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The consulting industry is in the midst of a profound transformation. Emerging from that change is Virtual Network Consulting, or VNC, the future of the consulting industry at large. Virtual network firms typically specialize in a particular industry like supply chain/logistics, and are not to be confused with either the old "Big Five" or the new niche "boutique firms" - though each of these may be network participants. VNCs are an aggregation of individual consultants and partner firms connected and networked through tightly woven professional and personal contacts. They are joined much like puzzle pieces and, when fit together, they make a compelling business case.
Following the recession of 1991, businesses of all types were analyzing growth potential and how best to use new technologies to competitive advantage. Big Five consulting companies gladly accommodated this demand and rapidly expanded their consulting businesses to keep pace. Y2K and the need to quickly deploy updated systems technology was also driving growth. This all came to a sudden halt in March 2000, however, when the NASDAQ composite index swooned and the speculative bubble burst. The economy entered a sustained period of significantly slower growth and the demand for traditional consulting services fell dramatically.
Since the giant consulting firms were heavily tied to technology, telecom industries and the like, it was inevitable that thousands of consulting jobs were eliminated. For example, most Big Five consulting firms reacted to the downturn by reducing their supply-chain practice groups by about a third. These newly reduced practices were temporarily in equilibrium with industry's reduced demand for those services. But companies that had purchased sophisticated packaged software solutions either before or during the downturn still needed consulting services - only now they could not pay exorbitant fees.
The demand was for a viable, affordable alternative to traditional consulting services. The components of such a service existed in the form of the many consultants who remained out of work without realistic hope for industry absorption or reinstatement. Thus, the emergence of the Virtual Network Consulting firm, a nimble entity spawned to fill the void left by the old Big Five and sustained by the desire of professionals to work and stay productive members of society.
VNC participants are newly displaced or semi-retired and do not desire to return to traditional jobs where they really have no control of their destiny. They prefer instead to put their hard-earned industry knowledge and expertise to work in a non-traditional structure where they are in effect their own bosses. Initially, they may consult for their previous employer or for customers of their previous employer. But these projects inevitably run their course and the vast majority of these people end up looking for work again. These persons mostly need marketing representation and VNC companies provide that for them. This group, then, represents the first tier of the VNC company.
The second tier is partnerships with small, boutique consulting firms. These firms typically consist of displaced technical and/or consulting persons specializing in a particular area, such as demand forecasting and planning, or a particular software like SAP or PeopleSoft. By themselves, boutique firms are often hard to find and frequently have limitations on the number of displaced professionals they can hire. And once these firms start a particular project, they do not usually have the staff to take on additional work. That is where partnerships with VNCs come in, and another piece of the puzzle falls into place.
In addition, legitimate VNC firms have substantial reach in their respective industry communities, which enables formation of partnerships with companies considerably larger and more established than boutique firms. Relationships with carefully chosen partners in this category create synergy. Both the VNC company and the partner firm are very selective in aligning with one another since each is, in effect, an extension of the other. VNC companies and partner firms reliably deliver specific expertise, unwavering client service and professionals with sterling reputations and proven track records. Formal partnership agreements are executed establishing this tier, and another puzzle piece is in place.
How VNCs Operate
The VNC model is unique in its ability to network together independent consultants, boutique firms and partner companies, creating a virtual company with resources equivalent (and frequently superior) to those of the old Big Five. The virtual network model is a multi-tier, multi-dimensional framework designed to match the correct consulting skill set to the opportunity at hand. The network is tiered with subcontractors rolling from project to project and uses an internet job board geared specifically to recruit individual consultants from specific expertise in areas like supply chain. The virtual model coordinates a network of contractually bound alliance partners and makes use of old-fashioned networking tactics.
By way of comparison, if someone needs a particular service like a plumber or a lawyer, it is common for them to reach out to persons they know and ask for recommendations. The VNC model applies the same principle. When a manufacturer, retailer or other entity needs a supply chain-consulting service, they can look to the VNC company to find the correct skill-set. The VNC company looks first at the individual tier, the boutique tier, followed by the alliance tier, then back to the job board, repeating the process until the correct team is formed. This model is highly efficient and has worked for process improvements, facility moves, and software implementation and integration. It can be applied to all elements of the supply chain and logistics industry.
Consider the case of a now expanding beauty-supply business that decided to concentrate on its core operations and outsource distribution to a third-party logistics provider. It called on a VNC to handle this transition. Just as important, when the lead virtual consultant took a senior management position within industry, the consultant was replaced in about two days by someone with an equal skill set. There was never a bump in the project, which was completed on time within budget. As a result, the beauty retailer is in a long-term relationship with the VNC firm.
Virtual network companies are not "project builders" focused on adding revenue by extending time or marking up expenses to cover overhead costs. Virtual Network Consulting firms keep their buildings, infrastructure and overhead capital expenses at a minimum. These firms have no permanent, full-time employees, do not pay traditional benefits and operate on modest margins, so the client receives a deeply discounted rate structure. In addition to fees, the client pays actual expenses incurred - not a percentage assumption built into the fee structure and not arbitrary, blended consultant rates. And conflicts of interest between a consulting arm and an audit business do not exist, as they do for Big Five firms.
Pioneering VNC companies and their clients are the first to reap the rewards of this innovative business model. An established VNC company has access to literally thousands of network consultants ready to assist businesses within a matter of days. Recently announced alliances between newly emerged VNC companies and long-standing software firms are evidence that this concept is taking hold. Today, the focus is squarely on how to best support the needs of customers to help achieve measurable results. Virtual Network companies' ability to bring additional resources to the task is formidable.
We all have heard the theory that there are no more than six degrees of separation between any two people. In the supply-chain consulting community, that separation frequently is even less. Certain persons previously employed with the "big guys" have formed boutique firms, and these persons are connected to industries that need additional resources. This is a fundamental principle of the VNC. The puzzle now takes on clarity and is manageable for the client and all members of the participating project.
In summary, here are the benefits of the virtual network consulting model:
Individual consultants benefit by having a reliable flow of work for their specific skill sets and by working primarily in their own geographical area, which is usually conducive to their lifestyle and work/life balance preferences.
Alliance partners benefit by being able to augment project staff without adding full-time employees; eliminating emergency hiring for peaks, and layoffs in slow times; being able to ramp up staff in an expeditious manner; eliminating costly recruiting, hiring and relocation expenses and providing for their clients well-trained and experienced professionals.
Clients benefit by obtaining a seasoned professional staff and one likely not to contain recent graduates; a depth of industry and technology experience from years of performance instead of textbook methodology; an array of contacts within similar companies, vendor groups, organizations and other known individuals that bring their particular expertise.
Virtual Network Consulting is not a fad, but a more efficient way of delivering much needed services. The value proposition for all participants is compelling: flexibility for the workforce and for clients, superior resources offered at steeply discounted rate structures.
By all accounts, for client, consultant, boutique firm, alliance partner and virtual network company, the VNC model is truly a winning proposition.
Karen Hawks is Vice President of Navesink Logistics and has led numerous projects in retail supply chain, operations process improvement, warehousing systems and logistics.
Thomas McKenna is President of Navesink Logistics with more than 25 years in logistics and supply-chain management. Navesink, based in Middletown, N.J., is a pioneer in virtual network consulting specializing in software implementation and integration for the supply-chain industry. www.navesinklogistics.com
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