What Are The Essential Components Of A Consulting Business?

Yesterday we established a clear definition of a business model for our discussion:

“A Business Model describes the rationale for how an organization creates, delivers, and captures value.”

This gives us a good starting point. Value creation, value delivery, and value capture are the universal functions of a business. Now we need to understand what are the smaller parts that each of those functions consists of.

So our next question here is: What are the essential components of a consulting business?

And here things get complicated again. As anyone will notice with some basic research, the short answer is: It depends on the framework you adopt.

Introducing: Business Model Frameworks

A framework is a structure or set of ideas we use to make sense of the world. Since there is not a single and definitive answer of how an organization can create, deliver, and capture value, different people came up with different ways to look at the problem. That’s why we can find dozens of business model frameworks we can use as thinking tools.

The probably best-known business model framework is the business model canvas, designed by Osterwalder and Pigneur. It uses 9 building blocks to visually describe how an organisation creates, delivers and captures value: Key activities, key resources, key partners, the value proposition, customer segments, channels, relationships, cost structure, and revenue stream.

The Business Model Canvas

These blocks guide and influence your thinking on how your business can operate.

It may sound obvious, but this means that the framework you choose to use when analyzing your consulting business matters just as much as the process you go through to rethink and make changes to it. The tool shapes the process. And the process will bias results.

On Choosing The Right Framework

As the old saying goes: “To the man with only a hammer, everything starts looking like a nail.” Not every problem is a nail, just like not every business is the same. If a boutique consulting firm operates in a completely different way when compared to a tech start-up or a massive retail organization, why would you use the same building blocks to understand how each of them works?

You wouldn’t. But that doesn’t mean we should throw the baby out with the bathwater, and reject every framework available to us.

As every consultant knows, specific knowledge is cultivated through pattern recognition. When we’re confronted with a new challenge we might have no clue where to start. But after solving the same kind of problems for the same kind of companies, distinguishing signal from noise becomes much easier.

Rethinking your business model is like making changes to the foundations of your house. You need them to be strong and robust, and only a madman would play around with them without proper guidance - mistakes can damage or even bring the whole thing down.

But maintenance is required for you to remain competitive. New foundations need to be built if you want to create space for your business to grow. To avoid wasting time, energy, and resources, choosing the proper framework matters.

Which leads us to our next question: What is the best business model framework for boutique consulting firms? I'll try to answer this tomorrow.