ConCon26: How to beat the big consulting firms | The power of niche boutiques - #66

Speaker A: Welcome to the Consulting Pulse, a podcast by cemap. CEMAP is an operations and intelligence platform purpose built for consulting firms. Let's dive into today's episode. Welcome back everybody. Thanks for joining us for this next session. I hold a lot of quite strong opinions on the future of consulting and this particular area is one that I am most interested in which is how do boutiques continue to beat the big consultancies? The power of the niche, it's the part of the market we serve, but also more as an observer, uh, both of qualitative and quantitative data. Uh, I feel like this is a unique opportunity for the SMBs to compete and win against some of the established names and brands in the space. Whether that is true we will be debating on this session, um, and hopefully if it is, we'll be getting some tips and insights into where our learned panelists have ah, seen great successes. So just a bit of context before they introduce themselves. So we're really fortunate that Christian's firm Kung Fu AI are a uh, CMAP client and a fantastic performing one at that. And Professor Joe is now our host of our uh, UK based thought insights based webinars and as well runs his own advisory firm. And we have crossed paths on many many occasions. But gents, why don't you give us your intros first. Christian, can we start with you?

Speaker B: Yes sir. Thank you for having me Ben. Uh, my name is Christian Bernard. I'm the chief operating officer of Kung Fu AI. We are an AI native management consulting and engineering firm based in Austin, Texas, founded in 2017. I've been with the company for four and a half years. We're about 50 people today, uh, all focused and based in the US and we help boards, CEOs, senior executives build bespoke AI enabled competitive advantages in their respective industries. Um, we don't just build slides, we also build production grade uh, AI systems. Way of background. Um, I spent the majority of the past quarter century working in consulting firms. Some large, some small agencies, um, such as Sapient, Frog Design and Razorfish.

Speaker A: Very good. Joe, over to you.

Speaker C: Thank you. Nice to see you again Ben and Christian. Um, I'm managing partner of a consultancy called Equity Sherpa and we consult to consultancies which is a little bit meta. We've all been grown and sold our own firms and we help boutique consulting firms maximize their equity value usually a few years prior to a sale or private equity involvement. Um, I'm also a professor of consultancy and have spent 20 odd years advising consultancies but also researching writing and teaching about the consulting industry.

Speaker A: Very good, thank you guys. So, a bit of a order and agenda for where we're going to be focusing some time today. There's a couple of topics that I'll be asking the guys for their insights on. So where are, ah, boutiques themselves winning? We're going to start with that. Uh, and then we'll be moving into the impact that services, buyers and market conditions are having on that dynamic. I want to look at how boutiques are winning, not just why, because then there'll be some learnings in there, hopefully for the audience as well. And then from the big firms perspective, like what are some of the challenges that they're experiencing that boutiques can capitalize on? Um, as with the previous sessions, the chat is open. Feel free to keep commenting there. If you want to ask a question that you don't want other people to see, you've got the Q and A tab and I will weave those into the discussions as well. But before we go into those four topics, just a bit of a high level scene setting. One, um, each of you, what's your hot take on where boutiques are beating the biggest firms, especially compared to the previous one or two years? And I'll look for a bit of eye contact to see who wants to go first. Go on, Christian.

Speaker B: Yeah, I'll do it. Um, you know, I think that the structural advantages that big firms have historically had and relied on for decades are eroding and it's changing simultaneously and faster than most of them expected. And I think that's what one of the things that I want to dig into in this conversation is. The operating model is fundamentally different. Um, and for example, McKinsey just cut roughly what, 5,000 jobs, 10,000 of their workforce. The publicly stated reason was AI tools can do now in minutes what armies of junior consultants and analysts used to bill out across multiple people, across multiple weeks. Research, synthesis, strategies, uh, are all being compressed via time, uh, with the usage of AI tools. So I think the nimbleness of, uh, boutiques or small consulting firms is why, um, you see the growth rate of boutiques growing while you see a lot of the large consultancies contracting. Um, I also think there's a bit of sort of bifurcation in the industry where these big firms, they need to transform their operating model and they're still scaling through acquisitions as they historically have, while boutiques are gaining a lot more traction through depth and agility and speed. And those firms that are caught in the middle, they're not big enough to Compete on scale, but they're also not specialized enough to compete on deep, uh, expertise are facing an existential threat, an existential squeeze at the moment. Um, the other thing I think would be interesting to talk about is our buyers have changed. Two years ago, I think client buying criteria was still heavily weighted towards brand and relationships. And today clients more than ever want partners who can implement, not just advise. Um, so I think finally the types of engagements that I see winning, um, right now are the ones that map fees to measurable outcomes, that also put senior consultants, senior people on the work and have the ability to go fast and iterate, um, and they deliver something real and tangible that delivers roi. And I think boutiques, small nimble boutique firms are structurally better positioned to do all three of those things compared to the big firms.

Speaker A: Very good. Level three, Joe.

