The Perceived Commercial Viability Of Strategic Consulting For Micro-firms

Statement of Purpose & Overview:

Do Management Consulting Strategists actively pursue “micro-firms,” businesses with less than 10 employees (DTI, 1995, p. 11), as potentially profitable clients, or do they view this business segment as outside of their target market and generally unprofitable? The primary purpose of the proposed research is to address this issue by contrasting the views and attitudes of Strategic Management Consultants towards micro-firms, with their actual commitment of resources towards attracting micro-firm owner/operators as a profitable market niche. A secondary goal is to discover a model for profitable strategic consultation to micro-firms.

Throughout almost ten years of experience in e-commerce consulting, I have increasingly found that our firm’s strategic business consulting to micro-firms is the part of our business offerings most referred by past clients to new clients. Indeed, over the past two years our firm has out-sourced up to 80% of our web design work and we are now restructuring the company to provide ongoing strategic management consulting aimed specifically to the micro-firm owner/operator both on and offline.

Relevant Literature & Key Research Questions:

Identification of the Relevant Literature

Recently, there has been a shift away from defining micro-firms as a simple subsection of “SMEs” (Small / Medium sized enterprises). This trend is imperative as the behaviour, needs and characteristics of micro-firms are significantly removed from those of other SMEs (Jay & Schaper, 2003; Becherer et al., 2006).

Micro-firms rarely engage in formal business strategizing (Robinson, 1982; Robinson & Pearce, 1984) even though it has been found to be essential to their success (Robinson, 1982; Robinson & Pearce, 1984; Fields, 1992; Becherer et al., 2006). When micro-firms do prepare formal strategic documents, it is overwhelmingly of the business plan variety and designed for securing outside funding (Reid et al. (1993); Hogarth-Scott et al. (1996); Stone & Brush (1996); Atkins and Lowe (1997)). This mandatory business plan is usually the only formal strategic effort by micro-firm owner/operators and after the document has served its fiscal purposes all other strategic thinking ceases (Anderson, 2001). Calvin W. Fields (1995) argued that a lack of formal strategy in micro-firms has stunted their growth and has often led to complete business failure.

There exists a dearth of literature on the role of Management Consultants in micro-firm strategy. Moreover, a large share of the published writing focuses on government-sponsored programs (Robson & Bennett, 2000) and then claims such programs to be under-utilized (Curran & Blackburn, 2000) and that external consulting is under-valued by micro-firm owner/managers (Smith et al., 2000; Mole, 2002; Jay & Schaper, 2003; Beresford & Saunders, 2005).

There is presently no published scholarly material on the specific approach of private Canadian Management Consulting firms towards micro-firms.

Key Research Questions

Micro-firms firms account for 74.4% of Canadian businesses (Statistics Canada, 2003). And with small business aggregate revenues1 accounting for 25% of Canada’s Gross Domestic Product in 2003, (Statistics Canada, 2003) micro-firms represent a major economical pillar of the Canadian economy.

Given the significant size of the micro-firm market in Canada and the apparent need for professional strategy implementation for micro-firms at many phases in their development (Dyer & Ross, 2007), coupled with the expertise of Management Consultants and their need to continuously attract new clients (Freeman, 1998), the following questions are raised:

* Do Management Consultants view micro-firms as a viable target market for their services?

* What percentage of total revenue is generated for management consulting firms by micro-firms?

* What amount of resources is allocated to attracting, retaining and advertising directly to micro-firms clients?

* What amount of resources is allocated to developing commercially viable programs geared towards micro-firm owners/operators?

* Has the amount of capital engaged in the micro-firm segment increased relative to the overall growth of this business segment?

* What existing for-profit management consulting strategies exist to serve the micro-firm segment?

Methodology:

Exploratory Pre-study
An informal exploratory study will be facilitated to ascertain the current consulting climate in Metropolitan Toronto (Canada). Such preparatory background work will focus the ultimate questionnaire design and deepen and update the researcher’s market knowledge. This “pre-study” will consist of several semi-structured interviews with Management Consultants, both independent and those belonging to a firm. This sample (N ≥ 3 firm-based and 3 independent consultants) will contain professionals in the metropolitan area of Toronto, Ontario – Canada’s largest city. This location is ideal for its proximity and inherent reflection of our firm’s competitive marketplace. Interviews will range from 10 – 20 minutes in duration and will be audio recorded. Again, no formal attempt will be made to code these responses; the procedure is functioning as an industry primer.

Formal Study

SUBJECTS

The subjects for our study will be practicing Management Consultants in the Metropolitan Toronto (Canada) area. Considered will be both firm-based and independent Management Consultants. The subjects will be chosen due to their common marketplace and their access to the same geographical pool of micro-firms.

DESIGN, DATA COLLECTION & ANALYSIS

The research will take the form of a survey with questionnaires mailed to the subjects with postage-paid return envelopes. The minimum sample size will be ≅ 100 individuals for each of the consultant types, firm-based and independent. The maximize size of the study will be determined by the finite size of the defined market, empirically expected response rates and statistical prudence.

Data analysis will feature relevant charts and tables displaying statistical procedures which may intuitively include: ANOVA, Chi-squared tests and Pearson Correlations. The ultimately implemented analytical tools will reflect the goodness of fit to the final questionnaire, the quantitative tools acquired during coursework and the suggestions of the supervisor. Various leading statistical packages such as SPSS® will be employed to strengthen the analysis.

Timescale:

The proposed timeline is in keeping with the broad guidelines provided by The Business School:

* 18 – 24 months: Research Modules, Coursework and Literature Review (The “pre-study” mentioned in the above “Methods” section will also be performed during this stage)
* 12 – 18 months: Research Design, implementation and evaluation
* 12 – 18 months: Prepare written thesis for formal submission

Footnote:

1 The Government of Canada (via Statistics Canada) defines Small Businesses as having less than 50 employees, thus this figure represents an unavoidable revenue overstatement due to the differing definitions and limitations of Statistics Canada reporting. A recent Australian study by Jay and Schaper (2003) may help shed some light on the aggregate revenue of the micro-firm segment in a comparative economy. This too, however, has its limitations as the Australian Bureau of Statistics defines micro-firms as having less than five employees, small businesses as having between five and 19 staff and a medium-sized firm having between 200 and 199 persons. Hitherto, this figure is used for emphasis and has no bearing on the outcome of the proposed research.

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