weeks ago Cap'n Jack Rowan of the White Squall borrered five
hundred dollars of the old man (that was Colonel Shelly, you know),
and the old man told me to be sure and get it of him before he
sailed. While I was in the city I got a letter from the cap'n stating
that if I would send for the money to-night, I could have it; so I
want you and Bob to take Rowe and go and get it. I'll give him an
order for it. Be lively, for there'll be a gale on in an hour or so.' That
was what Willis said to me and Bob; and although we didn't much
like the idee of going aboard the White Squall, knowing what sort of
a chap Cap'n Jack was, we told him we'd go, like a couple of fools.
'All right,' says he. 'You get the boat ready, and I'll go and tell Rowe
to hurry up. But mind, you mustn't say one word to him where
you're going. If you do, he'll stay ashore and I won't get that
money.' And then what does that old scamp do," exclaimed Tony,
with rising indignation, "but run up to the house and write this here
letter to Cap'n Jack, telling him that here was three men for him,
and he'd best take us along without asking no questions."
"Then he came into the room where I was and told me a funny
story, too," said Roy, who was listening with all his ears. "I should
like to know who came in with him, and what the pair of them would
have done if I had not awakened just as I did."
"I guess it was Benny," said Bob; and he guessed right. "Them two
is both tarred with the same stick."
Benny was ashore, as I told you, and by the merest chance met the
detective Babcock, who made a clean breast of the whole business;
whereupon Benny hired a tug, and started for home. By the time he
got there he was as frightened as was his father, whom he met
setting out for Tony's house.
"You needn't waste words with me," said the dutiful son, the minute
he saw that his sire was about to begin a lengthy explanation. "I
saw Bab, and he told me all about it. You are a pretty pair, I must
say. Who is this chap who looks so much like Rowe, and what are
you going to do with him?"
"His name is Roy Sheldon, and he is a Mount Airy wheelman,"
replied Willis. "I am going to send him to sea on the White Squall."
"The very plan I had in my own head," said Benny, approvingly.
"Who's going to take him there?"
"I thought of asking Tony and Bob. I'll offer—"
"Don't offer them a cent," interrupted Benny. "Tell them to go and
get five hundred dollars that Cap'n Jack borrowed of the old man,
and send this wheelman along as Rowe Shelly, to get it.
Understand?"
No; the superintendent did not quite grasp his son's meaning, and
he was afraid Roy might not be willing to personate Rowe Shelly. It
took Benny a long time to explain, but he succeeded at last, and
then he asked his father if there was not some way in which he
could get a glimpse of Roy so that he could satisfy himself that a
mistake had been made. This was the way he came to be introduced
into the presence of the young wheelman, who was fast asleep. The
moment Benny's eyes rested upon the boy's face he knew he had
never seen him before.
"You've done it as sure as the world," said he, in a savage whisper.
"Get rid of him. Send him to the White Squall, and have Tony and
Bob shanghaied at the same time, or they will get you into deeper
trouble. Wake him up, tell him you have found out who he is, and
say that you're going to send him back to his friends. In that way
you can get him off without any fuss, and—"
Just then Roy stirred in his sleep, and Benny took to his heels, barely
having time to close the door behind him before the boy was wide-
awake.

CHAPTER XVIII.
CONCLUSION.
"BENNY is old man Willis's son," Tony hastened to explain. "If you
was to shake 'em both up in a hat, it is hard to tell which one of 'em
would come out first for meanness. That's our story, sir. You know
what happened after we got aboard the White Squall."
"What did Willis mean when he called you off on one side saying
that he had an order for you?" inquired Roy. "Did he want me to
believe that he was about to send you to the city for goods?"
"I don't know what he meant you should believe; he jest wanted to
give me a few parting instructions. He said you didn't much like the
idee of going out in that wind, and that if you raised a fuss about it
after we got started, we must quiet you by saying that we dassent
turn around for fear of a capsize. He said, furder, that we mustn't
talk to you more'n we could help, for you'd kick if you found you was
going aboard the White Squall. He said you had the order for the
money in your pocket, and what was writ on the paper he give me
was meant to hurry Cap'n Jack up, so't we could get back to the
island before the wind riz any higher. But t'wasn't no such thing,"
continued Tony, wrathfully. "It told Cap'n Jack to take us to sea and
say nothing about it."
"And were you stupid enough to believe that our friend Roy was
Rowe Shelly? You stood within arm's-length of him, and it looks to
me as if you ought to have seen at a glance that it wasn't any one
you knew," said Arthur, forgetting that he had once stood within less
than arm's-length of Rowe Shelly, and never suspected that he
wasn't Roy Sheldon until he had come pretty near being thrown on
his head.