Speaker C: So I agree with everything that Christian has said. Smaller firms, more nimble. They're also cheaper and have been cheaper for a long time. Boutique consultancy growth rates have exceeded those of the big four and MBB for over, over 20 years now. Um, and that's partly due to an exodus of uh, sub partners from those firms. Um, it's also due to, as Christian said, changing by behavior. Um, and it's also due to consulting boutiques, the successful boutiques, um, because a vast number of them die. Um, focusing on a niche and built that message I think has very clearly got across in management education that focusing on a niche and building up that expertise is almost your only chance of surviving against the big, the big generalists. Um, so I think there's that. But I, I'd also say that this is a long term trend. There have been changes in the last couple of years. You know, most buyers, the vast majority of buyers now are using LLMs to help find the experts they need, ironically. And that means that they're being exposed to specialists a lot better than they were previously. So there's a whole, there's a whole host of reasons why boutiques have outperformed the large firms over the last 20 years. I only see that accelerating now.

Speaker A: Okay, very good. So let's get into the first of the four topics. So where are boutique firms themselves winning? Christian, if you kick us off, what are some of the services or solutions that are capturing attention?

Speaker B: Yeah, so as I mentioned in the intro, we are an AI consulting firm. So we are, I'm going to, I'm going to answer your question, um, outside of the AI space because there's probably a lot of participants that don't do AI consulting or specifically only AI consulting like we do. But there are um, there are four things um, that are capturing attention and differentiating in today's market. One is um, and they're all sort of engagement style, right? So outcome driven engagements, um, I see are replacing advisory services. You know, our clients um, across every sector are moving away from open ended advisory relationships and towards engagements with defined outcomes and measurable results. And I think boutiques that lead with outcomes, not methodology, are winning ah, at a, at a higher pace. Um, the second is, and we've seen the benefit of this is fractional embedded team models are growing really fast right now. And so this is one of the most important commercial shifts happening. So rather than project based engagements, clients are hiring boutiques as their functional team. They're getting a retained embedded capability that runs alongside their internal organization or if they don't have uh, the capability that they're buying, you are that function, that capability within a client organization. So we see this at Kung Fu and in the form of uh, us being our client's fractional AI team. Um, and we will bring to bear strategy, engineering, program management, client partnership, data science and be a fractional embedded team. Um, but I think that model applies broadly, right? A fractional cfo, advisory practice, fractional strategy team, it all sort of works the same. But the beautiful thing is the client gets senior expertise without the overhead of a full team hire or the scale and cost of a big firm. And big firms I think more often than not, you know, can't serve that model cleanly because their staffing structures require large teams and multi year engagements to be economically viable in the, in the, in the legacy construct. Um, so big differentiator, if boutiques, if the services that you're providing you can go to market and engage with clients in that way. Um, the other thing, and Joe mentioned this, it's uh, deep expertise I think now is the new growth engine for boutiques. You know, generalist positioning I uh, think is becoming more and more of a liability. And uh, the boutiques that are winning are the ones who can credibly say, you know, we are the firm for this specific problem in this specific sector that specifically builds you know, referenceability, which builds inbound traffic and brand awareness and that builds a competitive mode around boutiques that go deep and broad. But really deep is uh, deep expertise is really the differentiator now more than ever. And then finally speed, right, the ability for smaller. I was just talking to, by the way, I'm gonna have a caveat here. I was just talking to a friend of Mine at one of the large firms that we're probably referencing and not naming. Um, and I do want to make a comment that those firms do great work. Um, I've got a lot of friends that are in those firms. So I want to have a caveat or an uh, asterisk that everything that I say isn't disparaging to those firms ability to do good work, but it's more of the time that we're in and the legacy models that are somewhat broken and creating space for us as boutique consultancies to win ah, at a higher rate uh, than we have in the past. And so the fourth point is speed. The ability for a smaller firm to adopt AI, uh technologies to help with the entire operation can provide a lot of operational leverage. Right. So for instance CLAY for TAM and ICP development and data enrichment and Outbound, you know, CMAP for internal operations. Cloud cowork has been a um, as has been a game changer for us, right, to help automate routine functions, ah, cloud design for deck creation. I can go on and on about the tool set, but the point is those tools are changing the way that we go to market and operate as boutique consultancies. And I think it's just more difficult to test and learn and drive some of those transformations within a larger firm. A lot more governance, a lot more people to test and learn, a lot more cost in adopting some of those tools. So you know I'm a big advocate of uh, AI enablement and agentic um, enablement especially within boutiques, uh, to just really, really maximize operational leverage.

Speaker A: Joe, I saw you nodding along with a few. There's not least the speed thing is that, would you say number one or is there some other things that you'd put in there?

