While many similarities exist between Strategic Consultants (SC) and Operational Consultants (OC), there are also crucial, key differences between these two groups as well.

Operational consulting vs. strategic consulting

When it comes to Venture Capital (VC) and Private Equity (PE) firms, where the stakes run high, it is those details that could be the difference between a highly successful acquisition and one that continues to struggle to drive profit to EBITDA.

Every step in the process of a VC or PE firm acquiring a target company is vital. However, the due diligence phase is an especially crucial step within this journey. To determine the appropriate value, tradition dictates that a VC/PE firm seek out the help of a Strategic Consultant to assist in the consideration of market opportunities and the target position within said market. While this process provides a level of value in highlighting the potential opportunities and/or risks, it often falls short of truly showing firms the operational position of the proposed acquisition. Therein lies the strength of an Operational Consultant.

What’s the difference between a strategic consultant and an operational consultant?

Strategy Consulting requires deep analytical capabilities and the application of strong and disciplined problem solving skills. And in the context of VC/PE firms, strategy refers to assisting senior executives to help determine the overall direction in which they will drive their acquired organizations. When VC/PEs engage a Strategic Consultant, it is often to validate and/or strengthen the already defined thought process since strategy, by nature, is inherent to a VC/PE’s makeup and charter. At the end of the engagement, the VC/PE firm is given a detailed report outlining the exact market share information needed to support their acquisition decision. 

What is the problem with this? 

Strategy takes a top-down approach and primarily revises the allocation of scarce resources. Strategic Consultants are not looking within the functional areas of the organizations to determine where they are bloated. As a result, they fail to identify the issues that cause higher operational cost due to inefficiencies or antiquated tools or processes. This causes the areas of inefficiencies to be overlooked, meaning the VC/PE firm potentially consumed an inflated purchase price.

This is where the benefit of an Operational Consultant pays dividends. OC’s have the know-how and experience to analyze cost drivers at a more functional level. This ensures the VC/PE’s know the specific areas that can be quickly restructured to drive out cost and improve efficiencies. Like a Strategy Consultant, OC’s also provide a detailed strategic plan, but with an operational mindset that provides specific tactical steps that can be followed to reach the stated business goals.  These plans outline very specific metrics, benchmarks, and steps to ensure the impact is immediate and can be measured along the way. Enough detail is provided to accurately depict actual cost savings in the organization’s current state as well as the future. Most importantly, it also includes a means to measure ongoing improvement. Operations are like living, breathing organisms within a company. They must be fed and cared for to ensure sustained success as the organization develops, pivots and grows.

The largest benefit of an Operational Consultant lies within the implementation phase.

• OC’s specialize in understanding the day-to-day operations of an organization as well as the long term effects efficient operational processes can bring.

• OC’s are capable of implementing the very recommendations they put forth for in their plan. Additionally,

• They will not only assist the company in the actual work to realize this strategy, but can, will, and should teach the organization where they are implementing these strategies.

• A valuable OC will teach the principles of LEAN processing, Six Sigma evaluation practices and, where necessary, ISO and/or ITIL protocol so that the organization can develop the continuous improvement practices needed to change as the market changes.

These tools and processes being taught are key value propositions of OC’s essential offerings. Teaching an organization how to perform best practices in evaluating operational efficiencies and ensuring the process documentation is ITIL compliant can be the difference between continuously relying on outside vendors or becoming a self-sustaining organization. Assisting an organization to learn how to affect its own change and pivot as needed is a big piece of the plan an OC offers.

Resilience is key in sustaining growth and value and comes from the ability to constantly reflect, assess, adapt, and implement changes. In a growing company, proper implementation of operations means life or death. Having an efficient, streamlined process means your operational model will lead you towards sustained growth. As you grow, the operations established need to be flexible enough to adapt to unforeseen circumstances, timeframes and pain points. Sustainable, adaptable growth is the key to developing long term survival in the marketplace.

Hiring a consulting firm is a proven way to decrease risk and increase sustainability of the company’s growth. While it may seem that the difference between Strategic Consultants and Operational Consultants is subtle, this difference can mean a massive impact to your bottom line. A strategic plan is crucial, but much less effective without the operational and implementation component. By partnering with an Operational Consultant who utilizes best-in-class methodologies such as Six Sigma and LEAN technologies, an organization is able to succeed in realizing a businesses’ strategy which improves productivity, lowers operating costs and increases profits.

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