"We never knew the difference," said Tony, earnestly, "for the reason
that we didn't know there was anything wrong. We knew Rowe had
run away, and as me and Bob supposed that he had been ketched
and brung back, like he was before, we didn't ask no questions. Of
course we thought it was Rowe that we were going to take off to the
ship after that money, and why should we not? How could we tell
one from t'other when the night was so dark, and they were both
dressed alike and the wind blowed so loud that we couldn't
recognize his voice?"
"What did you think when you saw him jump into the harbor?"
inquired Joe.
"Well, sir, we was scared to death, and there isn't no manner of
sense in saying we wasn't. We wouldn't never dared to show our
faces in New London again if I hadn't found this letter, 'cause we'd
been afraid that we might be tooken up for trying to make way with
Rowe, though Lord knows we wouldn't a raised a finger against him.
What's writ onto this here paper will clear us, won't it, sir?"
"I think it will; but if you need any more evidence, drop a line to me.
I will give you my address," said Roy. "What made you back away
from me when I got off my wheel and walked toward you? Did you
think I was a ghost?"
"I ain't quite sure that there is such things as ghosts in the world,"
replied Tony, "though in my time I've talked to more'n one who has
seen 'em; but wouldn't you feel kinder oneasy under them
circumstances? We took you aboard the ship a purpose, like we told
you, but we didn't do it to get you used like you was."
"Then you knew that ship was the White Squall, and that she was
not going into the harbor for shelter?" said Joe.
"Course we did, sir. What would any craft want to run from a fair
sailing wind like that for? We knew she was going to sea, and was in
a hurry to get you aboard so't you could get the money we thought
you wanted. We thought it kinder queer 'cause you didn't give the
cap'n the order when I give him the letter, but we didn't mistrust
anything till we seen you go overboard. Of course we knew before
that, that we had all been shanghaied; but what I mean is, that we
never mistrusted till then that mebbe you wasn't Rowe Shelly. We
didn't think he'd have the pluck to jump overboard, for he isn't much
of a boy for going a swimming. When we was running into Plymouth
some of them Bethel fellers flung a lot of papers aboard of us, and
me and Bob happened to get hold of one that told us all about it,
only it didn't say anything about Rowe Shelly. Ain't your name Peter
Smith?"
"Not much," replied Roy, with a laugh. "But I am the fellow who
jumped overboard, all the same. Now, what induced you two to
tramp back to New London instead of shipping on some vessel that
would take you there?"
"There are two reasons for it," answered Tony. "In the first place,
there wasn't no ship in port that was going where we wanted to go;
and in the next, we've had enough of the water and thought we'd
like to stay on shore for a spell. You see, we ain't by no means as
young as we used to be, and can't stand the hard knocks as well.
We never got a blow after we was drove for'ard that night, 'cause
we know what a sailor man's duty is and we done it; but them was a
rough lot of officers, I tell you. Do you know where Rowe Shelly is
now?"
"I am sorry to say we don't," replied Arthur. "We hoped to hear from
him before this time, but if he has written us, the letter hasn't
caught up with us. But we can tell you one thing: when you get back
to the island you'll not find matters as they were when you left. My
two friends here saw Rowe, mistook him for me just as Willis and
Babcock mistook me for Rowe, had a long talk with him, and put
some ideas into his head. Colonel Shelly will have to give up Rowe's
money and get out of that—you'll see; and if Captain Shelly is still
alive, he will come to that island and take possession."
Joe Wayring and his friends spent the best part of the afternoon in
Tony's company and Bob's, and did not take leave of them until they
had learned as much of Rowe Shelly's history as the men were able
to tell them. They also asked after Captain Jack; but that worthy and
his mates had disappeared the moment the Sarah West had reached
the wharf at Plymouth, and Tony could not say where they were. No
doubt they had gone to New London on the cars, while the foremast
hands, having no money at their command, had to ship again as
soon as they could, or turn tramps for a season as Tony and Bob
had done. Roy gave them his address, advised them to use all the
means in their power to open communication with Rowe when they
reached the city, and stand by to aid him in getting his rights; and
then he and his friends shared their small stock of money with them,
and once more turned their faces toward Mount Airy.
"Didn't I tell you that you were taken aboard the White Squall on
purpose?" said Joe, as they shot around the first bend in the road
and left the sailors out of sight. "I guess you are willing to believe it
now."