Speaker C: Well, it's quite interesting I think. I mean speed of adoption and speed of change which is required at the moment. I mean consultancy as a sector has had 120 years of fairly solid growth and it's been pretty much uninterrupted. Things have changed. Um, the, the thing about speed is it's partly a function of size. You know that, that book Elephant teaching elephants to dance about um, IBM in the 1980s? I mean nobody taught IBM to dance because they were too heavy. They were elephants teaching elephants to dance. Um, but it's also a function of, of governance. And so I uh, deal with a lot of partnerships, mid sized partnerships as well as some large ones. And their challenge is it's the speed of decision making. If you, if you're, if you're an LLP and you've got a hundred partners, all of whom want to have a say. You're not, you know, your business plans for change are being pushed out. You know, a year, two years, three years and it's way too late. At the same time people are asking for the, you know, AI enabled services etc and so you, you really need to look at your governance at the moment. And if your governance and um, I don't want to name firms but if your governance structure isn't enabling you to make decisions fast and implement those quickly, there's a challenge. So I think that's a challenge for large firms and smaller firms. Your question was specifically about sectors, so the research around sector performance, AI, you know, Christians, you know, we're all very jealous of Christian's position at the moment in the market. You know, AI growth is where it's at, but specifically on firm that can execute. So everyone, everyone on LinkedIn all of a sudden has become an AI expert and is producing wonderful slide decks and uh, visuals around it. The world is sick of that now after, after two years of it and they want people that can execute. So AI tech, anything in governance there's lots of governance change around esg, around um, uh, uh, governance of AI around financial services. Um, and there's two or three sectors that are growing quite fast. So healthcare is one of those pharma and life sciences. Partly due to the impact of AI, um, energy and resourcing, supply chain and risk, all of those things that boomed during COVID we're getting them again. But those are every, every couple of years there's different hot spots. But I think AI and tech have now been a hotspot for, well for as long as they've been around. So if you're thinking about a niche to move into, those two are uh,

Speaker A: great niches within consulting firms. Which people or skills are ah, making the most impact to where boutiques are winning or clients are getting fantastic outcomes?

Speaker B: That's a great question. So I think Joe, if you don't mind, I'd like to lean into that one really quickly. Um, I think the profile, so this is really interesting. The profile that wins engagements and retains clients I think is someone who operates fluently at the executive level. So they can have C level conversations, they can talk about business value and business outcomes and they can also roll up their sleeves and do the work. And I think that combination of strategic judgment, discernment, et cetera, um, maybe industry vertical expertise plus hands on execution is a rare, an extremely uh, valuable asset. To clients. And I think big, big firms, to put it in contrast, have historically separated these roles by design, you know, having level and a tiered model with, with a, maybe a managing director or a partner with a junior staff. Um, so I think that, that um, you know, boutique firms can put those capabilities in the same person, although very difficult. I'm realizing what I'm saying is not easy. But I think that um, we've got some folks like that at Kung Fu and I think those people that can go very, very high level on the business strategy side also understand the tool set and get their hands dirty and building whatever it is that we're delivering, um, are the true differentiators, uh, in the market today. Joe.

Speaker C: Sales. It's always been sales. I mean we all know getting a senior person that can sell, um, is hard. It's getting harder because there's more boutiques out there. Um, uh, and so grow your own is the cheapest and most effective version. I'd say four out of every five lateral hires fail when it comes to sales, um, onto other things. Christian's completely right. Senior practitioners who have operating experience, no one wants to pay for pyramid juniors um, anymore. Or generally speaking, one can always push that point a bit, a bit too much. Um, and, and then the, you know, the, the unicorn is the, is the person that has domain experience, but also the tech literacy that can, you know, there's so much productization that clients want. They, you know, they're talking about A.I. uh, they want someone who has deep sector expertise in their area, but also can, you know, you know, knock up a prototype in, you know, in the meeting even. Um, and, but, but getting those combinations is hard for boutiques. It's going to become a little bit easier shortly because so many of the big firms are making redundancies at the mid level. But you know, big four doesn't always translate into boutique success. There's very often cultural reasons for that. But I, I would, you know, I, I think there, there is a temptation to say the whole world is changing. Um, but you know, Christian, what's um, his name, um, the innovation guy, he wrote, he, he wrote a paper 15 years ago now saying, you know, the disruption of consultancy. There was another paper 30 years before that that said the consulting industry has been disrupted, but each year you look at the figures and it grows by, you know, 6 to 6 to 10%. So I think that can be overwrought and I would say, you know, making the most of the people that you've got, having a competence framework Having clear career paths and all the rest of it are the way in which you're going to develop capable people. Even if the skill sets are slightly changing because of AI automation and productization.

Speaker A: Thanks for those responses. That was really interesting. Even if nobody could see me or hear me saying so and so, let's have a, let's have a chat about the impact of services buyers as well. So Joe, you've touched, both of you have touched on it a little bit, but how are you finding, Joe, that the actual clients needs of the firms that you're working with is changing?

