An Architecture for Consulting Business

Introduction

Consulting is profoundly knowledge creation driven business that depends heavily on relationships between institutes and people.  The challenges that consulting at best helps to solve are more and messier  as business becomes networked, international, and products more cyber-physical . Therefore, the transformation of the consulting business should address the social challenges through the consulting value chain. Consequently, this paper provides more social and knowledge creation oriented business architecture model that illustrates the evolution of business. The aim is to provide a dynamic architecture model for an enterprise architect to analyse any consulting business and improve the success in business transformation. 

To narrow the approach, the paper focuses on a case of embedded consulting unit operating in the closed market (value, but no price competition) (Osterwalder & Pigneur). Furthermore, the approach is also emphasising the knowledge creation (Nonaka&Takeuchi)  so technology layers are not included. The paper focuses mainly on five features of the consulting business from the business and knowledge creation approach as illustrated in Figure 1:

1. Business environment and forces of competition
2. Business model
3. Cultures within unit
4. Maturity of Collaboration
5. Maturity of Processes
6. Content management

Figure 1: Architecture layers of this study

The framework follows the TOGAF 9.1 model but focuses on business rather than technology. Addition to TOGAF, the framework provides maturity or stage model for each layer, which helps to analyse better the roadmap this far and further towards the future.
Furthermore, the used framework introduces environment, significant stakeholders and forces of effect in the value chain. The motivation, organisation and function of TOGAF model are substituted with more granular layers of business model, organisational culture, collaboration, and business processes. The approach helps to analyse the evolutionary path of the socio-technical system and define options for its future. The information and content management model simplifies the TOGAF data architecture. Furthermore, the study does not include levels of data, application or infrastructure technology.

Business Environment and Competition

Since business is an open, purposeful system , the environment and the relationships between stakeholders affect the business model. Ackoff defines possible relationships as exploitation, cooperation, competition and conflict. The study focuses merely on competition and cooperation. The high-level business model in Figure 2 illustrating the environment and competition in the environment of business follows Porters  value chain with primary activities providing value to customers and supporting activities in helping business units or supply chains structure. The Porter’s  model for competitive strategy defines the competitive powers within the business environment. The competition model explains five forces driving the competition in the market environment:

1. The rivalry between existing enterprises in the same market that either feels pressure or sees the opportunity to improve the position.
2. Potential entrants may change the competition with new capacity or differentiated value. There may be barriers to entry like economies of scale, product differentiation, switching costs, access to the distribution channel, and government policy.
3. The threat of substitute products performing the original function thus creating different value to customers
4. Bargaining power of customers when they buy large volumes, products are standard or undifferentiated or have the full information of the market.
5. Bargaining power of suppliers when they are dominant, there are no substitutes available, the supplier is focusing in other markets, supplier’s product is a crucial element for the value proposition.

Since the Porter model for competition does not illustrate the degree of certainty or maturity, a model from Gattorna  helps to model the degree of certainty of the market. The two dimensions of competition and certainty define a quadrant showing:

1. Stable market when competition is low, and certainty is high.
2. Forgiving market when competition is low, but the market is on the move (probably decline).
3. Competitive market when competition is high, but rules have matured, and expectations are quite confident.
4. Turbulent market when competition is high, but the possibility of changes is high which makes the market more uncertain.

Figure 2: Environment and Competition in Consulting Business

Business Model

The business model (Osterwalder and Pigneur) explains how value is proposed to customer segments, delivered via channels and ensuring continuation through customer relationship. The value is created with critical activities using resources from in-house and main partners. Financial dimension includes revenue streams, cost structure, and value chain relationships as illustrated in Figure 3.

