One of the topics we’re most often asked about is expansion. Usually, this is about geography, but it doesn’t have to be—a point I’ll come back to later. Perhaps demand for a particular service is on the wane; perhaps there’s no headroom for growth in a specialised market; perhaps the opportunities elsewhere simply look more attractive. Whatever the driver, the questions are the same: Where to go, and what to do when you get there? writes Fiona Czerniawska of Source Global consulting
The problem is that there aren’t any easy answers to this. Consulting doesn’t have the latter-day equivalent of the Wild West, huge swathes of unclaimed land where you can hope to find gold. Better to imagine that you turn up, tools in hand, ready to dig and pan your way to wealth, only to find that every possible square of turf has someone already digging and panning on it. And, of course, that’s why so many attempts by mid-sized and smaller firms to expand into new geographies prove so difficult. Yes, there are operational challenges (facing off against local competitors, recruiting people in an employment market where no one’s heard of you, starting from almost scratch when it comes to building client relationships, lack of knowledge of the local market), but all these issues pale into insignificance when compared to the challenges that stem from an overcrowded market. Success—if we define this as either the ability to grow a business in a new market to the same size as that in a firm’s “home” market—is vanishingly small. If we broaden our definition and include firms that started in one country but subsequently managed to establish a disproportionately dominant position in another (Booz, now Strategy&, in the Middle East is a good example) then it becomes clear that being first in is hugely important. But there are no geographies where you can be first today: Every market you go to, another firm has got there first.
We need to reframe the question. We shouldn’t be asking where we can go; which markets look as though they’re big enough to accommodate us; or where incumbent suppliers look weak enough to be toppled (South Africa, anyone?). We should be thinking about how we can recreate the conditions in which a first mover advantage is possible. This is, of course, exactly what happened in the Wild West: It’s a truism of that time that the people who sold tools to the gold diggers ended up making more money than their customers, but they probably didn’t know that was the case when they arrived. Most hardware merchants would originally have gone to find gold, just like everyone else, but realised that the market for supplying tools was far less crowded.
When considering expanding into a new geography, consulting firms need to be sure they have a service or product that is better than anything else on the market. Even better, they need to be able to give the impression that they’re creating a whole new market, one where there just aren’t any competitors. Before you say “Go West, young man”, or even “Go East, young woman,” ask yourself if that’s really the case.
Fiona Czerniawska is a leading commentator on the consulting industry and a co-Founder of Source who provide specialist research on the management consulting market to consultants and their clients.
© Source Global Research 2019. All rights reserved. Reproduced by permission.