Speaker C: Yep. So as uh, it won't, it won't, it won't surprise anyone to know that clients are starting to do more stuff themselves. Um, obviously with the big decisions and risky decisions and stuff that's board level, they're not going to, even if AI gives them the right answer, they're not going to say to the board that they got this answer from AI. So they, they need to get the, the credibility, legitimacy, uh, from you know, seasoned experts that have ideally have some type of brand behind them. Um, so, so that's I guess number, number one is that clients, and again this is a long term trend. Clients have been doing more of the work themselves. One of the partners from PA said the other day, um, the era where you could go in and tell a client what the problem was is pretty much over. Um, ah, but for a long time clients have been shifting so that they come to the consultancy and tell them what the problem is and the consultancies bid to solve that problem. So pure strategy consultancy has been on its way out for 20 years which is why McKinsey, Bain and Boston are all now doing implementation, um, even though they don't necessarily call it that. Um, there's been a significant shift over the last 10 years in buyers that are valuing expertise. Most buyers who are using boutiques are saying they're going to them for exactly what Christian said, seasoned experts who can deliver rather than the partner who flies in, does the deck and then pushes a whole load of MBAs in the big four waking up to that as well. Um, and so they're increasingly, you know, I teach MBA students and increasingly they're finding it very hard to get into the large firms because they're not recruiting at that level anymore. They want mid level experts that they can then push up to the partner levels, especially ones who can sell. Um, what else has changed? Uh, procurement, you know, it's just again another long term trend. It's a pain in the ass um, and there's lots of talk about buying on value, but everyone will know that's a difficult conversation if you're going through procurement. And as I said before, I think, I think the figure was 94 of buyers are saying that they're using AI to help them find and research suppliers, um, as opposed to Google. So all that money that was, you know, we're all spending on pay, uh, per click and Google Ads. Not necessarily a waste of time, but everyone's going to AI now. So it's quite big changes.

Speaker A: And Christian, without giving your secret sauce away within your firm, but maybe sharing some best practice, like how have Kung Fu and yourself maximized this opportunity and maybe some of the changing buyer behaviors or stakeholder threading and anything along those lines would be really interesting to know.

Speaker B: Yeah, I think, you know, there, there are a few things that um, and I'd love to get Joe's feedback on this that we're seeing. Um, buyers are now sort of waiting more than they did even a year and a half or two years ago. And maybe this is just it. It's uh, you know, the type of work that we do at Kung Fu. But, um, the first is a really proof that a firm can actually build the thing, not just recommend the thing, regardless of what it is. In our case it's, you know, machine learning models. But I could see that this would also apply to, you know, uh, software development or any other, uh, consultancy. I think there's just more of a, um, need to understand that a firm can actually build the thing, not just recommend it. The second one is speed. Again, I'm going to keep going back to this and I think we've, we've uh, focused on speed without sacrificing quality. Number two is speed to, you know, getting to a working solution in more like 60 to 90 days as opposed to 12 months has been a big differentiator. Um, and then number three is really, you know, ah, someone who will tell the client the truth about what will and won't work. And you know, that last one, that third one sounds a little soft, but it's actually a big differentiator. It builds a lot of trust and credibility in the space. I think big firms are structurally, you know, incented to keep the meter running, so to speak. But a boutique can say this won't work for you or you don't need to build this, you should go buy something off the shelf instead. You know, you don't need us anymore. Because, you know, the boutique model is not as dependent on endless Scope with large teams billing by the hour, especially if you're, if you're billing like we do or price our services based on, uh, value and outcome as opposed to, you know, TNM and inputs. Um, so I think with that, you know, if you can take a pilot first, sort of like a phase gated approach to selling, um, we're seeing a lot of traction with that right now because clients want to test before they commit to a long term relationship. You know, so for boutiques that are willing to structure engagements in this way, do, you know, do a smaller scope first, prove your value, earn the next phase. That's a huge advantage. And big firms prefer large scope commitments up front because the economics around some of those large firms require it from an operational perspective. And as boutique, we have a little bit more freedom to operate that way.

Speaker A: Uh, appreciate you sharing that because others can learn from that. And Joe, before I come to you and Christian, I don't want to stitch you up, but are you able to share any insights as to like anything around your growth? Because it is pretty, pretty impressive. So how does this best practice translate to what you've actually been able to achieve?

