7 Problem solving and capacity building

At some point the analysis must end, and when that end is reached, clients expect out-
puts. In Chapter 2 we saw two types of client demand, ‘pure’ problem solving in which
the consultant plays a technician role and comes in to solve a particular problem, and
capacity building, where clients want to develop their own capabilities and learn to solve
problems for themselves.
In reality, of course, there is a great deal of overlap between capacity building and
problem solving, just as there is – or should be – a great deal of overlap between
problem solving and analysis. The discussion in this chapter and the previous one is
therefore somewhat artificial. What we are doing here is picking the consultancy process
apart in order to examine its parts in more detail; but it must always be remembered that
consultancy is a whole in which process and relationships, analysis and problem solving
should ideally all happen together in a homogeneous way.

Problem solving
In the previous chapter, in the sections on analysing problems and analysing potential
solutions, we talked about the process of analysing information and creating a menu of
possible solutions. What we did not discuss is how we assess the problem in order to
come up with realistic solutions. How do we arrive at a solution to the problem, i.e.
what needs to be done to resolve the problem or make it go away? And how, among the
multitude of potential options for action, do we pick the ones that seem to make most
sense? How do we make the decision as to which options we will recommend to the
client? And then, as consultants how can we best assist the client to make the final
Copyright © 2015. Taylor & Francis Group. All rights reserved.

decision as to how to proceed?

First and foremost, good consultants rely once again on experience and common
sense. They have a ‘nose’ for the best solutions and the best options for actions. They do
not take their instincts for granted; they stop, they think and if necessary they analyse
further before making their final recommendations. But experience is the most valuable
asset a client can bring to bear on problem solving and decision making. (In strict
philosophical terms, problem solving and decision making are two separate concepts, but
for simplicity’s sake I am treating them here as the same thing; problem solving involves
making a decision as to how best to solve the problem.) Younger consultants who lack
experience should watch and listen to their more experienced colleagues carefully and
learn from them.
However, there are also tools that can aid in problem solving. Indeed, there is no
shortage of problem-solving frameworks. Many consultancies offer their own

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 Problem solving and capacity building 87
frameworks, and many companies have also developed their own problem-solving
frameworks. The problem with the vast majority, however, is that they concentrate on
problem identification and analysis, and are very vague as to how problems get solved
and decisions get made. The famous Eight Disciplines or 8Ds model, developed at Ford
Motors to resolve production problems, is a good example of this:

Ford 8Ds model

1 form a team
2 describe the problem
3 develop an interim containment plan to isolate the problem and prevent it
spreading
4 determine and verify the root causes of the problem
5 verify permanent corrections that will resolve the problem
6 define and implement corrective actions
7 prevent recurrence
8 recognise the efforts of the team and thank them.

The most critical steps are arguably 5 and 6, because these are the action elements of
the process; here is where we make our decisions and take action. But how are we to do
this? What determines our selection of corrections or actions?
Sometimes the answer will appear to be obvious, and then there would seem to be
little reason for long deliberations. In other cases, though, the problem will be complex
and the solution may need to be equally complex; and even in the first instance, the key
word is ‘appear’. Sometimes the apparently obvious solution is not always the right one.
As we saw earlier, apparent problems may mask real ones, and the same is true too of
solutions.
So, consultants do need some tools to help them check that their decision is the right
one. Let us take a look at a few problem-solving frameworks and test their utility. I have
selected just seven, but a little research will uncover many more, some of them variants
on the themes given below (Flood and Jackson [1991] and Weiss [2011] are good places
to start looking).

Problem-solving tools
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Weighted options
This is sometimes known as the RAND model or the Kepner-Tregoe model, but in fact
versions of this technique have been in use for many decades, probably centuries. This
assumes that the analysis process, if not complete, has identified the key problems and
reached a point where options are beginning to emerge. Using the weighted options
model, the consultant first lists the key issues that will be involved in implementing
any solution. These could include affordability, complexity, ease of implementation,
management time and effort required to implement, impact (see Chapter 8), congruence
with the client’s stated needs and expectations, and so on. Each option is then tested by
scoring on a scale of 1–10, with 1 representing unfavourable and 10 representing
favourable. If more than one option at a time is being considered, a matrix can be created,
for example:

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 88 What consultants do
Table 7.1 Weighted Options Matrix
Option 1 Option 2 Option 3 Option 4
Affordability 5 3 6 5
Complexity 7 7 7 4
Ease of implementation 2 7 8 4
Management time required 3 4 8 5
Congruence 7 6 3 6
Impact 8 7 3 7
Total 32 34 35 31

