One of the most frequently asked questions by people seeking to enter the management consulting industry is "Do you need a business background to be a consultant?". NO, business knowledge is NOT a mandatory condition to become a consultant. Nevertheless, it still has specific obligations and advantages for consultants.
The following article will help you acknowledge how business knowledge and business intuition integrate into the process of becoming a consultant. Besides, It will also provide you with the insight you need regarding this sector as well as practice strategies that will make you perform at your best during this portion of the case interview.
Business knowledge in general is a broad term that refers to the understanding and familiarity with various aspects of the business world.
It encompasses a range of concepts, principles, practices, and information related to different functional areas within an organization, industry dynamics, market trends, economic factors, and strategic decision-making processes.
This type of knowledge can come from different sources such as business school, experience or industry certifications and covers many topics related to business success including marketing, finance, accounting, human resources, business strategies, leadership, operating, and many others.
Business knowledge is an essential piece of expertise that managers need to have since it plays a significant role in several organizational orientations and divisions, thus, it shapes and drives the business overall operation.
Similar to the above, business knowledge in management consulting is also important since it is present in many different aspects of numerous fields. Nevertheless, consulting firms are usually grouped it into 3 main categories: industry, function and location. In each category, the consulting firm continues to divide it into smaller divisions.
- Function: marketing, management, accounting, human resource, etc,...
- Industry: FMCG, entertainment, F&B, Banking, etc,...
- Location (culture): city, state, nation, continents, etc,...
As mentioned, business knowledge is extremely broad and each person can only have a certain set of abilities and specialties. Hence, dividing each employee into specific groups like this makes it easier and more efficient for consulting corporations to manage and assign work as well as ensure that consultants work at their strengths and reach their full ability.
In essence, business knowledge will remain similar and retain its value when used in the consulting field, regardless, the major difference lies in the way this knowledge is utilized.
As we are discussing the management consulting industry, I can simply describe the way a consultant applies business knowledge is in the same manner as how a manager uses business knowledge.
A successful boss/manager in a business will always have a general comprehension of their employees daily tasks and responsibilities. However, a manager's knowledge toward the work of employees will not be exhaustive and practical, instead they are more inclined to understand fundamentals for more management purposes.
Business knowledge of consultants is also used in this way. When a company hires a consultant to provide support, the consultant will encounter issues at the macro level of that business.
In consequence, instead of focusing on the details of a department, consultants need to adopt a business manager's perspective and take a comprehensive picture of the company's overall operations to address large-scale challenges.
Moreover, people working with consultants in each project are frequently upper executives (CEO, Shareholders, BOD, ...) which also requires consultants to apply business knowledge in this viewpoint, as we call "Top-Down approach".
Working in this method will enable the consultant to examine the issue through the lens of seniors with profound insights, taking into account several business functional areas like marketing, finance, and operations...Combining with their expertise and skill can better align the problem-solving solution to match with the client's objectives.
Although, all of the aforementioned are important, in order to be successful in management consulting, the most significant in this topic that you need to have is business intuition (business acumen).
Business intuition is developed through a combination of expertise, observation, and pattern recognition. It involves drawing upon past experiences, industry knowledge, and a deep understanding of business dynamics to make informed judgments without relying solely on data or formal analysis.
The relationship between business intuition and business knowledge is integral to success in the consulting field. Business knowledge provides the foundation, information, and analytical framework necessary for consultants to develop and apply their intuition effectively.
By leveraging their business knowledge and honing their intuitive abilities, consultants can deliver valuable insights, drive impactful decision-making, and help clients navigate complex business challenges with confidence.
Are you qualified to apply for a consulting firm without a business background?
So with all the roles and the significance of business knowledge for consultants as described above, is business background a mandatory requirement of consulting firms?
I will not mention the standard to pass the resume round because each consulting company will have its own requirements and there are no set guidelines. Despite that, there is a truth in all management consultants firms that having a business background is not an obligatory requirement to become a consultant.
According to The New York Time, more than 50% of consultants at McKinsey & Company do not have a Master of Business Administration degree (MBA) and this proportion tends to increase compared to previous decades. Furthermore, partners at Bain or McKinsey are increasingly finding that their careers don't require much specific training or knowledge.
Rajat Gupta - McKinsey's managing partner shared: "Honestly, business is in some ways not that difficult to learn. We can pick up people who have not research business and can teach them, if they have the intellectual firepower"
Thereby, you do not need to have a business background or a business degree to be able to get a consultant position at a consulting firm. They are professional sewing systems that will evaluate candidates in a variety of aspects, foremost, they will determine whether you have the potential to be able to learn/train to become a consultant.
We are now all know that business knowledge/background is not required for a consultant, but it is still extremely important, why?
Because consultants work with businesses
You should be aware of knowing that business cases make up more than half of consulting projects as well as the majority of them have to do with management or business. Thus, the acquisition and application of business knowledge can significantly impact the quality and speed of work performed by consultants.