"And I think you are equally willing to believe that I was right when I
said that Tony and Bob were shanghaied the same as I was,"
retorted Roy. "That man Willis is a schemer from way back. I shall
always think that the easiest way for him to get out of his difficulty
would have been to send me ashore, as I thought he was going to
do. I never would have made him trouble, for up to the time I was
sent aboard that ship I was treated as well as I wanted to be."
"I think Willis was afraid he would lose his situation if he told the
colonel that he had made a mistake, captured the wrong boy, and
given Rowe a chance to get away," said Arthur.
"I don't see why he should be, for if I understand the situation, his
employer would not dare discharge him," continued Roy. "For some
reason or other Willis made up his mind that the only thing he could
do was to get rid of me; he was afraid to hire Tony and Bob to take
me aboard that ship and leave me there, for that would give them a
hold upon him; so he thought the best way was to get rid of the
whole of us in a lump. I will say this much for Willis: he came pretty
near doing it. I felt tolerable mad at Tony and Bob when you fellows
suggested that they had been hired to have me kidnapped, and here
I've gone and divided my last dollar with them."
"And we felt just as angry at Rowe for getting you into a scrape, and
yet we are ready to stand by him," said Joe. "On the whole, I am
satisfied with what we have done on this trip."
I thought he had reason to be. There was no one along the route
who knew what Joe had done to avert that railroad disaster, but the
folks at home had been posted before this time. On the day they left
Plymouth Arthur and Roy mailed the full details of Joe's "Wild Ride,"
but the latter knew nothing of it until a week had passed, and they
stopped for the night at a railway station where they found their
trunks and a package of mail waiting for them. When Joe glanced at
his mother's letter beginning: "My dear boy, how could you do it? I
am frightened every time I think of it," and the first line of Uncle
Joe's, which ran: "I am proud of my brave namesake. You have
covered yourself with glory enough for one summer, and had better
come home and relieve your mother's anxiety," he knew just what
had been going on, and congratulated himself on having escaped
return orders until his face was toward Mount Airy. All he said to his
friends was:
"You fellows spread ink a trifle too freely while we were in Plymouth.
If I had suspected it, I would have dropped the pair of you over the
end of the pier like a couple of kittens."
"Perhaps that wouldn't have been so easy, either," replied Arthur.
"More than twenty days' steady wheeling has brought us a tolerable
muscle, I want you to remember. But what's the odds? It was bound
to come out, and Roy and I kept still about it until we were
homeward bound. When you write all you've got to do is to tell
Uncle Joe we're coming."
Joe wrote that very night, and his letter contained a complete
history of Roy's doings in New London harbor, and told how Arthur
had come near getting them into serious trouble by shooting Matt
Coyle's watch-dogs. He omitted nothing, and when he finished, he
flattered himself that he had described the thing in language so
graphic that Roy and Arthur would be invited to expedite their
return.
The next time they came up with their letters, they also found
papers containing some surprising as well as gratifying intelligence.
Every man in the Buster band, including Matt Coyle and his gang of
train-wreckers, had been arrested and put under lock and key.
Acting upon the advice given him by the young wheelmen, Mr.
Holmes had gone to New London and identified his property; that is,
the implements that had been used to force that big rock from its
bed and roll it upon the track. It was by his suggestion (which in the
first place came from one of our three friends, as you will
remember) that a couple of officers, disguised as tramp hunters,
came to Glen's Falls and proceeded to "spot" every man they
wanted. More strange tramps came in at intervals, and when the
officers, for that was what they really were, were nearly equal in
number to the law-breakers, they "corralled the whole business and
ran them in." To quote from Roy Sheldon, who was so highly excited
that he wanted to yell, it was a "pretty slick scheme," and by the
time Matt was through serving the sentence that would surely be
passed upon him, they would no longer stand in any fear of him, for
they would be big enough to punch his head if he didn't let them
alone.
"But I am really afraid our friend Bigden will see fun now," said Roy,
in conclusion. "If Matt gets half a chance he will tell all he knows."
"I don't believe the things he did in the Indian Lake country will be
brought against him," said Joe. "He'll come in for trying to wreck the
train; and by the time he has been punished for that, he won't want
to get into any more scrapes."
"And where will we come in? Look here, Bub," exclaimed Roy,
shaking his finger at Joe. "When you took that unworthy revenge
upon Art and me, and told your mother what we have done and
suffered since we have been on the road, you told her that we laid
in the bushes and heard all Matt and his fellow rascals had to say,
didn't you? I thought as much. Well, that will be sure to come out,
with all the rest of the things, and the last one of us will be
subp[oe]naed. If any one of us spread ink too freely, you are the
man."