Figure 3: a generic value creation model

The customer segments define the different groups of people or organisations a business unit aims to reach and serve. The segments may be differentiated by:

• Mass-market which focuses on one large group of customers with broadly similar needs and problems.
• A niche market has specific and specialised customer segments. Each segment needs tailored proposition, distribution and customer relationship.
• In a segmented market, several groups of customer provide business with slightly different needs and problems. The same business unit may provide value to each segment from the same line of production if channel and customer relationship tailor the proposal according to each segment.
• The diversified market is a model where one business unit proposes value to two or more separate customer segments.
• Open or closed market defines whether there is competition in the market, or it is a monopoly or controlled by market authority.

The value proposition describes the bundle of products and services that create value for an individual customer segment. Values may be quantitative (price, the speed of service) or qualitative (design, customer experience) and are differentiated by their:

• Newness which will satisfy the entirely new set of needs that occurred recently to customers.
• A performance which will improve the perception of value because with same price there will be more benefits
• Customisation which will address the specific needs of a customer. This includes mass customisation and customer co-creation.
• “Getting the job done” will help the customer to achieve her tactical goals.
• The design will provide a product that stands out from others because of its looks, package, features, or interface.
• Brand/Status provides value by merely using and displaying the brand
• The price where the lower price will differentiate the product from regular market prices. Free offers can be used either for claiming market shares or with a different revenue model.
• Cost reduction when helping the customer to reduce their costs and therefore improve their revenue.
• Risk reduction is appreciated if the proposition is lessening the risk in further use of a product (availability guarantee, service guarantee, insurance, service-level guarantee). 
• Accessibility is a value when products are delivered to customers with no previous availability.
• Convenience/Usability is substantial value if services are easier to use, convenient to acquire or better replaced when broken.

Channels describe how business unit communicates with and reaches its customers to deliver the value proposition. Channels may be direct or indirect and also owned or partnered. Channel is building following the phases of:

• Awareness addresses the challenge in raising the knowledge among the customers of the available value proposition. 
• The evaluation aims to help the customer in assessing our value proposition 
• Purchase aims to support the customer in buying/ordering our products or services
• Delivery takes our products or services to the customer in need
• After sales support the customer in post-purchase situations.

Customer relationships describe the types of relationships unit establishes with each customer segment. Customer relationships may be driven by customer acquisition, customer retention or boosting sales. It is measured by the overall customer experience. Customer relationships may be established through:

• Personal assistance provides human interaction through the process of value proposition and delivery (point of sale, call centres).
• Dedicated personal assistance provides a dedicated account manager to an individual client and possibly develops over time to most profound and intimate relationship (key account manager, own doctor, local store personnel, barber).
• Self-service provides all necessary means for customers to help themselves.
• Automated service is more sophisticated self-service with automated processes and individualised support (AI drove service centre, service robot).
• Communities like user community provide peer support when using similar product/service (user groups, sports groups, patient groups).
• Co-creation invites customers to participate in the design, production and improvement of products (reviews of the product, immaterial content production, hackathons).

Revenue streams represent the cash flow a unit generates from each customer segment. There are two types of streams: 1. transactions revenues from one-time customer payments, and 2. Recurring revenues from ongoing payments either to continuously deliver value or provide post-purchase support. Revenue streams can be generated from:

• Asset sale means selling ownership of a product.
• The usage fee is generated using a service.
• Subscription fee comes from selling continuous access to a service.
• Lending/Renting/Leasing revenue comes from temporarily granting some the exclusive right to use an asset for a fixed period in return for a fee.
• Licensing creates revenue when the customer is permitted to use protected intellectual property in exchange for licensing fee.
• Brokerage fee is collected from intermediation services performed on behalf of two or more parties.
• Advertising creates revenue when unit market/advertise a product, service or brand.

Key resources describe the most important assets required to make the business work. These resources allow the unit to create, offer and deliver a value proposition, reach markets, maintain relationships and earn revenues. Resources may be owned, leased or acquired from main partners. The primary resources may be:

• Physical assets such as manufacturing facilities, machines, distribution networks, or point-of-sales systems. 
• Intellectual assets such as brands, proprietary knowledge, patents, copyrights, partnerships or customer information.
• Human assets as competent people that can work together, for example, creating innovations or new knowledge.
• Financial assets as cash, lines of credit, or stock options.

