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Fads dropped in favour of factsTHERE are faint signs that businesses are tiring of transformation and reengineering. As more and more corporations re-engineer their business processes, so competitive advantages tend to be neutralised. Many companies that re-engineered their business processes in the hope of bottom-line improvement have been sorely disappointed. Re-engineering the distribution function might bring efficiency improvements, but what if the real problem is declining market share, and falling profits and revenues? There are murmurs of discontent over some of the global best practices initiatives that have been implemented, particularly where these do not improve bottom-line performance. Some companies have started to question the vaunted competitive advantages of global best practices when all their competitors are doing the same. Companies have tried cost cutting, transformation, re-engineering, total quality management and just about every other fad the consulting industry has to offer. Now what? "We find that clients have had enough of process, what they really want is industry knowledge and content," says Henri Staal, joint managing partner of Ernst & Young Management Services. "This is where most value can be created in the long term - knowing industry trends and moving faster than your competition. "Companies want to grow revenue and maximise value for shareholders and other stakeholders. Consulting in the past was process-orientated. Now clients want knowledge and they are bringing in outside consultants to get it," says Staal. With this comes a demand for complete rather than partial business solutions, with a stronger emphasis on financial performance. Clients want to minimise use of and maximise returns on capital, says Mark Otty, joint managing partner of Ernst & Young Management Services. Inevitably this involves an element of strategic planning - choosing a future course of action and pursuing it doggedly. Internationally, there is a greater willingness among companies to share strategic information with competitors in the interests of industry-wide efficiency. Ernst & Young has created a forum in London where the chief executives of top energy companies can share information to the mutual advantage of all. The Department of Trade and Industry in SA is attempting a similar course of action through industry "clustering". Its purpose is to elevate the competitiveness of entire industries by sharing information and facilitating co-operation between competitors in areas such as export promotion and skills development. "In any consulting engagement, we emphasise knowledge transfer," says Otty. "We do not want to entrench ourselves. We like to do it with our clients, not to them. "The engagement is for a finite period, after which we leave, making sure that we have transferred our knowledge and skills to the client." The brain drain compels many companies to look outside their organisations for skills, one reason the consulting industry is increasingly called on to manage information technology, human resource and finance functions. Ernst & Young has taken outsourcing a step further by setting up joint venture companies mandated to perform specified tasks and share in the spoils. Two such joint ventures have been set up so far, one with Farmland Industries, and another with Shell International. The Farmland joint venture was set up to deliver a variety of IT services, as well as finance and human resources functions, and supply chain management. The venture enables Farmland to gain leading-edge technology, improve efficiencies and cap IT expenditure. Rather than outsource the IT function to an external provider, Farmland saw an opportunity to leverage its own strengths alongside Ernst & Young's. The Shell International joint venture, known as Tasco, was set up to pursue outsourcing opportunities for pan-European accounting services. It is expected to employ more than 1 000 people within four years. Tasco will offer a range of accounting services, at the same time enabling Shell to achieve greater efficiencies and obtain world-class accounting support. "These agreements are based on the notion of shared risks and shared rewards," says Otty. Ernst & Young Management Services focuses on a limited number of industries - energy, manufacturing, automotive, insurance, banking, water and selective public sector accounts - as well as organisations in other industries with specific information system requirements. After a rough patch in recent years, the firm is now back to full speed, says Otty.
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