"I didn't see Matt that night," protested Joe, "for it was so dark I
couldn't see anybody."
"No matter, you heard his voice. You will be called upon to tell how
you knew it was his voice, and all that, and the first thing you know
there'll be something wormed out of you that you don't mean to
tell."
Joe Wayring did not like to think about that, but still he did not eat
or sleep any the less for fear of it. He enjoyed the homeward run
and so did his friends, for they had done what they set out to do,
and more too. They stopped for one night at the Lafayette House,
and spent the evening at the Academy of Music; but there was no
detective waiting to take one of them by the arm when they came
out, and neither did they meet any one who could give them any
information concerning Rowe Shelly. They sent a despatch to their
parents, telling where they were, and when they would be home,
and the result was that about three miles out of Mount Airy they
found a delegation of wheelmen waiting for them. Of course the
drug-store crowd was not represented, but Tom Bigden and his
cousins were there. Joe thought he knew what Tom had come for,
and was made sure of it when Tom ranged alongside of him, after a
short halt had been made and the hand-shaking was over, and in a
roundabout way began making inquiries concerning Matt Coyle. Joe
was sorry he couldn't tell much about him, but he said enough to set
Tom's fears at rest. He declared—not as if he thought Tom had the
least interest in the matter, but merely as an item of news—that he
would not prosecute Matt for stealing his canoe or tying him to a
tree, because he would have enough to answer for when he was
brought up for putting that rock on the railroad track. Joe was not
revengeful, but he did want to see the squatter punished for that.
It is hardly necessary to add that Tom Bigden breathed easier after
his talk with Joe, and when he left the latter at his gate and told him
he was glad he and his friends had had an enjoyable run and come
safely home, in spite of everybody and everything that had tried to
hinder them, the words came from his heart. Tom had been on
nettles ever since he read in the papers that Matt was still alive, and
in a fair way to be brought to justice, and although he felt relieved,
he knew he would not sleep soundly until Matt's trial was over and
prison doors had closed upon him.
"Six hundred and forty-two miles in thirty-five days," said Joe, when
he had kissed his mother and shaken hands with every one who was
on the back porch. "A little over eighteen miles a day. That wouldn't
be anything to brag of if the roads had been good all the way; but
when you take the mountains and long patches of sand into
consideration—"
"And Matt Coyle and the train-wreckers," added Uncle Joe.
"They didn't delay us any to speak of," replied the young wheelman,
"but that Roy Sheldon, with his black eyes and lame arm, did. Well,
I'm glad to get back, and why don't you say you are glad to see
me?"
Every one of them had said so more than once, for I had heard
them, and besides, they showed it very plainly by their actions.
Everybody in town was glad to see him, and he had so much visiting
to do that for a time I was entirely neglected. One morning I had a
chance to say "hello!" to the Canvas Canoe and Fly-rod as they were
carried across the porch and down the path that led to the lake, and
when they returned at dark I exchanged a few words with them
before they were taken up-stairs. In as few words as possible I told
them where I had been and what I had seen during my long
absence, and in return Fly-rod told me that he had that day seen
two old acquaintances; or as he expressed it, "the whole of one and
a part of the other."
"In the show-case in which I stood before Joe Wayring bought me,
were a couple of high-priced lads, a split-bamboo and a double-
barrel shot-gun, who wouldn't say a civil word to me because I was
worth only six dollars and a half," said Fly-rod, with a ring of triumph
in his tones. "The gun was purchased by a dude who went into the
woods because it was fashionable, and the bamboo became the
property of one of the handsomest little girls you ever saw. Well, I
saw that rod to-day lying flat in the mud, while his owner was
paddling in the water with bare feet. He was rusted all over where
there was any thing to rust, and you could see daylight between his
ribs where they had been glued together. He was ashamed to speak
to me, for he had boasted that he was going to Canada to do battle
with the lordly salmon. A little while afterward we heard a booming
up the lake and saw a commotion in a boat whose crew were
engaged in shooting wood-ducks. The Canvas Canoe took us up
there in a hurry, and we found that a gun had burst in the hands of
one of the party—the very dude who bought that double-barrel shot-
gun. There wasn't much left of the gun, nothing but the stock and
locks, in fact, but I knew him. The dude wasn't hurt, for a wonder,
but he was mad, and the minute he recovered from the fright into
which he had been thrown, he grabbed the wreck of that gun and
sent it as far as he could into the bushes. Here I am, sound as a
dollar, thanks to the good treatment I have received, supple as ever
and ready to catch another black bass any time I am called upon."