Key activities describe the most important things the unit must do to operate successfully. These activities may be:

• Production relates to design, making and delivering a product
• Problem-solving relates to advising, training, knowledge transfer or just fixing customers problem. Activities include knowledge management and continuous training.
• Platform/Network may be built on networks, social channels, software, or brands. Activities include platform management, service provisioning and platform promotion.

Key partnerships describe the network of suppliers and partners that make to business model work. There may be four types of partnerships:

1. The strategic alliance between non-competitors
2. Coopetition which is a strategic alliance between competitors
3. Joint ventures to develop new business
4. Buyer-supplier relationships to assure reliable supplies.

The partnerships are mostly motivated by:

• Optimisation and economy of scale when it is not cost-efficient for a unit to own all key resources or perform every activity by itself. Outsourcing enables the supply chain to specialise and gain economy of scale.
• Reduction of risk and uncertainty especially when developing and bringing new technology in a competitive market or sharing the R&D costs of a high-value product.
• Acquisition of resources and activities is typical in modern value chains where products are complex and require significant development investments.

Cost structure describes all costs incurred in operating the business. The cost structure may be driven by the following approaches:

• The cost-driven approach seeks to create and maintain the leanest possible cost structure using low price proposition, automation, and outsourcing.
• The value-driven approach seeks to maximise the customer value with the premium proposition, personalised services and risk minimising post-purchase.

Cost structures may be characterised by:

• Fixed costs include costs that remain the same despite the volume: example salaries, rents, physical machines and facilities.
• Variable costs are those that proportionally vary with the volume of goods produced.
• Economies of scale advantages may be gained from the suppliers as unit’s output expands
• Economies of scope advantages may be gained when same activities are used to support different segments.

Value chain relationships describe the types of relationships unit establishes with each supplier or partner. Vendor relationships is measured by the overall revenue of the value chain and driven according to Gattorna  by:

• Continuous replenishment fulfils predictable demand and focus is on retention of the customer relationship.
• Lean fulfils constant but loosely related demand and focus is on gaining efficiency. 
• Agile supply chain fulfils unplanned or unforeseen demand, so supply chain reacts with the swift response and higher cost-to-serve. The focus is on the service-cost equation.
• Fully flexible chain responds opportunistically and manages the yield. The focus is on providing creative solutions for a premium price.

The architect uses the above business canvas to define existing model for consulting business and collects the future intentions indicating the needs for transformation. Furthermore, the architect analysis the stage of consulting using the types described in the following subsection.

Variations in Consulting Business Models

For specific consulting business the model uses Sniukas’s  approach for reinvented consulting business. He defines six specific business types for consulting pictured in Figure 4: 1. Classical, 2. Brokering, 3. Information, 4. Solutions, 5. Objective driven, and 6. Flexible. 

Classical consultation business is based on two principles: 
1) Hiring talented and experiences people;
2) Charging clients the usage per time of this talent, expertise, or workforce.
The classical model optimises the sale of as many consultants per time as possible. The client does not have too much choice for talent or number of consultants engaged.

Brokering top talent is a business where the consulting company does not hire consultants but provides access for clients to available freelance competence. Clients choose from the available consultants their preference. As clients become more expert in using the consultants, more value is provided. Consultants are not in pressure of selling new projects, so they can concentrate on providing successful projects. Lower overhead cost translates to lower fees, trusted talent, and focused contribution.

Figure 4: Variations of approach in contemporary consulting business

Providing information and analysis of top experts is a model where consultants are not meeting with a client but provide standard reports, analysis, trends and other knowledge goods to the client per-content basis. Consultant work is researching and publishing. Publishing happens via portals, blogs, or other digital means. Besides off-the-shelf reports, there may also be customised reports provided to a type of challenge. New products and clients can be created quickly with flexible consultant teams, who are working together for quality knowledge.