In theory, the best option is the one with the highest score, i.e. the most favourable factors.
But, take a look again at the table. Option 3 scores highest, thanks to its ease of imple-
mentation and the fact that little management time will be required to implement. But it has
the lowest score of all for congruence and impact. Is this necessarily a solution the consultant
wants to recommend? Won’t the client see this as an easy option, perhaps even a lazy option?
There are two problems with the weighted options model. First, the weights assigned
to each factor are necessarily subjective. The team can try to eliminate this subjectivity as
far as possible by discussing each factor and each weight in detail, but an element of
subjectivity will always remain. And second, as we have just seen, an apparently high
score can be undermined by weaknesses in key areas.
Sometimes, though, the value of the weighted options model is that it exposes what
should not be done. In this sense, it is a little like flipping a coin to choose between
options. If we flip a coin and are satisfied with the result, then that probably is the right
option. But if we flip a coin and the result makes us uneasy, feeling that we wish we had
taken the other option, then that is a signal telling us that we now know which option
we should have chosen. The right course of action is to ignore the coin toss and do what
we should have done at the beginning.
Scoring the weighted options can also expose flaws in our earlier analysis, as we suddenly
realise we do not have enough information to go on to make an informed decision. It can
expose weaknesses in our thinking, but equally it can also highlight strengths. This can be a
very useful aid to decision making, so long as we don’t let it rule our thinking completely.
Experience and common sense, once again, should always trump the score on the matrix.
Copyright © 2015. Taylor & Francis Group. All rights reserved.

Trial and error

Trial and error, or the suck-it-and-see method, is another long-established tool for pro-
blem solving. The reasoning is that because we cannot know the future, the only way to
establish for certain whether something will work is to try it. Rather than run the risks of
implementing a full-scale solution, consultants will sometimes try a pilot study and
observe the results, using the PDCA (Plan, Do, Check, Adjust) method. The pilot needs
to be designed carefully so that, if failure occurs, there will not be spillover consequences
for the rest of the client organisation.
There are disadvantages to this method. Even a limited-scale pilot project may be
costly; more importantly, there often is not enough time in the tightly compressed
schedule of a consultancy engagement to run a pilot and observe the results. Some

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 Problem solving and capacity building 89
consultants do not like pilot projects, believing that even a limited small-scale failure will
reflect badly on their own reputation. Nor does the success – or failure – of a pilot
project necessarily mean that the same result will be achieved when the concept is rolled
out on a larger scale.
However, pilot projects, properly designed and monitored, will give a great deal of
experimental data which can be applied to refining the solution, and experience of
running a programme in something like real-life conditions, more real than the slightly
artificial world of boardroom and meeting room. Pilot projects are a good idea, but only
if there is time and resources to run them and monitor them properly.

Abstraction
Unlike pilot projects which involve testing solutions in real-life conditions, abstraction refers
to the creation of an artificial model in which the solution can be tested and checked before it
is applied. Modelling requires the creation of an artificial environment in which an abstracted
version of the solution is run and its performance observed. Most of this kind of modelling
involves computer simulation, and can be highly complex, especially when large-scale
corporate strategies or reorganisations or global product launches are being considered.
There are specialist agencies which do nothing but build and run bespoke models;
there are also generic models which can be applied to a wide variety of circumstances.
Those consultancy firms with the time and resources to do so will often develop models
of their own; this again demonstrates professional competence and is an important part of
establishing reputation and competitive advantage.
The disadvantages of modelling are several. First, unless the consultants already have
appropriate models to hand, building and designing models is time-consuming and
expensive; and even with pre-existing models, running them for long enough in order to
test all possible options can take a long time. Second, the principle of garbage in, garbage
out (GIGO) means the outcome of any modelling exercise is only as good as the model
itself. Flawed models will produce misleading results. Consultants must therefore take
steps to verify the accuracy of any model that is suggested for use, and this too can take
time and requires technical expertise.
Finally, it is often assumed that well-designed models will provide wholly accurate
results and can predict future performance. Where a closed system is being modelled –
that is, where the environment is limited, all known factors can be included in the model
and there is no chance of new or unexpected factors being introduced, this is true. But in
Copyright © 2015. Taylor & Francis Group. All rights reserved.

open systems, where the presence of new or undiscovered variables is always a risk, there
can be no certainty in modelling (LeShan and Margenau 1982). This is not to say that
models of open systems should never be used. But, if they are used, the margin for error
should be noted and, if possible, calculated and applied to any results.
Models, properly employed, can however give a great deal of useful data, and rather
like trial and error, these data can be used to refine and hone conclusions. A good model,
properly employed, will enhance the consultancy team’s knowledge and help identify
which options are most likely to work and which can be discarded.

