Economy

A Guiding Hand

The evolving role of the consultant

The rise of results-driven consultancy contracts is restructuring many consultancy firms in Colombia, making them more accountable than ever. 

Consultancy firms are part of any mature business ecosystem. Consultants are engaged by a client in an advisory capacity, usually for the short term and on a project-by-project basis, to address the various challenges faced by the client’s business. Each constantly firm typically specializes in a particular sector, preferably in a specific part of the world. The areas of specialty range from helping a startup take off to optimizing the business procedures of a long-established brand.

Colombia is a provider of consultancy services in the LATAM region and a gateway to the region for western consultancy firms. While Colombian firms serve Latin American businesses in terms of strategy, technology, and operations, they also help international businesses that want to venture into Latin America, using their firsthand knowledge of the region’s business climate as well as their ties with the US economy. The consultancy industry in Colombia, however, is currently going through a phase of transition, as in most of the world. Although this phase will not be free of challenges, it will improve the sector and justify its role in the economy over the coming years.
The ongoing paradigm shift in the sector is in response to criticism from clients. Giving advice is famous easy, particularly when the consultant does not face any consequences if the advice produces poor results in practice. If the advice turns out to produce good results, however, everyone will be happy to take credit. As thinkers such as Nassim Nicholas Taleb have warned us in recent years, this model of consultancy leads to a terrible asymmetry. Anyone who enjoys the upside of an enterprise must also accept responsibility if things begin to go downhill.
A new model of consultancy is solving this problem by the democratization of risk. In an outcome-based consultancy contract, the client will only make the payment if a certain objective has been achieved thanks to the consultancy service. This will give an incentive to consultants to seriously consider the efficacy of their advice before giving it to others. Advice is evidently not cheap anymore.
Some firms go a step further: after learning about the challenges faced by their client, the firm comes up with a solution, implements it, and transfers the running of the system to the client only when the solution has stood the test of time. This is the next level of accountability that more and more consultants will have to offer to remain in the competition.

In any case, result-driven consultancy is now the most basic expectation in the market. The managing director of Boston Consulting Group (BCG) recently sat down with TBY to, among other things, discuss the realities of the consultancy business in 2022. Juliana Sguerra pointed out that companies such as BCG “normally go and tackle a very concrete situation and bring teams to the ground that are 100% focused, we bring speed to solving the problem by generating a work plan and acting upon it.”
When discussing the BCG’s mission in Colombia, Sguerra noted the rapid evolution of their consultancy service in the country in the space of a decade, adding that “BCG has evolved in a way that it is able to tackle the problems of our clients. Over the years, we have realized that the impact that we generate on clients is not just designing the strategy, but helping clients implement the strategy and bring it to market to capture the impact.”

Giving generic, off-the-shelf advice to businesses in terms of strategy or marketing is no longer part of the consultancy sector. In addition to the goal-oriented format of consultancy, firms have very useful technological solutions at their disposal these days. BCG, for example, employs teams of data scientists and analysts to mine big data using artificial intelligence (AI) to see what practices have in the past generated desirable results. The best strategies in a given market will then be transferred to other clients in the form of heuristics. Although Big Data and AI, in their present form, have been accessible for barely 10 years, they are already revolutionizing the sector.
There is little wonder, therefore, that Colombia with its robust IT infrastructure is ahead of the curve in the region. The nation has a sizable skilled workforce with a high level of digital literacy. This is reflected in the exponential growth that consultancy firms in Colombia have enjoyed over the last decade and their many success stories.

Traditional consultants, too, are embracing the transition. Oval, a firm based in Colombia, now also offers results-based fees to align their incentives with those of the client. The company has “done a great deal of work in Panama and the Dominican Republic and have clients in Guatemala, El Salvador, and Honduras,” according to the firm’s senior partner Camilo Toro. Going forward, consultants that have taken a proactive step by taking responsibility will seem more reliable to business leaders, leaving no room for old school advisors who merely dish out advice.

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