A Consulting Practice Or Business?

According to Peter Drucker, the two key elements that shape the operation, management and organization of every firm are:

1. Its choice of technology: "Technology", in this sense, refers to the particular project operating system or process employed by the firm to do its work; and
2. The collective values of the principals: The personal goals and motivation of those who lead the business.

Yesterday I talked about the first one, and how firms can be divided into three categories - brains, grey-hair, and procedure firms. Now let's talk about values.

Ask yourself: How big do you want your business to be, in terms of revenue, profit, and staff? What your main driver for work is? What is the role you want to play in the future?

There is not a single right answer here - your preferences and ambitions are entirely personal. And it's easy to see how they affect your goals, your priorities, and ultimately how your consultancy works.

I particularly enjoy Drucker's distinction between a practice and a business (he refers to architecture organizations, but the same applies to any consultancy):

The fundamental differences in values become evident if one examines the word “practice,” which is so often used by professionals to describe their organizations, in contrast to the word “business.”

Practice, as defined by Webster, is “the carrying on or exercise of a profession or occupation as a way of life.” Business, on the other hand, is defined as a “commercial or mercantile activity customarily engaged in as a means of livelihood.”

When the two definitions are compared from a management perspective, what stands out is the contrast between “a way of life” and “a means of livelihood.” What is becoming evident is that many architecture firms are practices first and businesses second, while others are businesses first and practices second. Therein lies a whole new perspective about what goes on in such organizations.

What is important about the distinction is recognizing that, even though most successful firms strike a balance between "practice values" and "business values", it makes a significant difference which of the two is primary.

Tomorrow I'll share some of the concrete differences I've identified between practice-centered and business-centered boutiques - which include how founders make decisions, promote their offerings, and deliver consulting engagements.