Speaker B: Um, our growth, we did have a very, you know, pretty, pretty large growth trajectory last fiscal year. Um, we almost doubled in revenue. Um, I'll also share that we did not double in cost, um, which has been really good as far as the profit goes that we're able to throw off. Um, but, but one thing that we've done really well I think is, um, has gotten really crystal clear on our icp, our ideal client profile. And we've sharpened our ICP until it hurts a little, honestly. Um, and we've started talking about ICP squared. And so ICP ideal client profile is your demographic, firmographic, who you target use as your qualification criteria the second half of that icp. The squared part is your ideal client project, which we've defined both of those. And it's really important for us to understand the type of work that our engineers and our strategists want to do because you know, you can do a lot more volume of work that you like to do as opposed to work that you don't like to do. Um, and so we've gotten really laser focused on the ICP squared, which to your question, Ben, I believe has fueled a lot of our growth. We've gotten really clear about what we sell, who we sell to and why we're different and why a client should buy our services. And I think that's fueled a lot of the growth the other thing that we've done is, I've already mentioned some of them. We've changed, you know, how we, how we engage with clients. Right, um, uh, you know, listening in the market right now is so much easier. Using AI tools, meaning listen, using conversational AI on your meeting transcripts to understand how custom clients are talking about your capabilities in your business. We're able to do that now and adjust and pivot how we go to market, how we talk about our services and how we engage with clients in you know, a weekly basis where before we wouldn't even have that data available to us. So, um, being really focused on who we sell to, what we sell, uh, saying no, um, is also, believe it or not, it sounds like an oxymoron, has actually helped fuel our growth. Um, and being very uh, targeted, uh, and laser focused, um, and the type of work that we want to do and then um, drinking our own champagne. Being an AI consulting firm for a long time we didn't adopt tools internally and we've made a massive push to adopt the right tools and to have them quickly test and learn and iterate on those tooling, A.I. tooling, um, in order to really just increase our overall uh, operational leverage. I think that's the beauty of being in a boutique right now. I feel like we can operate as a 50 person firm. We can show up in the market and deliver value to our clients. That's similar to a 10,000 person firm right now, which is crazy to think about, but it's true.

Speaker C: Yeah.

Speaker A: On a podcast that I've not yet released, I spoke to a firm who said similar. I challenged them because they were saying it's the best times being consulted consulting ever. And I was like, well, what about all of these challenges? And they're like, well, you know, we can be a, they were a 40 person firm and they were like, we can 10x our output. So there is this Ying and the yang. And that's why I feel like right now it's a really unique perspective. Joe, before we move on to the next sort of subject matter, next topic, have you got any follow up thoughts?

Speaker C: I mean, uh, sector is sector, uh, sector and leadership. I mean if, if you're doing, you know, if you're in a partnership, if you're in a large partnership and you're focused on, I know, public sector or you know, a low growth zone, you're stuffed. Uh, you know, you need to, you need to rapidly change your governance and really, really, really focus on your niche and the high value stuff. If You've got, you know, if you're in a limited company plc, um, and you um, and join, you know, AI implementation. You know, you've got to ride the waves. Yeah. Um, so you got to, you've got to choose to be in the right place and the boutiques can do that a lot faster than anyone else. So it's, it's hard, but you've gotta, you got to be uncomfortably narrow with what you do, as Christian said. Um, but you've got to ride the waves because there's so many whirlpools out there at the moment. Stretch the analogy.

Speaker A: I'm always here for analogies and I like that one a lot. We've had uh, doctors on, on the previous one and surgeons. So hopefully we get a different theme on the rest of the sessions. So let's move, let's move on to a little bit more of the how. Although to be fair, both of you have touched on it a little bit. Um, I guess the first point. So Christian, like, can boutiques and even without the bodies in the scale come after some of um, that mainstay the traditional big consulting work that maybe bought on relationship, trust or breadth. Um, is that possible? Is that where you're winning or not?

Speaker B: Yeah, I mean, you know, honestly we've, you know, we've. I'll, uh, go back to the ICP for a minute. You know, we, we've defined our icp, um, specifically to be mid market because those organizations for us in, in the US between 100 million and 10 billion in USD revenue, um, represent a really good opportunity space where um, they may not have internal AI, uh capabilities or they may not be a big incumbent within the organization like a deloitte or Accenture, etc. Um, and what we found is that uh, those clients that have worked with a large firm is really, they're really a great target for us because of the capability set that we bring to bear that some of those larger firms can't. So I think absolutely, um, the, you know, and I think the mechanism, and I don't want to talk about AI tools for the entire time, but really, you know, research that used to require 10 analysts can be done by one person with the right tools and document production, competitive analysis, financial modeling, like all of the production costs are compressed across the board. So a boutique team of eight, I think using AI tools can now compete and win scope that previously required 50 people to execute. So can boutiques come after the mainstay of uh, big consulting work? I think absolutely. And, and I don't think it's a future state like this is available today. Um, these tools are available today. The boutiques in this audience today who are aggressively adopting AI, ah, as an operational tool to create leverage, not as a service offering like we do, um, but uh, as a way that you run your business internally have a structural cost and capacity advantage over competitors who are not adopting those tools.

Speaker A: I think that's a great learning and one that just, in just general conversations I have both sides of the Atlantic, by the way, most firms uh, are looking at AI as like, how can we introduce a new AI service line? Whereas just thinking about how you can use it internally is such a big unlock. Joe. Ah, on that sort of like how topic, how boutiques are beating the bigger firms, obviously tech AI, if you've got some insights there, but equally if there's some insights on other areas that you know, you've observed. I know you're working with lots of, lots of sort of firms not just at the smaller end, but like are uh, on that more scale part of the journey.