Providing solutions means that there is a structured, repeatable and standardised process in solving the challenges that clients are facing. There might be tool and method development for quantitative research to enable the quick delivery of results. Licensing these tools to clients may also be a stream for revenue.

Objective driven consulting changes the pricing policy in the business. Only 1/3 of charge is based on fixed prices and rest is dynamic based on successful delivery. The risk of consultation is divided between provider and client. This motivates consultants to innovate and seek more creative solutions for clients’ challenges.

Flexible and scalable business model for consulting is somewhat a combination of the previous. There is a structured process for knowledge creation within in-house consultants, but there is also a more extensive network of experts and experience available for solving challenges. Each challenge is addressed together with a client by assigning a tailored team and consulting service. The solution is found in close cooperation sustaining the confidentiality of the client. Value is created more with knowledge transfer and solutions rather than manning projects. Generic information as a service is also a part of the service portfolio. The model attempts to integrate trusted people with broader competency and expertise into the same team, so both logical and social needs are met.

Organisational Culture

After assessing the business model in the previous sector, analysing the social structure and relationships within an organisation and through the value chain becomes the next challenge. The Logan et al.  model of tribal subcultures defines simple stages and paths for cultural analyses and roads for improvement. The cultural categorising is based on a concept that human beings form tribes, i.e., teams within an official organisation. These tribes tend to draw similarly feeling and motivated people together, and there is a pattern of stages defined in improving the maturity of the culture illustrated in Figure 5.

Figure 5: Five different subcultures that can be found in an average organisation

Members of the 1st tribal subculture are despairingly hostile. They band together to get through a perceived world of violence and unfairness. Their shared feeling may laud as “Life Sucks”. About 2% of professionals in the US operate here at any given point.

Members of the 2nd tribal subculture are passively antagonist. They cross their arms in judgement but never engage enough to make a difference. Their feeling is apathy since they have seen so many failed attempts. The culture does not recognise urgency or accountability. Their slogan reverence as “My Life Sucks”. About 25% of organisations in the USA have pockets of people belonging to this subculture.

Members of third tribal subculture think that knowledge is power. Therefore, they want to possess and hoard it. They outthink and outwork their competitors on an individual basis. These people are drawn together since they beat others and win being the smartest and most successful. About 49 % of workplaces in the US belongs to this “I am great, and you are not” stage.

Members of fourth tribal subculture think that “We are great, and they are not”. There is a tribal pride and always an adversary to reflect their greatness — bigger the adversary, more powerful the tribe culture. About 22% of workplaces in the US are in this stage. The most usual way to create a successful organisation is to create enough teams with this subculture together and then show them adversary worth the fight.

Members of fifth tribal subculture have a feeling that “Life is great”. These teams are going to make history because they have a cause bigger than themselves or anyone else. Most successful organisations do not stay in this stage but alter between 4 and 5. Less than 2% of organisations in the US have evidence of this stage.

Culture can effectively deny many intended, logical changes of the future business model. Therefore, the architect needs to define the area of cultural stages the consulting unit resides. Longer the value chain for knowledge creation is, the less successful consultants at cultural stages of first and second are. More complex the challenge and more stakeholders are included, further, between levels four and five, the consulting team needs to be. 

Degree of Collaboration

After the coarse analysis of culture explained above, the architect needs to focus on the core feature in Nonaka and Takeuchi  model of organisational knowledge creation - collaboration and cooperation. Collaboration and cooperation between talented people are essential in knowledge-intensive consulting, whether collaboration happens between consultants or with clients. Collaboration accelerates knowledge creation as socialisation, externalisation and combination require cooperation between people and sources of information. The study uses the Synapticity collaboration maturity model illustrated in Figure 6 because of its simplicity with four stages but the richness in six dimensions.

Figure 6: A simple maturity model for collaboration within an enterprise

The four stages create a roadmap for maturity in collaboration:

1. Base level describes point-to-point individual level collaboration
2. Tools oriented describes more function-oriented collaboration
3. Knowledge repositories introduce cross-domain collaboration
4. Collaboration and interaction introduce wider society, tribal collaboration.