Reduction
In the reduction method, consultants will try to simplify a problem and reduce it to a
few key elements. They then compare this much simplified problem to other similar

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 90 What consultants do
problems and create a generic problem. For example, the failure of a new brand to
make impact can be compared in its simplest form to other brand failures and thus a
generic problem, ‘failed brands’. Next, the consultants look at generic solutions to the
generic problem. What are the usual generic solutions to the problem of failed brands?
The usual options are: drop the brand entirely, re-launch it with different features to
the same market, or re-launch it with the same features to different markets. Now the
generic solutions are applied to the present day problem. The client’s brand managers
have the same three options: the consultancy team’s task now is to identify what
changes could be made to the brand in order to follow the second option, identify
what key markets could be developed for the third option, and the costs, risks and
returns of all three.
One reduction method is TRIZ, originally developed in Russia and now widely used
in Europe (Barry et al. 1996). TRIZ uses a fairly simple process of abstraction and con-
cretization to get at the fundamentals of problems and then build up solutions from
fundamentals too. The processes of abstraction and concretization effectively eliminate all
non-workable solutions and leave us focused on those key fundamentals.
The main criticism of TRIZ and other reduction methodologies is that they can be too
reductive and reduce problems to such an abstract level that they are no longer mean-
ingful. This in turns means that the range of solutions reached will not necessarily be
appropriate to the specific problem of the company. On the other hand, reduction is
quick, easy and cheap to do, and can usually be performed by a team brainstorming
around a table. Reduction is very useful for helping teams to focus on fundamentals, but
on its own is probably not precise enough for advanced decision making and should be
used in conjunction with other tools and methodologies.

Analogy
Analogy is a philosophically complex and diverse concept, and I have simplified it greatly
here (see Holyoak and Thagard [1995] and Keane [1997] for more details). Analogy
means comparing a thing to something else like it in order to generate ideas. For
example, consider the following proposition: heat is to fire as cold is to ____. There are
several possible responses to this, including ice, frost, snow and so on, but all these are
elemental things that have cold as a property.
An example of analogical reason in business problem identification might go something
like this:
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Our client, ABC Logistics, is considering entering the Japanese market. The client’s
chief rival, XYZ Logistics, tried to enter the Japanese market last year, and
encountered severe resistance from Japanese businesses who were unwilling to deal
with a foreign logistics company. Therefore, if ABC Logistics tries to enter the
Japanese market, it will _______.

In terms of solutions, the reasoning might go something like this:

To get over the problem of cultural resistance, XYZ bought a Japanese logistics firm
and left its senior Japanese management team in place, reasoning that they would
know and understand the market. Another company, LMN Logistics, has just
established a subsidiary in Japan but hired several top managers from Japanese

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 Problem solving and capacity building 91
competitors. A third company, PQR Logistics, decided the market was too difficult
and chose not to enter Japan at all.

Thus by comparing like with like, we come up with three possible solutions, all of
which have been tried by other firms. This is a very simple example, and analogies have
a tendency to become rather more complex very quickly, but the principle should
be clear.
Analogous reasoning is not relevant to every situation; there may be no clear-cut
analogy, and the consultants might then be in danger of forcing the situation, looking for
an analogy when none is there. More seriously, there is within analogous reasoning the
fallacy that just because a thing worked once, it will work a second time. It is possible
that it will; it may even indeed be likely that it will, but there is no certainty. All sorts of
intervening variables may lead to a different result. The best way of using analogous
reasoning is as given in the example above, to generate a range of possibilities. Each
possibility then needs to be examined and several questions asked:

 Why did this analogous example happen as it did or come to exist as it has?
 What are the key factors that make this an analogy?
 What are the differences that set our own situation apart from this analogy?
 What impact might those differences have on the outcome in our case?

Within limits, analogous reasoning can help spur creative thinking and choice, but like
all the methods discussed here it should be used with care.

Hypothesis testing
In this method, each solution that was identified by analysis is then treated as a hypothesis
and tested. The question asked of each hypothesis is:

Can this be proven?

To prove the hypothesis, the consultants will then need to go back to the data and
analysis and examine the reasons why they came up with this hypothesis in the first
place. Supporting arguments will need to be marshalled and examined rather after the
manner of lawyers presenting a case in court. For example:
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Our client, RCM, is considering developing a second production facility. Our analysis
suggested factor conditions that would make Turkey a possible base for this facility, as
costs are low and the return on investment would be good.

Turn this into a hypothesis and you have:

An investment in a production facility in Turkey would yield a strong return on

investment.

