We concluded some years ago that consultancy was a poor business model for long-term wealth creation, with its regular peaks and troughs and constant resourcing challenges to manage and only a sale able to realise value.
The best way to make money out of consulting, as evidenced by large consulting, legal and audit firms, is to leverage a pyramid model where expensive partners leverage the efforts of many juniors. The other option is to build the business up to sell. We know the first doesn’t work well for most consultancies as clients tire of paying over the odds for inexperience, and the second doesn’t work either.
Pretty much all of the innovative, creative businesses that sell-out lose their spark, or their leaders, or both. We know why. We sold to a publicly listed e-consultancy just before the dot-com bust in 2000 and ended up buying the company back a year later. Chastened, but not deterred, we set about defining another model where we could participate in the value we create, enjoy the best bits of consultancy (learning, creating, doing great work for great clients) but avoid relying on selling the business as the only exit strategy.
After experimenting with value-based pricing (we were bought out of every risk reward contract we entered), acquiring Equire the managed services business and Nucleus-ip our trade mark attorneys, we concluded that we had to participate in ventures to be able to really exploit our own IP.
This we have done successfully with two ventures and less so with a third, which we have just sold to a partner.
Luxury Explorer and sQuid were both ideas identified while working with consulting clients, deciding to put our money where our mouth is, so to speak, proving that as well as strategic and design skills, we also know how to operate successful next generation businesses.
We have learned a lot. Without doubt, we are better business people having experienced how difficult it is to create something from nothing. Our consulting clients value the learnings this approach brings to their own projects, differentiating Nucleus from competitors, because we know not only the theory, but also the pressures of day-to-day business reality.
In time we will invest in more ventures, but for now sQuid and Luxury Explorer are keeping us busy...