Speaker C: Yeah, so, so we, so I run something called the Boutique Leaders Club where We've got around 40 CEOs or owners of boutique firms and we all share best practice and you know, have a good moan at each other and share assets and things and, and if I look at the ones there that are doing remarkably well that perhaps aren't driving as big a wave as say AI it's as we say, number one, those that are niche focused, um, number two, those that have built an internal development system for sales. So um, and they've exper, you know, marketing isn't something that you, you know what to do. You need to experiment. So you, in other words, you're going to be losing a bit of money when you start doing marketing properly. But eventually you get to a system that works and you get to a system for building competencies, sales competencies. There are other competencies that need to be developed, but the big one is sales. So if you can get away from that founder dependency and build a senior team that can sell automatically, you'll, you know, you're quadrupling say the number of people and then the amount of business development activity. If you add to that a marketing funnel that actually works and that's, that's hard. A lot of what happens with a lot of firms, they experiment with marketing, they get burned, it doesn't return. They spent 20 grand over three months. It hasn't worked. So they stop doing it. Instead of saying, we've learned some lessons about what doesn't work. Now let's experiment elsewhere about what might work. Because marketing done well and as a process of experimentation can work. So uh, you know, these traditional things around, you know, marketing and sales and focusing down on the right niche but you know, looking at your day rates and thinking you know, are we in? Are we. So you know, when you focus, everyone says niche but there's also bad niches. Yeah. So if you're solving a problem that a client can probably solve for themselves but doesn't have time or you're body shopping, you know, it's uh, unless it's tech and AI, um, it, it, it's not going to generate large, you know, day rates. So look at your day rates and if they're not where they should be, you know, maybe you need to focus in a hot, you know, ride a different wave, sharpen your proposition. Focus on problems that clients can't solve for themselves. The unknown unknowns, um, and some known unknowns, uh, and, and look at your strategy.

Speaker A: So before we move on to the final topic and the questions come in which plays to this, how boutiques winning it is directed at you Christian, but I would also like J's take on this Joe afterwards. Like are you open to sharing a little bit more about what's actually in your tech stack? And uh, I'm curious how he's narrowed it down. Was the follow up point to that then Joe, if you can give us some insights as well that'd be great.

Speaker B: Yeah, I'm happy to share what our tech stack is. We use um, Clay at the top of the funnel. Um, we use clay for, to define our total addressable market. We uh, use uh, it to and it's a wonderful tool. I think I spoke about it in the last time we got together Ben, but I can't, I can't say enough about it. Um, it's a data enrichment tool which is enabled by AI. So um, um you can automate a lot of um, top of the funnel activity. So Clay is at the top of the funnel. We use HubSpot, um for our CRM and HubSpot's implemented Breeze, uh, which is an AI conversational agent uh within the platform. That's pretty good things that, that in me and my role. If I go to HubSpot and I report out on our pipeline I'd have to do a lot of things manually and now I can just have a conversation and it creates charts and graphs for me which just saves a lot of time and increases the quality of my output. Um we have made a very concerted effort to um, adopt Fireflies as a meeting recording tool. And within Fireflies, um, I've actually built um, an AI skill or agent if you will. It's more of a skill than an agent, honestly. Um, um, but takes every sales call that we have with a client and it basically creates a sales scorecard for the client, partner or myself or whoever's on the call, um, to coach basically on what we did well according to our sales methodology and what we should be doing differently next time. And that has been a great unlock, um, Cause I agree with, with Joe, like one of the most important roles is sales, um, to keep the machine running. Um, but Fireflies has been, uh, brilliant in that regard. We use cmap, um, as our sort of operational backbone, um, which has added uh, great new AI functionality. Um, we just bumped up to the highest tier of access to CMAP most recently. Um, and it's you a photo of

Speaker C: Ben on every desktop, doesn't it?

Speaker A: Yeah, yeah.

Speaker B: He just pops up out of the, out of the blue like anywhere. He's like, hey, how's it going, Christian? Um, and then, and then probably the most important and last one and that I'll offer is, ah, Claude Cowork and I could go on for the rest of our time talking about the use cases that we within our, within our firm have implemented Claude Cowork to do. But I'll just, I'll frame up one, one sort of idea around this, right? If Cloud Cowork has immediate MCP connections to everything else that you're doing. So it's connected to my HubSpot, it's connected to uh, CMAP, it's connected to uh, fireflies. All the other tools that I just mentioned automatically connected. Um, so I can have a conversation with all of that context. So I can say how are people talking about Kung Fu? Or um, what are people disagreeing with in our new business meetings? Um, what's the top reason that clients don't move forward with us? And through a conversational AI, I'm actually having, asking those questions, but it's not giving me generic answers. It's actually taking Slack conversations, uh, email conversations, video meeting, uh, transcripts. And actually then I'm able to train it on what's important to me and it's giving me real live context and insight into the business. Um, and then we've got several skills or agents that we've built that run off every Monday morning. Um, so new contacts in our CRM, it goes, it throws those, takes those out Of I don't even touch it. I don't even touch it. By the way, it takes new contacts out of HubSpot, puts it into clay, enriches those contacts, puts it back into HubSpot for me and then sends me a slack for human in the loop to let me know new contacts have been added and enriched. I mean this is the state of the world today, which is I believe just incredibly fun. It's incredibly powerful. Um, it's taking a lot of the toil out of day to day work in running a boutique consulting firm yet also increasing the quality and impact that we have, which is super exciting. So I hope they answer your question. I know it was a little long, I apologize.