The next step is to analyse all the data that have been gathered so far. Can it be proven
beyond doubt that there would be a strong return on investment? Probably not, so the
next step is to ask:

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 92 What consultants do
How confident are we that an investment in Turkey would yield a strong return?
Confidence can be expressed in some sort of ratio or percentage, or perhaps simply
categorised as high, medium or low.
The main weaknesses of hypothesis testing are two. First, hypotheses are by their very
nature not real; there is none of the real life experience one would get from running a
pilot, and how thoroughly and well the hypothesis is tested depends entirely on the skill
and experience of the consultants doing the testing and whether they know to ask the
right questions. Second, people tend to become attached to hypotheses they themselves
have created, and there is a stronger than usual risk of bias creeping in (see later). The
advantages of hypothesis testing are once again that it is relatively quick and requires few
resources; the consultancy team can brainstorm a test around a table or online without
much effort or investment being required. Hypothesis testing also requires the team to
look again at the gathered data, and may expose inaccuracies or holes in the data that
need to be plugged.

Disproof
This is the opposite of hypothesis testing, where instead of proving a hypothesis, the
team creates a hypothesis and then asks:

Can this be disproven?

The same method as above is followed: the evidence and data are examined, but this
time with a view to disproving the hypothesis. Therefore in the example given above,
the statement that:

An investment in a production facility in Turkey would yield a strong return on

investment.

would be considered incorrect and the team would attempt to prove that position. Once
again, it is likely that there would be no absolute proof that this statement was incorrect,
and the team would have to state their level of confidence. The disproof method forces
teams to look at negative factors and therefore should in theory reduce the level of bias;
so long as the team is honest in its assessment and considers all the evidence fairly.
Copyright © 2015. Taylor & Francis Group. All rights reserved.

Which method to choose?

The choice of methods, either those discussed above or other bespoke methods of pro-
blem solving, must depend on the situation, the client and the nature of the engagement.
All seven of the problem-solving methods discussed above have their strengths, but all
seven all have their weaknesses and not all will be usable or applicable in every situation.
Generally speaking, it is best to use more than one method, preferably two, three or
even four. Apply each in turn, then compare the results. If the results are broadly similar,
there is an excellent chance that, if the team has avoided bias, it has come to a sound
conclusion. If the results show significant variance, then the team needs to look again.
Perhaps there are faults in the quantitative or qualitative data; perhaps one or more of the
methods chosen was not appropriate to this situation; perhaps one or more of the
methods has been misapplied or mishandled. The consultancy team needs to try to

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 Problem solving and capacity building 93
isolate the reasons for the variance, and then conduct the exercise again, using different
methods if needed.

Bias in problem solving

Complete objectivity in problem solving and decision making is impossible, and even the
best consultants will admit that they suffer from bias in their decision making. There is
nothing wrong with this, so long as we are aware of the potential for bias and are willing
to admit it and to correct the bias we observe in ourselves and others. Here are some of
the most common forms of bias that affect the work of consultants:

 Cognitive inertia. Teams have already developed a set way of looking at the world
and doing things, and are unwilling or unable to change or compromise. It is
important to mix teams up and bring in fresh faces and fresh ideas at intervals, to
prevent cognitive inertia from setting in.
 Groupthink. This refers to the tendency of stronger members of groups to influence
weaker members to see their point of view, or at least, to refrain from expressing
their own point of view. The resulting decisions therefore reflect the views of those
stronger members, rather than the group as a whole.
 Prospect theory. Put simply, prospect theory holds that we are more likely to take risks
if presented with a threat, and less likely to do so if there is a prospect of gain (there
are arguments to the contrary, of course). In consultancy, this could lead to teams
steering towards more risky options to ward off threats, but being more conservative
in order to protect gains. There will be times when either is the right course; there
will also be times when the opposite is necessary.
 Role bias. Teams may find themselves putting more weight on information derived
from senior levels in the client firm, on the grounds that senior people must know
more and their information must be more accurate. Contradictory information from
more junior levels will be discounted accordingly. This bias must be corrected, and
all information evaluated equally in terms of credibility and importance. CEOs have
no monopoly of truth.
 Selective use of evidence. We all have opinions about things we see around us, often
reached before we have assessed the situation. It is easy for a team, consciously or
unconsciously, to form judgements and reach conclusions before the analysis begins.
When this happens, team members are likely to focus their search by looking for
Copyright © 2015. Taylor & Francis Group. All rights reserved.

evidence that supports these judgements and conclusions, and ignore or bury
evidence to the contrary. This results in a skewed set of data and evidence and a
higher risk of reaching a bad decision.
 Source credibility bias. A dislike or distrust of the source often leads people to discard
data and information which are, in fact, both valid and important. While the credibility
of any source always needs to be assessed, dislike and other personal feelings about a
source must be eliminated. On the other hand, people tend to pay more attention
to data and information from a source they do like, regardless of its accuracy or
value. This bias too needs to be corrected.
 Taking the first alternative. Rather than exhaustively pursuing all lines of inquiry, the
team will fasten on the first likely looking alternative and then look for evidence to
support that, rather than considering all alternatives. This is a particularly common
bias when teams are working under tight time pressure.

