Management consultants to the auto industry are being asked to do more than ever and, increasingly, to wait and see if their strategies work before they get paid.
The days of consultants solely providing clients with numbers, conducting interviews and then offering them a vision of the future - all for a daily fee - are decreasing, according to industry professionals.
Just as carmakers demand more sophisticated products and closer partnerships with their supply chains, consultants are finding that clients want more complex services.
Consultants say the shift is toward analysis involving total business solutions, followed by rapid implementation of the solutions. And financial compensation is increasingly tied to their success.
Fees for consultancy work have traditionally been seen as a discretionary expense by many automakers and suppliers. But Daron Gifford, global automotive practice leader at Deloitte Consulting, believes that even in a downturn there will be 'a drive to become more aggressive and inventive' by consultants.
Andersen Consulting recently estimated that the value of top-tier consultancy work - typically embracing strategy advice; high-end system integration and information technology; and e-commerce consulting, amounted to $100 billion in 1999. That figure is expected to grow to $180 billion in the next three to four years.
While consultants will retain many of their traditional services - including the ability to summarize even the most complex business processes on a two-dimensional diagram with quadrants - a new level of expertise is increasingly being required. That expertise is often drawn from experience with other industry sectors.
Though most consultants are anxious to differentiate themselves from competitors, much of their past growth has come from similar activities. These were typically focused on cost, quality and market issues, for clients happy to accept independent analysis and advice without demanding implementation.
This evolved during the 1990s into internal business process re-engineering. But now that is increasingly seen as a commodity service offering low margins.
Today, major consultants such as Andersen Consulting, Deloitte Consulting, McKinsey and Co., PricewaterhouseCoopers, A.T. Kearney and KPMG are all striving to provide strategic analysis and then solution implementation.
Jurgen Gerlach, managing partner for Andersen Consulting's Global Automotive Group, says today's clients are faced with problems with branding and with closer interface with end consumers. He says both often demand an in-depth appreciation of e-business and e-commerce opportunities.
'Today they [automakers and suppliers] want solutions,' says Gerlach. 'Boards have become much younger and have more global experience, but they tend to be specialist automotive managers who have problems adapting to a
virtual, e-commerce framework. Intellectually they understand it, but they don't have the culture to do it and need a lot of help.'
Such help is increasingly offered through a partnership approach where, according to Wayne Bartel, global leader of Pricewater-houseCooper's Automotive Prac-tice, client and consultant 'stand shoulder to shoulder.'
Bartel says consultants must contribute to the creative process through closer collaboration with clients, but 'speed of implementation - how quick a program can be brought to fruition - is becoming increasingly critical.'
PricewaterhouseCoopers' implementation skills may benefit from its proposed link-up with Hewlett Packard, much as A.T. Kearney's appear to have done through its relationship with Electronic Data Systems Corp., a leader in the global information services sector.
The way ahead is perhaps indicated at DaimlerChrysler's Micro Compact Car, where Andersen Consulting secured a contract to manage the majority of operations concerned with Smart car assembly.
Andersen is responsible for all plant operations. It also integrated a host of key internal systems, from purchasing from Tier 1 suppliers to sales. A similar systems outsourcing contract is under negotiation.
Says Gerlach: 'To survive you have to have industry know-how; contact with board members; the ability to sell strongly and create huge deals; and the capacity to build trust and then provide technology. Just doing strategy studies is fine for a boutique but is too little to be successful in the future.'
Consultants see growing pressures not only to accept payment offered as a reward for successful implementation, but to take financial stakes in new joint ventures or start-up businesses.
The potential rewards for these additional capital requirements could be substantial, particularly if an initial public offering offers a longer-term exit route. However, a number of consulting firms may remain hampered in this area until separation from traditional auditing activities is completed.
Many consulting firms are marketing their automotive capabilities to a wider audience. Sponsorship of industry conferences and Internet portals is growing, and proactive studies to advance industry thinking are on the increase.
Some consultants are suggesting more radical solutions to the industry's current problems with overcapacity and poor returns on investments.
Such solutions - like Price-waterhouseCoopers' Second Auto-motive Century study - see a dramatic reconfiguration of the industry.
The result will be automakers acting more as brand managers or owners and suppliers taking on much of the redeployed manufacturing and assembly assets.
Says Colin Wilson, senior consultant in Cap Gemini Ernst & Young's Automotive Centre of Excellence: 'The drivers for such thinking came initially from consultants but are now coming from automakers.'
Whatever the way forward, consultants seem to all believe that demand for their services will remain strong, even in a cyclical downturn in the key North American and European markets.