Speaker A: No, I loved it. The, the greater detail on these sorts of topics the better. People love to know like the numbers and they love to know like the tooling. I find that every session. So like all the high level stuff, really powerful but sometimes just getting deep into the weeds, there's some value unlocks there. Joe, what about from your side?

Speaker C: Um, so yeah, we used to co work and have automations built around it. Generally we're quite traditional. We put out a lot of what I would say high quality thought leadership research based around what drives equity value in boutique consulting firms. What actually works when it comes to growth. Uh, and we find that if we put that out we actually don't need to sell 100% of our one, uh, hundred percent of our revenue is inbound. Um, and some of that is referrals but a lot of it is just off thought leadership and LinkedIn. What I would say in my experience advising um, boutiques, um, just building on what Christian has said, there's obviously lots of. For every thing that Christian mentions, whether it's you know, finance or um, PSA or CRM or there's there's a whole load of alternatives when it comes to the psa. Obviously CMAP is, is the one that I, you know I, I genuinely recommend it because I've had the m best feedback about it. I'm not being paid for this by the way, although I'm open to offers. But the key thing is, is two, two things. One is matching your tech stack to your size. So I've seen small firms over build their tech stack. Cost them a fortune, need to cut it, whole load of problems, cash flow issues. Um, the second is integration. So the research shows that the more integrated your tech stack the higher growth that you have and the higher margins that you have. And there's obvious reasons for that. So you know it. I, I would say when you're building, it's better to do a little very well than a lot. And a lot can actually cause too many problems and you end up collapsing back in on yourself.

Speaker A: Yeah, that's the same with KPIs as well. Whenever we do like client sessions around what are the KPIs that you should obsess over? Uh, and then you present that list of 25 to a 20 person firm, they're like, whoa, this is overkill. And equally you speak to like a 200 person firm and they're tracking two. You're like, maybe we should throw some additional ones in there. Okay, so final point, talking, um, about the challenges for boutiques that they can capitalize on against some of the big fans. I guess flip it on its head. Like what are some of the weaknesses or some of the areas where boutiques maybe you don't feel can be the big firms? Like what are some of the places that they shouldn't play, if any, I

Speaker C: mean, if you don't mind. I mean the obvious one is internationalization. Uh, internationalization is incredibly, incredibly risky for boutiques. I've seen some, some 100 person firms actually, uh, have, who have internationalized quite well. But that's typically following very big clients who are prepared to chuck loads of money at them to keep them alive in those territories. Boutique firms, um, shouldn't underestimate the costs and risks of international expansion, especially into the States, because labor there is so much more expensive. So you need a wall chest behind you before you can do that. So I'd say that is one key area, um, where firms shouldn't overestimate what they can achieve.

Speaker B: Christian, I've got, yeah, I've got a few tactical things. As I was thinking about this, I think, you know, we, and this, this is really in the context of a 50 person firm like Kung Fu. You know, we start every new relationship really at a trust deficit. And what I mean by that is big firms carry pre established institutional trust. Like when McKinsey walks into a room, the credibility question is already answered. Right. Um, when a boutique walks in, it has to be earned. That credibility has to be earned from scratch every single time with every new client. And I think that's just to recognize that because it takes effort. Um, I think the other thing is talent. Ah, concentration is a legitimate concern. So you know, our boutiques, a boutique's greatest strength is a small, elite, highly specialized team. Right. It's also an operational risk for the client. You know, when our delivery Depends on one or two or three key people and one of them leaves or gets sick, you know, it's, it's, it can hurt the project and a client will feel it immediately. Where large firms have a much greater bench depth that, that boutiques do not. Um, and I think that we struggle with this third point as well is if we have a hard time at our scale and size, winning the one throat to choke deal so many large clients. That's why our ICP is sort of below enterprise enterprise, um, uh, level, um, because many of those clients want a single firm accountable for broad multifunctional scope. Finance, operations, technology, AI, supply chain, all under one engagement umbrella. And that's the big firm's natural habitat for 100 years. And boutique that is excellent and one or two domains can't serve that need. Um, and I think also pretending otherwise creates delivery risk that damages your reputation as a, as a boutique, you know, so I think, you know, the boutiques that scale with integrity are the ones who are disciplined about the deals that they'll walk away from and the deals that they pursue based on whatever rubric that you want to use, um, are the ones that are going to win. Because winning the wrong engagement, especially for a boutique, whether it's too, too large, the wrong client maturity, wrong buyer motivation, it costs, you know, us far more than losing it cleanly. Um, so I think, uh, I just want to focus on that. It's one thing that we try to maintain on a daily basis because there's a lot of opportunities to work, especially in the AI space and we've got to be really, really, really careful about the work that we take on.

