Consulting research

The professional title management consultant does not enjoy any protection under German law. This means that basically everyone, regardless of his education and qualification, can call him or herself a consultant. This makes it all the more important to have a theoretically sound discussion of the nature and performance of consultants. Especially since the economic importance of the consulting industry has increased considerably in recent years. Because management consultants contribute to the circulation of knowledge, probably the most important productive factor of modern economic systems.

Research is only beginning to reflect the growing relevance of the consulting industry. Although an increasing academic interest in specific aspects of consulting is becoming apparent, the discussion of theoretical and practical problems of the discipline is still at the beginning of its development. In our own work, we focus primarily on three areas: the market of and competition between consultants, the impact consultants achieve in the organization of their clients, and the reputation they enjoy in the market.

Fields of research

Market and competition

The German consulting market is highly fragmented – and accordingly confusing for those seeking advice: around 16,000 consulting firms generate annual sales of around 30 billion euros in Germany. Almost a quarter of this is accounted for by the 25 leading companies alone – above all the big three: McKinsey, the Boston Consulting Group and Bain & Company.

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But the structure of the industry is changing: the big accounting firms – PwC, EY, KPMG and Deloitte – are massively expanding their consulting arms and developing into serious competitors, advertising giants such as WPP are forcing their way into the consulting business, specialist consultants are successfully establishing themselves in thematic or industry-related niches, not to mention technology giants such as Accenture and IBM, which traditionally run a consulting-intensive business. Our research has been accompanying these developments for more than 20 years – the ups and downs of individual market segments as well as the strategic positioning of the key players and the changes in their business models.

The impact of consultants

The question of the effectiveness of consulting projects has always been controversially discussed in the business world and in the media – often with a skeptical basic tenor. Do consulting assignments really make sense? Are the considerable fees charged by companies such as McKinsey, the Boston Consulting Group or Bain & Company worthwhile?

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We have intensely dealt with this topic as well, in the early years mainly with work on the “Return on Consulting”. Despite the very positive response that this work has received from the market, we have to admit that a strictly economic approach takes only limited account of the very complex effects of consulting assignments. Therefore, we have chosen a different approach in our research today. We have transferred a psychometric model to the consulting market that has proven its practical value in many other areas of life. What, this is the central question of the model, can consultants actually achieve for their clients? When and how can a consultant effectively influence, move and change the thoughts and actions of his or her clients? When is consulting effective – when does it have the greatest impact?

All this is largely based on the perception clients have of their consultants. Our model measures this using an index value that we call the Perception Value Index. Its explanatory power is extraordinarily high both at the individual level of a manager and at the aggregated level for different consulting firms. We have compiled detailed information on our own website:

The reputation of consultants

The reputation of a consultant is – not least because of its self-binding effect – a good indicator of the consultant’s performance and willingness to perform and thus usually a solid basis for the decision to choose a consultant.

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In order to build up a reputation, a consultancy must first exceed the expectations of its clients. It must invest in building trust, showing that it is capable and willing to do more than an “average” competitor. Once it has established a high reputation, it is tied to a certain level of performance. Reputation acts as a binding promise to maintain established behavior in the future. With every project, a consultancy puts its reputation at risk again: If it breaks its promise, even if it only conveys one bad experience, this can destroy its reputation – not only with the client concerned, but also with all those who get to know about it. On this basis, we have designed various reputation rankings and indices in our research to support clients in their selection of consultants and consultants in their strategic positioning.

Looking back on the developments of recent years, one can see that the consulting industry can increasingly be divided into reputation layers – with two companies increasingly leaving the rest of the market behind: McKinsey and the Boston Consulting Group. Bain and Oliver Wyman have established themselves as the strongest competitors in the chasing group in recent years. Roland Berger and A.T. Kearney have lost their previously outstanding positions. However, in the coming years McKinsey and BCG will probably not have to look for the most important challengers in the circle of classic management consultants: The four major accounting firms – PwC, Deloitte, EY and KPMG – are massively expanding their consulting businesses and are slowly but surely entering the traditional field of the two market leaders. At the same time, McKinsey and BCG are expanding their traditional range of services to include operative and technological consulting services, which the consulting divisions of the four major accounting firms have long been claiming for themselves. Sooner or later, however, even more important than the Big 4 could be another competitor that lacks neither size and financial strength nor aggression and competence: The technology giant Accenture.