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 94 What consultants do
 Time bias, or listening to the last thing one heard. People tend to pay more attention
to things they have heard or read yesterday than things that were heard or read
several months ago. This can lead to older but more important information and data
getting laid aside or lost. Related to time bias is repetition bias, whereby we pay more
attention to the things we have heard or read most often.
 Wishful thinking. Rather than looking for the best available alternative, the team goes
off at a tangent and pursues the best alternative in a perfect world, the alternative
they would like to see rather than ones that are likely to happen. This means that
more realistic options can be sidelined. Similar to this is choice-supportive bias, where
people unconsciously make their preferred alternative better than it really is, while
simultaneously playing up the weak elements of other alternatives.

Capacity building
Capacity building, the other outcome of management consultancy, is less fraught with
difficulty and risks in terms of decision making and option choice, but is arguably more
risky in terms of implementation.
Client organisations that need capacity building will sometimes already have a fair idea
of what capacity they lack and where more is needed, rather like the patient telling the
doctor the diagnosis. In other cases, however, the consultant will uncover instances of
lack of capacity, and in some cases these could threaten the viability of any proposed
solution to the client’s problem. We saw in Chapter 6 the example of a transport company
which failed after accepting consultants’ recommendation of a strategy of acquisitions.
What the consultants did not realise was that the company’s financial situation and
management systems would not support that strategy. Had they known this, they would
have either put forward a different strategy or recommended building capacity to support
the strategy that was ultimately chosen.
What do we mean by capacity? Earlier, in Chapter 2, we talked of capacity in terms of
reducing barriers to growth and enabling companies to meet their goals. Essentially,
capacity takes one of three forms:

1 systems capacity
2 knowledge capacity
3 people capacity.
Copyright © 2015. Taylor & Francis Group. All rights reserved.

Systems capacity
Systems capacity can mean a variety of things:

 production systems for making and creating products and services

 technology used either for production or for transmission of information and
knowledge
 organisational systems and structures which determine how the organisation functions
and channels of reporting and control
 information and communications systems which enable parts of the organisation to
talk to each other and share knowledge
 sales and marketing systems, or outbound logistics, which enable delivery of products
and services to customers

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 Problem solving and capacity building 95
 innovation systems which enable companies to create and develop new products and
services
 financial systems which enable financial management, reporting, control, budgets
and the like
 management systems, or in other words, the processes by which the company is
managed and led, and decisions made and implemented.

This latter is often overlooked. As Kemp et al. (2013) point out, companies will spend
millions investing in production systems, software and so on, but rarely give much
thought to the systems by which the company is managed. This can result in management in
different parts of the company managing in entirely different ways, using different methods
of reporting and control, different budgeting processes, even different language to
describe the same things. This can make central coordination of the business difficult, if
not impossible.
Lack of capacity in any of these systems can hamper a company’s efforts to reach its
goals. Poor production systems can result in lack of quality, slow delivery, inefficiency
and lost time. Poor communications systems mean parts of the company do not talk to
each other and there is a loss of focus. Poor financial systems can result in weak cashflow,
inadequate due diligence on investments, and even open the door to the prospect of
embezzlement and fraud. All of these systems must be working well if a company is to
function effectively.
How can consultants add systems capacity? One thing that consultants become very
good at is systems design. Experienced consultants are familiar with a wide range of sys-
tems across different companies and different industries. They know what works well,
and what is less than optimal. They can spot bottlenecks and weak points and have the
knowledge to work out how to re-engineer systems to make them more efficient and
effective: efficient in that they run smoothly with low costs and minimal wastes, effective
in that they deliver what the customer and the organisation need, on time and on target.
Developing systems capacity, then, begins with analysis of existing systems. The consultant
will usually have in his or her mind a picture of an optimal system of this type. How does the
current system compare? Using the analytical and problem-solving techniques already dis-
cussed, the consultant looks for those bottlenecks and weak points and gaps, and then designs
or re-designs a system which can get the job done efficiently and effectively.
As with other problem solving, this design process should be undertaken in conjunction
with the client, who should be fully engaged in the process. Experience shows that pre-
Copyright © 2015. Taylor & Francis Group. All rights reserved.