Speaker A: Yeah, uh, I remember speaking to you even a couple of years ago when all the AI hype started to surface. And one of my primary thoughts was like, you must have to work really hard to differentiate those types of opportunities that you really want to, uh, work versus those that you know, because it was still in its infancy at that point and dare I say it still is. You know, I think everybody thinks AI is incredibly mature, but it was still. When you look at like those hype cycles and technology evolution waves, it's still. Actually we're still early. Last question for you both. You might not have your thought on this, but, uh, intrigued. So what weaknesses do you think either in the market structure or compared to big consultancies or just in terms of the opportunities that present themselves at the moment that you're seeing boutiques maybe aren't capturing, they're not making the most of. Like, is There any diamonds in the dirt? Is there anything that you would advocate people take a closer look at? And it might not be external, uh, it might be internal. But I'll leave that with you as a final question. Go on, Jack.

Speaker C: So, so I mean that there's a lot of things that most boutique owners and you know, it's hard running a boutique because you can't do everything. You need to work on two or three things a year. And any, you know, board advisor or strategy consultant that comes up with a list of 20 things for, uh, a boutique to do doesn't understand boutique leadership. You know, bandwidth is a real problem and budget is a real problem. You know, you might be bringing in 5 million, but that doesn't always mean you've got 20 EBITDA to splash around everywhere, especially in the, in the current environment. But I would go back to basics. You know, where are your sales coming from? Um, you know, I, I, you qualifying well enough is are your projects productized? Um, are you using fixed, I mean one of the biggest areas is pricing. Um, are you using fixed pricing or value based pricing or outcome based pricing? If you're not, you're probably leaving money on the table. There are some areas where time and materials are always going to be because that's what buyers are demanding. But most firms will say, when I mention this, they'll say, oh, well, we tried that a few years ago. Didn't really take, you know, we're not going to do it again. And you look at what they've done and very often they haven't, haven't done it in the right way, um, or they have, they've given up too soon or they, they've done it with a client they shouldn't have done it with. So, you know, going back to the basics, obviously, you know, we'd all like to be doing, you know, AI implementation or you know, um, cyber security, um, in a fast growing market. But if you're not, and most of us aren't sticking to the basics, um, and implementing them when, when you can, will lead to a better firm, higher margins and higher valuation.

Speaker A: Yeah, I like that, Christian.

Speaker B: I love that, Joe. I think the, the only thing, um, and I think value based pricing, which we didn't talk about a whole lot, um, is definitely the way to go, especially if you can, if you have a willingness to share risk. Um, you know, I've seen that clients want to see skin in the game. Um, you know, so that could be a, you know, pilot for structure, a fixed fee or a phase gate. Or fees partially tied to outcomes. And I think it's really hard for big firms to. To put skin in the game. Um, and, you know, I think the other thing is, um, the, the bait and switch. Ah, I've seen clients are really fatigued with the bait and switch. And what I mean by that is, and for a boutique, the opportunity, if I flip that is to give senior access throughout the entire engagement, not just the pitch.

Speaker A: Right.

Speaker B: This is the single most frequently cited differentiator when clients choose a boutique over a large firm is the person who sells the work should be on the work. Um, you know, big firms pitch a partner and staff the engagement with associates. Buyers know this now and they're increasingly explicit about it in their evaluation criteria. They want that expertise that was in the room for the first meeting. They want it to be. They want that person or those people to be in the room in the last meeting as well.

Speaker A: I didn't expect this to be one of the unintended consequences of the day, but every single session so far, there's been something relating to really senior people capably leveraging AI and technology and that being a huge part of the value. So when you see the crumbling of the pyramid and the disappearing of junior roles. Although it makes my heart sink a bit for those people who won't be able to get on the ladder, like as a model moving forwards. We had it in the first session with SBR Consulting where Danny said she's never worked so hard in her life, but AI was supposed to give her time back. We had superstep private equity guy telling us about, like that piece. You guys are saying it. There's a thread and I m feel like that's the thing that's come out quite strongly so far. Joe, Christian, as always, like, unbelievable to get your perspectives and insight. Loads of comments in the chat. Loads of, loads of people saying thanks as well. So it's genuinely appreciated. Any final words from you both? If not, I'll let you guys drop.

Speaker C: It's been a hot. I've gone all blurry, but it's been a hard few years. Um, and these years, for those of you that haven't, you know, studied the history of consulting, we're not going to go back to the old normal, but we will be going back eventually to a new normal where growth is more solid. So if you're, if you're having your doubts, stick it out if you can.

Speaker A: We need that sometimes. Joe. Yeah, yeah.

Speaker C: Good luck, everyone.

Speaker A: Thanks, Joe. Thank you, Christian.

Speaker C: Bye bye.