The next thing that interested me was hearing a letter from Rowe
Shelly read on the porch. He hadn't written before for the very good
reason that he had nothing to say; and although he had plenty now,
he had no time to say it, for he was going after his father and
mother who were alive and well, but poor owing to ill health. He
went into hiding, as Joe said he did, and found a lawyer to interest
himself in his case; but although the latter went to work very quietly,
Colonel Shelly and Willis and Benny had taken the alarm and cleared
out. His parents had been advertised for and found, and Rowe was
going to them by the first train. He would have more to tell them in
his next letter, and wanted them, one and all, to get ready to visit
him the minute he sent them word. He owed them everything he
had, or was going to have, and they would see that he wasn't the
boy to forget such things.
And neither did Roy Sheldon forget those men on the light-ship. Of
course they did nothing more than their duty when they pulled Roy
out of the water and took care of him, but that did not lessen the
boy's gratitude nor his father's, either. Mr. Sheldon made it his
business to drop into a bank shortly after Roy came home, and when
he left it those old sea dogs had a handsome sum of money to draw
on, though they were advised to let it accumulate so that they would
have something to fall back upon when they became too old to
attend to the light-ship.
Before I went into winter quarters I had the satisfaction of knowing
that everything had turned out just as Joe Wayring and his friends
wished. Rowe Shelly found his parents and easily established their
identity, with his lawyer's help, and the rascally guardian, as well as
those who aided him in keeping the boy out of his rights, were
overhauled before they had left the city many miles behind; but they
were not brought to trial. They simply surrendered their ill-gotten
gains, Captain Shelly took quiet possession of his island home, and
that was the end of the matter so far as they were concerned; but
the gossips had something to talk about for weeks afterward. Joe
Wayring and his friends were not needed when Matt Coyle was
brought before the court in Bloomingdale, for those tramp detectives
had all the evidence they wanted to send him and his gang to
prison. Then Tom Bigden felt safe, and I hope he has turned over a
new leaf as he has often promised to do. Although every one in
Mount Airy heard of the things that George Prime threw up to him,
there were few who believed them, thanks to the way Joe and his
chums stuck to him through thick and thin.
A few days ago Rowe Shelly wrote that he was ready and waiting for
Joe and the "rest of his crowd," and the sooner they came to see
him the better he would like it. They will accept the invitation for the
coming holidays; and if I am any judge of boys' tastes they will find
few topics of conversation that will be of more interest to them than
the incidents I have attempted to describe in my story, and which
happened during The Rambles of a Bicycle.
THE END.

FAMOUS CASTLEMON BOOKS.

GUNBOAT SERIES. By Harry Castlemon. 6 vols. 12mo.
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 The Sportsman's Club among the Trappers.

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 True to his Colors.
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Other Volumes in Preparation.
Copyright, 1888 by Porter & Coates.

FAMOUS STANDARD JUVENILE LIBRARIES.

ANY VOLUME SOLD SEPARATELY AT $1.00 PER VOLUME
(Except the Sportsman's Club Series, Frank Nelson Series and Jack
Hazard Series.).
Each Volume Illustrated. 12mo. Cloth.
HORATIO ALGER, JR.
The enormous sales of the books of Horatio Alger, Jr., show the
greatness of his popularity among the boys, and prove that he is one
of their most favored writers. I am told that more than half a million
copies altogether have been sold, and that all the large circulating
libraries in the country have several complete sets, of which only two
or three volumes are ever on the shelves at one time. If this is true,
what thousands and thousands of boys have read and are reading
Mr. Alger's books! His peculiar style of stories, often imitated but
never equaled, have taken a hold upon the young people, and,
despite their similarity, are eagerly read as soon as they appear.
Mr. Alger became famous with the publication of that undying book,
"Ragged Dick, or Street Life in New York." It was his first book for
young people, and its success was so great that he immediately
devoted himself to that kind of writing. It was a new and fertile field
for a writer then, and Mr. Alger's treatment of it at once caught the
fancy of the boys. "Ragged Dick" first appeared in 1868, and ever
since then it has been selling steadily, until now it is estimated that
about 200,000 copies of the series have been sold.
—Pleasant Hours for Boys and Girls.
*** END OF THE PROJECT GUTENBERG EBOOK THE STEEL HORSE:
THE RAMBLES OF A BICYCLE ***

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