senting clients with fait accompli solutions is risky. The client may not like the system, may
not understand it, or both. Getting clients involved early on means there is a much greater
chance that the client will be committed to the system and will make it work. Where
possible or desirable, alternative system designs should be considered and the best option
chosen. Opinion is then divided as to whether clients should be left to implement the
system on their own, the consultant sticking to the role of advisor, or the consultant should
also assist with the implementation process; but today, more and more consultancy firms
are getting involved with implementation, even if only at the early stage.

Knowledge capacity
Knowledge capacity refers to the ability of organisations to create, assimilate and use
knowledge in an effective manner. De Geus (1988) argued that the only form of

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 96 What consultants do
sustainable competitive advantage open to companies is their ability to learn faster than
their competitors, and de Geus (1997), Senge (1990) and Nonaka and Takeuchi (1995)
all described systems and structures for creating ‘knowledge organisations’ or ‘learning
organisations’, organisations capable of quickly absorbing and embedding new knowledge.
Note that knowledge capacity is not just a matter of innovation; that is only part of the
picture. Successful companies learn from a variety of sources including the environment
and the competition as well as creating knowledge internally.
Another important point to make concerning knowledge is the difference between
explicit knowledge – knowledge that can be easily codified, transmitted and shared – and
tacit knowledge, which is locked up inside companies or people because they find it hard
to express what they know or how they know it. For example, a football player may
know how and when to pass the ball to a team-mate to set up a chance of scoring a goal,
but when asked to explain exactly how he knows the right moment to make the pass, he
might struggle to explain. A painter knows exactly what pigment to use and what
brushstroke to apply, but she may well have difficulty explaining her technique to
another person, especially someone who is not a painter. Nonaka and Takeuchi (1995)
argue that the staff and management of any company represent a huge untapped reservoir
of tacit knowledge, and one of the tasks of management is to help people to make
explicit and share the many things that they often only half-consciously know.
Knowledge is essential to organisations (Witzel 2015), and lack of knowledge is one of
the main things that holds them back. Companies need knowledge in a variety of
dimensions: knowledge of markets, knowledge of suppliers, knowledge of financial risks
and opportunities, knowledge of the best and most efficient methods of production,
knowledge of new technology, knowledge of how to manage people; the list could go
on forever. If they lack knowledge in a key dimension, then decision making becomes
more risky. Companies either make bad decisions through lack of knowledge, or they
become afraid of the consequences of making decisions without knowledge and do
nothing. Let us look again at the list of reasons why companies engage consultants from
Chapter 5:

1 identifying and solving problems

2 gaining a fresh and objective perspective
3 the need to be challenged and stretched
4 access to specific expertise
5 seeking to benchmark or learn about best practice
Copyright © 2015. Taylor & Francis Group. All rights reserved.

6 access to more and better analysis

7 supplementing existing staff
8 training.

The need for knowledge is implicit, to a greater or lesser degree, in every one of those
eight reasons.
Consultants are a powerful source of knowledge capacity precisely because management
consultancy firms are true knowledge organisations in every sense. The average con-
sultant probably knows no more than the average client (though as we said earlier, he or
she will know things the client does not know, and vice versa). It is not how much they
know that sets consultants apart, but their capacity for learning and developing knowledge.
Consultancy firms know the truth of de Geus’s statement that the only sustainable form
of competitive advantage is the ability to learn, and any consultancy firm that stops

