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ATD Blog

Growing Talent Management Firms: Consulting Versus Product Scaling

Tuesday, May 25, 2021
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Six years ago I wrote a blog post in this series on scalability and called it the “holy grail” of most businesses. The blog started with this:

In theory, scaling a business means eliminating costs and time to produce and distribute products and services, resulting in greater margins and more profitability. The basic underlying proposition of scaling the business is relatively simple: create replicable processes that take less time and labor to produce results.

Nothing has changed about this definition. But what has perhaps changed during the last several years, especially during the pandemic, is that many talent development firms are trying to determine how they can expand their offer by adding consulting services, products, or programs. The challenge with this goal, however, is that these offers are different in their operational scope and don’t often support each other. That is, simultaneously providing both rarely optimizes either but potentially underleverages both.

As a result, scaling these two types of offers requires different approaches and may even butt up against each other if a firm provides both—namely, in developing and distributing the offer, as well as operating the overall business. To support this contention, look at the chart below. Pulled from a presentation I gave about how to build and grow a successful talent development business, it illustrates the major differences between these two offers.

Elements

Consulting Services

Generic Products/Programs

Financial Management

Labor rates, utilization, employee capability

Capitalization expense, development costs, plant, amortization

Inventory Control

Consultants on the bench, competency development, just-in-time

Product production, licensing, digitization, distribution

Costs

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People, selling and marketing, administrative

Product development and management, inventory, selling and marketing, administrative

Selling Process

Deep expertise, emphasis on customization, solution creation, longer sales cycle

Features and benefits, minimal alteration, solution selection, shorter sales cycle

Scale Building

Unit of currency hours billed, leveraged models and approaches

Unit of currency product pricing, more readily and cheaply, one-time sunk costs

Personal Skills

Deep expertise and experience, project management, consulting and facilitating, analysis

Product development, innovation, training, marketing

As can be clearly noted, these differences suggest the best means for scaling each would also be different.

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Consulting Services

There are only three ways to scale a consulting business.

1. Staff the project. As all the big consulting firms do, you can scale by having senior people sell and manage the engagement while the less-salaried deliver it. But what these multifaceted service firms do is have their higher-priced senior partners sell the services then charge relatively high fees for those less-experienced and less-costly, but still bright and competent upcoming employees, to deliver. Since the consultant model is based on billable hours, the more you can charge for less expensive resources, the more you make.

2. Package the offer. To the extent you can ring the offer into a fixed template, the more scale you will achieve. You’re creating a “program” that has intentionally built-in opportunities for “tailoring,” not “customizing.” There is a vast difference between the two—tailoring is altering that which is, while customizing is creating that which isn’t. The latter is more time consuming, expensive, and requires a higher-level people resource. In addition, proprietary models and frameworks can be reused from client to client. But these templates are easily tailored when they are completed with the unique information and insight of each client. In other words, the process or model is replicated and fits any set of customer requirements.

3. Replicate the process. Perhaps the easiest and best way to scale a consulting-like offer is to create a project management process that is readily replicable in that it is guided through the exact same steps for every engagement, includes many templates along the way, and results in the same deliverables with the context for each client engagement tailored to fit that customer’s unique needs. By standardizing and adhering to the process, project staff will follow a well-oiled procedure rather than reinventing the wheel each time.

Products

There are only a few ways to scale products, but each offers significant opportunities to do more for less.

1. Mass customization. By products I mean relatively off-the-shelf programs, assessments, and tools. For these, the most direct route to scaling is through a “mass customization” design. Mass customization is a common scaling technique many businesses use. The core offer accounts for some 80 percent of the needs of the target market, with the remaining amount allowing for tailoring or customizing the offering to the specific needs of buyers. Think rental car companies for which the only difference in the product is the type of car you rent and is tailored to your needs, whereas the booking, pick-up, and delivery processes are identical. The options for mass customization of a training product include, among others, altering case studies and role play scenarios to resemble the client’s industry and context; editing words and phrases that are unique to the client’s business; changing logos to represent the specific client’s branding; and even creating a facilitative experience that meets the unique needs of the client and its end-users.

2. Manage inventory. Today’s inventory-management challenges are much less difficult than in the past given the opportunity to digitize product so it can be altered just-in-time to meet customers delivery and customization needs. In fact, one may argue that the word “inventory” is obsolete today in that there is no need to keep anything on-the-shelf; rather simply produce it as needed. In fact, even producing product may not be necessary since it can be “shipped” electronically and controlled for customers to produce what they need when they need it.

3) Distribute widely. With a reasonably “off-the-shelf” program, the more channels are available to sell it, the more leverage is achieved. Developing the program is typically a one- time cost, with it amortized over several years, putting it in the hands of multiple sellers significantly improves the return on that investment. Furthermore, multiple translations can offer widespread scale through international expansion. In fact, the more sales outlets in the field, the more scaled the business becomes. What has changed during the last six years is that sales and marketing has lent itself much more to online digitization; indeed, online digitalization was relied on particularly during the pandemic when face-to-face in-person sales opportunities have been few and far between, if any. But the good news is these approaches allow the business to do more for often considerably less cost and time, thus providing another opportunity to scale the business. In fact, digital tools permit rapid message customization to the needs of different customers.

Regardless of the make-up of the offer, my favorite operations scaling opportunities focus on project management. I have found that any processes that can be reasonably eliminated from project management procedures should benefit in greater margins. One option is to develop a repeatable project management process, with accompanying tools, that enables fast and lean production rather than reinvents the wheel every time a new project surfaces. The process could be applicable to small internal operational projects as well as the development of any product or service offerings mentioned above.

The bigger question is what can your organization do more effectively to scale its three key business areas: offer development, distribution, and operations? More importantly, what scaling examples do you already use in your business? Finally, have you been able to quantify the improved results your business has achieved through scalability?

For more insight, check out my book The Complete Guide to Building and Growing a Talent Development Firm.

About the Author

Steve Cohen is founder and principal of the Strategic Leadership Collaborative, a private consulting practice focused on business strategy and development. A 40+ year veteran of the talent development industry, largely on the supplier side, he has demonstrated a proven track record for building equity by growing top and bottom-line performance for eight different consulting enterprises in the education and training industry he has either founded and/or led. He has been called on to consult with numerous firms needing strategic planning guidance, business coaching, and board advisory services.

His latest book is The Complete Guide to Building and Growing a Talent Development Firm.

He can be reached at: 952.942.7291 or [email protected] or at his website: www.strategicleadershipcollaborative.com.

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