Each stage is defined by six dimensions or features:

• Information Types: Is the conveyed information unstructured, structured, referential, rich, or media based?
• Scope: How many people and how they are affected by collaboration? One-to-one interaction, roles based, task-based or self-defined communities.
• Communities: How collaboration is changing the culture? Hoarding information, we have all the information, small sharing groups or dynamic community of collaboration that shape per each interest.
• Information Persistence: How relevant the communicated information is? Life cycle, consumption means, exposure to different users.
• Integration Points: How much collaboration is interacting with other means of sharing information and ideas? Is security mature enough to stand integration? How are standards used in creating integration links?
• Connectivity or Density: Improves from non-connected to full connectivity and multiple connections.  Density increases as hubs and outliers are bringing value to society and knowledge creation process. 

The above model provides architect an assessing tool that helps to define how the consulting unit reached the current situation in the maturity of collaboration and possible guidance on how it may be improved.

Processes of Consulting Business from the Knowledge creation approach

Processes or chain of functions allows an organisation to align the way to create value for the customer.  The ThinkingProcess  provides three dimensional model for process, performance and improvement maturity and follows the stages of classic CMMI-model : 1. Ad hoc, 2. Local, 3. Aligned, 4. Integrated and 5. Optimised. The maturity model for processes illustrated in Figure 7 is cumulative, which means that achieving the upper stage, the organisation needs to master also the features of previous stages.

Figure 7: Model for consulting process maturity

The process dimension matures as processes are defined, followed, extended, and they start to provide direct feedback for continuous improvement. The performance dimension matures as measuring and feedback is improving and creating closer loops of iteration. The feedback loops include both operational and strategic key performance indicators. The improvement dimension matures as development becomes more controlled and value-driven approach starts getting rid of waste gradually through the whole value chain.

The tool provides architect not only a maturity model for business functions but also a view for the value stream improvement and performance. The approach ensures that business architect considers establishing a continuous improvement rather than guides towards project aimed change.

Information and Content Management

Finally, the content management provides a base for knowledge creation in consulting. Cameron , in Figure 8, defines content management through systems, processes and people. He does not follow the CMMI maturity model but introduces stages of maturity through social connections and extends the path of maturity with development by optimisation and innovation.

Figure 8: The dimension and stages of content management in consulting business

The people dimension includes human itself but also support, competence, training, relationship to risk and reward and performance management. There is also an organisational culture aspect, but it is assessed better in previous culture oriented models.

The processes in this model focus only on information or content management functions. They have different forms as standards, guidelines, policies, records, and workflows. The content management processes are analysed based on their: 

• Relevance: why information is relevant, 
• Retention: what information needs to be recorded and what destroyed
• Timing and throughput: when information needs to be acted upon
• Responsibility and contribution: who manages information effectively.

The systems include hardware, software and applications which are used create, store and manage information. The technical part of content management is measured by:

• Retention: where information needs to be kept
• Timing and throughput: when and whether information can be processed
• Responsibility and contribution: who is managing information and when
• Ubiquity: where and when information is being accessed
• Analysis and meaning: how to help interpret, create and manage information.

Conclusion

The business of consulting becomes more messier as it evolves towards networked, international and cyber-physical. Since the TOGAF model does not directly address the ways to describe the evolutionary nature of consulting business, this paper creates an applied architecture model for assessing the past and future roadmap for consulting business.

The model for consulting business explains how to analyse the environment and five interconnected layers of business architecture. The model answers the questions of: 

• Where the business has evolved to current situation and 
• What opportunities or challenges it faces when developing towards the future?

The model addresses specially the knowledge creation and social aspects of consulting business, which are substantial in consulting business.

The model is only presented in this paper. Other publications test the model and proof its feasibility. The focus of this model is in knowledge creation and business architecture. Therefore, all technical structures are left out from architecture considerations.