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 Problem solving and capacity building 97
learning will not last for very long. Consultants don’t just use knowledge; they think
about knowledge, sources of knowledge, where and how to get more knowledge, all the
time. It is a constant part of their work, and if they slip up in this area, they will start to
fall behind. It is this thinking about knowledge and capacity for learning that consultants
can pass on to clients, and it is far more important and valuable than knowledge itself.
How can consultants provide knowledge capacity? There are three principal ways.
The first is direct knowledge transfer: the consultant in effect ‘teaches’ the client what he or
she knows, through problem solving, provision of specific expertise or analysis, or training.
This provides raw knowledge, but it also builds capacity: cognitive scientists tell us that
the more we know, the easier we find it to learn, and so increasing the stocks of
knowledge in a company should also improve its learning capacity.
The second we can call learning by osmosis. If consultants and managers from the client
organisation work closely together and the latter are involved in analysis and decision
making, they will get used to the consultant’s ways of working and will begin to
adopt these methods themselves. Managers who work with consultants for long periods
will tend to pick up the routines and ways of thinking of the consultants, often
unconsciously.
Third, there is co-created learning and capacity building through dialogue and discussion.
Talking with consultants and sharing information with them helps clients to become
familiar with new concepts, including new concepts of knowledge management and
learning. They do not so much learn directly from the consultants, but rather the inter-
action sparks off learning and thinking processes in the client managers that gets them
used to engaging in knowledge and learning in different ways.
There will always be finite limits to what consultants can do in terms of knowledge
capacity building, and it is important for consultants to realise this from the beginning
and managing expectations. Above all, never, ever should consultants go into a client
organisation pretending to know more than the client, or assuming the pose of teacher
or wise guru. This puts the client in an inferior position, which can lead to humiliation
and resentment on the part of the latter. ‘Stuck-up consultants who think they know
everything’ will struggle to achieve impact. The best course is ‘confident humility’; be
confident in what you do know, admit candidly what you don’t know, and be prepared
to embark on a learning journey with the client, rather than lecturing to them.

People capacity
Copyright © 2015. Taylor & Francis Group. All rights reserved.

People capacity means having the right people in the right places to enable the organisation
to carry out its mission and achieve its goals. It is an area where businesses often struggle,
particularly when growing rapidly or embarking on a radical change in strategy such as
expansion overseas or moving into entirely new product/service markets. Having the
‘right people’ in turn means not only people with the skills and competencies to carry
out their jobs but, at senior levels in particular, the vision and understanding to design,
develop and execute ambitious strategies in a realistic way. Without the right people in
the right posts, without the right mix of skills and vision, companies will at best struggle
to reach their goals and will at worse flounder and fail.
Consultants can again add people capacity in one of three ways. The first is through
direct substitution. Here, a consultant is seconded to a client company for a period of time
to provide skills and competencies currently lacking. Not every consultancy firm is happy
doing this, as they fear compromising their independence; others see this as an essential

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 98 What consultants do
part of client support, especially for young, rapidly growing companies where the
management team has enthusiasm and drive but lacks essential experience.
Direct substitution is usually seen as a short-term solution; while in the seconded post,
the consultant should also employ mentoring and coaching and develop enabling systems to
ensure the capacity building is permanent. Of course, sometimes the client firm makes
the consultant an attractive offer and he or she leaves the consultancy and joins the client
company, thus making the substitution permanent after all.
The second method is mentoring and coaching. This typically happens at quite a high
level in the client organisation, at board or just below, but there is no reason why this
cannot go on at any level. Here, consultants pass on knowledge and skills they have
received, but they also use mentoring and coaching techniques to help client managers
become more reflective, improve their analytical skills, learn to focus on core issues, and
above all else, become more confident and more willing to take responsibility and accept
justifiable risk. Familiarity with mentoring and coaching skills is increasingly becoming
part of the consultant’s basic toolbox.
Finally, consultants can help to create enabling systems and structures that will help client
executives and managers do their jobs better. Something as simple as a good manage-
ment information system, or a more clear and less cluttered line of communication
between key people, can give managers access to more and better information and
improve their confidence in decision making. A common problem among high-growth
companies is that growth in management structures fails to keep pace with the expan-
sion of the rest of the business, so that senior managers and executives are in effect
working below their pay grade. Structural reforms such as bringing in new managerial
posts to support the executive can free up time for consideration of bigger issues such
as strategy.
This brings us with nice circularity back to systems capacity, and the final point to be
made here is that capacity building is seldom a matter of choosing between one of three
options. True capacity building usually requires attention to all three areas, systems,
knowledge and people. After all, within organisations, all three are closely interlocked; it
follows that any capacity-building measures must reflect this.

Chapter summary
We started this chapter by looking at problem solving and considered a variety of
problem-solving tools, how they work and some of their strengths and weaknesses. We
Copyright © 2015. Taylor & Francis Group. All rights reserved.

looked at problem-solving biases, and underlined the importance of being aware of these
biases and looking out for them in one’s own thinking. We then moved on to capacity
building and looked at how capacity can be built in three key areas, systems, knowledge
and people.
There is of course a danger in reducing either problem solving or capacity building to
step-by-step processes (and of course, we must never get that in many consultancy
engagements, problem solving and capacity building happen at one and the same time).
Every engagement is different, every client is different, every problem is different. We
look for similarities and analogies because they help us to understand and make sense of
what we see, but we must never forget the unique nature of consultancy engagements.
Consultants need be prepared to mix and match their tools, picking the right ones for
the right engagement. If they get the mix right, then they should be able to have impact;
and that is the subject of the next chapter.

