Why German buyers favour analysts’ consulting

Why is the business model for the analyst firms so different in the German-speaking regions? The greater interest in custom consulting projects outstrips demand for research. This is great news for mainstream consulting firms, but a real challenge for the analyst firms.

Many strategy consulting firms, such as McKinsey & Company or the Boston Consulting Group, find Germany to be their largest market outside the US. Analyst firms also find demand for consulting projects are very high there. In the case of META Group, consulting work formed an exceptionally large part of its work in Germany, Austria and Switzerland.

Having spent most of the last week in Germany, I’ve had a number of discussions on this point, and heard the opinions of former BCG, GfK, IDC and McKinsey consultants. Three reasons came up repeatedly.

  • Detail. German managers are taught to understand the detail rather than what Anglo-Saxons might call “the big picture”. Few analyst firms provide the same level of detail in their analysis of the German market than of the US market. The higher data sufficiency needs of most German businesses, also allow consultants a larger gap in which to operate, between the lower level of detail provided by analysts and the higher information needs of decision-makers.
  • Few MBAs. The Anglo-Saxon business school model emphasizes rapid analysis on the basis of incomplete data. Some friends suggested that the higher ratio of consulting to research comes from the lack of an MBA culture: without the MBA-type approach, it’s much harder to reach conclusions rapidly, or on the basis of smaller volumes of data, that will be credible to most German managers. Furthermore, tools like game theory and other strategic decision-making methods have been often neglected in businesses, and business education, in the region. The ‘classic’ training for German managers, the Diplom Kaufmann, is certainly not lightweight. Technical training in finance, for example, is at least equal to many good MBA courses, but fails to be ‘joined up’ to other business activities. I hear from colleagues that many German students pass US CPA exams with ease while they are in the middle of their Kaufmann education. However, decision-making in many German businesses is more tightly concentrated than in the US: few young, or even middle aged, managers are involved in competitive strategy. All of that means fewer people with deep, rapid analysis skills.
  • Language. Hiring local consultants removes the language barrier. Few analyst firms headquartered in other countries translate their research, even into such a major language as German. They assume that their clients have an excellent command of English, and that translating a modest amount of their research for those who do not would not add enough value. Personally, I find this counter-intuitive. Most Germans don’t speak English, but even those who do will clearly be able to work more quickly and accurately with material in their mother tongue. Few analysts write with the second-language reader in mind – even at firms where many of their readers do not have English as their maternal language. Analyst research is also heavy going, and this means that working through large amounts of analyst research is a big headache for managers with fluent spoken English.

On reflection, I also think there’s a fourth reason. Of course there are also a range of barriers between the Anglo-Saxon analysts’ culture and German business culture. From the buyers’ point of view, hiring local consultants also overcomes those barriers. I know from Lighthouse’s experience with our in-house training sessions for German business people who interact with analysts that there are some specific issues which can be easily misunderstood. Those risks are eliminated by working with others from the German-speaking region and with foreigners who have adapted to the culture there.

P.S. I’ve had an interesting comment from a reader in Germany, who explains that some research houses had an increasing problem with selling standard IT research studies, because their customers started to review the added value of those more critically. There are three clear examples.

  1. Consistency – Differing methodologies of different research houses help increase some clients’ misunderstanding of each study and it is accordingly harder to compare anything. Using consulting or customized research has the nice effect that methodologies can become customer centric / controlled by the customer.
  2. Focus – Only seldomly does standard IT research exactly cover what a German customer wants to know at present. A client could only want information about the market shares forBPO in just one German state, like North Rhine-Westphalia. Of course, many research houses try to defend their products against such granularity by making the standard study the smallest unit that can be sold – but this is simply causing annoyance at the customer side.
  3. Unattractive market – As a third point but not as the least important aspect, standard research has become a part of the ‘Red Ocean‘. There have been incidents when research houses where about to publish standard studies about the same topics, like CRM in Germany or BPO in Germany. The vendor with the more detailed study seemed to win here. Competition is less likely when research gets customized.

My correspondant makes a lot of sense here: ad-hoc services of all types also be increasingly important to IT research customers, and not only in Germany. Online tools and databases, with real time charts and figures, without a lot of descriptive text will form the other end of the spectrum of research and consulting services.

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