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 Problem solving and capacity building 99

Student exercise
Go back and examine the seven problem-solving methods described above:

1 weighted options
2 trial and error
3 abstraction
4 reduction
5 analogy
6 hypothesis testing
7 disproof.

Consider them carefully, and then answer the following questions:

What are the strengths and weaknesses of each of the seven? In what sorts of
situations would you employ each, and in what sorts of situations would each not be
suitable?
Which of the seven will be most prone to bias? From the section on bias in problem
solving, work out what kinds of bias will affect them, and why.

Student exercise
In Chapter 2, we discussed five areas where companies feel it is particularly important
to build capacity:

 strategic thinking
 risk thinking
 resilience
 international experience
 sustainability.

In each case, consider the kinds of capacity needs a growing company might have.
What elements of systems, knowledge and people would each company need? How
do you think you, as a consultant, could go about providing these?
Copyright © 2015. Taylor & Francis Group. All rights reserved.

Case study: Samaya

Samaya is a watch manufacturer located in the Indian city of Bangalore. It is one of the
largest branded watch makers in India, its main rival being Titan. Samaya was founded
five years ago and quickly made a name for itself with ranges of watches for both men
and women that were stylish and reliable. Although watch purchases worldwide have
declined thanks to the introduction of smartphones and other devices, Samaya has
bucked the trend and seen its sales rise steadily.

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 100 What consultants do
Market research suggests people buy Samaya watches as style accessories rather
than as time-keeping devices, and on the back of this Samaya has also branched out
into jewellery, hair accessories for women, and most recently a highly successful
cosmetics range. The company is considering a move into fashion footwear, but has
not yet made a decision on this. At the moment, watch sales still account for 92 per
cent of turnover, but the other ranges have grown very quickly since their launch and
the Samaya board believes there is clear potential.
Turnover last year was $332 million, with about 11 per cent of income derived from
exports. The level of exports has also been rising steadily, mostly to Pakistan, Sri
Lanka, the Gulf States and Southeast Asia, but Samaya has also had inquiries from
importers in the UK, France and the USA. The company also believes its products
would do well in Japan, as many middle-class Japanese are quite fashion-conscious.
Samaya’s board have made international expansion a priority, as its products sell for
higher prices than in the Indian market.
Preliminary analysis carried out by a team of consultants from your firm suggested a
number of strategic options. Samaya’s board has chosen to focus on four of these in
particular:

 buying an established fashion footwear manufacturer in either the UK or USA and

then using this company and its products as a channel for distributing other
products made in India.
 concentrating on establishing a watch market overseas, and setting up a
production facility in either Europe or the UK.
 adopting a purely export strategy but concentrating on watches for the moment,
where the company has a proven competence.
 adopting a purely export strategy but focusing on cosmetics and accessories,
using these to establish brand presence before developing the watch market.

Based on what you have read here, how would you use each of the problem-solving
methods discussed above? What results might you expect from each? What problems
might you encounter in using them? What problem-solving biases will you need to be
aware of?
Copyright © 2015. Taylor & Francis Group. All rights reserved.

Case study: Nordanvind Hotels

Nordanvind Hotels was founded in Sweden in 1912. Its first ski resort, Nordanvind,
was a luxury hotel favoured by the rich and famous across northern Europe. Expan-
sion did not begin until the 1970s when the third generation of the owning family,
seeing the increase in air travel and package holidays, began buying other hotels
across Scandinavia. Today the company owns fourteen hotels in Norway, Sweden and
Denmark, a combination of ski resorts, summer resorts and year-round hotels, and is
about to conclude the purchase of a spa hotel in Iceland.
Nordanvind is now interested in expanding further, and has possible acquisitions
planned for the Canadian Rockies, the Adirondack Mountains in New York, the Andes
in southern Chile, the Julian Alps in Slovenia, and the South Island of New Zealand.

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 Problem solving and capacity building 101
However, Nordanvind is conscious of the difficulties it will encounter in managing such
an expansion. The firm is still family owned, and most of the board members have
some family connection. Their IT and financial systems still suit those of a mid-sized
family hotel chain, not a global luxury resort operator. Although all the directors are
well travelled, none have experience of running a business outside of Scandinavia.
They are aware that they need to build capacity, quickly, if they are to stick to their
expansion plans. They have called on your consultancy firm for help, and engaged you
to work with them for six months.
What mix of the three capacities discussed in this chapter, systems, knowledge and
people, will Nordanvind require? How would you go about delivering on these within
the six-month time frame?
Copyright © 2015. Taylor & Francis Group. All rights reserved.

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