First of all, business knowledge empowers consultants to enhance the quality of their work. With a comprehensive grasp of business principles, concepts, and frameworks, consultants gain the ability to proficiently analyze different intricate scenarios of clients.
Secondly, consultants are often required to work within tight deadlines and deliver results efficiently, hence, business knowledge can benefit in maximizing the speed of work for them. With a strong grasp of business foundations, they can quickly grasp the obstacles of the whole customer's corporate issue, leading to expediting the examination, decision-making, and resolution procedures and ensuring their clients receive timely and efficient results.
Furthermore, possessing this kind of expertise allows consultants to receive information more effectively. They can communicate and collaborate with clients, stakeholders, and subject matter experts with greater ease. This facilitates the gathering of crucial data and insights necessary for making informed decisions and developing accurate solutions.
Ultimately, by utilizing their business skills, consultants can go beyond surface-level symptoms and provide sustainable and impactful recommendations that are closest to the root of the customer's problem. This ability to delve into the core causes of business difficulty enhances the value consultants bring to their clients, fostering long-term partnerships built on credibility and measurable results.
In addition, as previously explained, business knowledge is a fairly broad concept that is partly present in every industry. For this reason, even if you do not work on business tasks, this expertise is still greatly helpful when it compliments other fields. It practically remains how to minimize input while maximizing output.
Regarding all the aforementioned factors, even if BK is not compulsory, you must have understood its significance. There are a few core business knowledge/skills that you certainly must acquire to work in the consulting field.
Firstly, a solid understanding of basic accounting principles is essential for consultants. This knowledge enables you to grasp concepts such as revenue, expenses, assets, liabilities, and equity, providing you with insights into the financial operations of businesses. Hence, consultants with great accounting skills can assist in budgeting evaluation, cost analysis, and financial forecasting.
Proficiency in basic finance equips consultants with the ability to evaluate the financial viability of projects, assess investment opportunities, and analyze financial risks. Understanding concepts such as time value of money, cost of capital, financial ratios, and cash flow management enables you to support clients in making informed financial decisions and optimizing their financial resources.
Basic management knowledge enables you to understand organizational dynamics, strategic planning, and operational efficiency. Consultant can analyze business processes, identify inefficiencies, and recommend improvements in areas such as workflow, resource allocation or team dynamics. People with management skills can provide guidance on organizational structure, leadership development, and change management initiatives.
How to read financial statements?
Last but not least, one of the key skills needed for consultants is the ability to read and analyze financial statements. This involves interpreting balance sheets, income statements, and cash flow statements to gain insights into a company's financial performance, profitability, liquidity, and overall financial health. Being able to extract meaningful information from financial statements enables you to identify trends, assess risks, and make data-driven recommendations to best address the challenges.
If you are preparing for consulting case interview
The man who moves a mountain must start by moving small stones! If you lack a foundational business knowledge, start with the exact four types of knowledge/skills I have listed above. They are the most fundamental business knowledge that a consultant has to possess in order to develop later on.
These four knowledge areas are actually fairly diverse, but if you only prepare for a case interview and do not have much time, focus on the basic concepts.
After you have acquired the above skills, the next thing you should do is to improve business intuition (business acumen). Frankly, there is no particular exercise to develop this kind of expertise.
The best thing you can do is practice using the concepts and formulas of business knowledge as much as you can and over time your business intuition will gradually become more swift and responsive.
In addition to the customary business knowledge drills, you should also have a lot of conversations with individuals who have extensive consulting expertise. In addition to the fact that we can practice and obtain current information, attempt to comprehend the way they utilize business expertise to solve different situations.
When exposed to a lot, this could help you to notably enhance your perspective on implementing business knowledge more prudently.
If you are a new consultant
Similar to the above, even if you have already become a consultant, the above methods are still valuable and needed. Business knowledge is actually quite important, especially for new consultants, when your early period at the company will often be assigned to general projects instead of regularly working in a certain field.
Thus, business knowledge now comes into play when it gives you a comprehensive view as well as the ability to link between different industries.
Secondly, there is a great method to develop the kind of knowledge that can only be applied once you are already a consultant: Read a lot of the company's practice materials. Practice material is a collection of old documents from previous projects of a consulting firm that have been meticulously archived.
The senior solution is available to observe and learn from, those are the greatest samples for a newbie. As a quick reminder, you should only begin working on projects that are directly related to the one you are currently working on in order to prevent overload. This is because the library of consulting businesses like MBB is very extensive and will easily oppress you.
In essence, a consultant should always have greater business knowledge—the more, the better. The most crucial thing is to always learn and develop; even if you have worked as a consultant for a long time, there is still much to learn about business in an environment where the market is constantly changing.
Some challenging you will face
With a wide array and time-consuming practice such as business knowledge and business intuition, there are some challenges that you will hardly avoid.
One of the main disputes is the abundance of information available. The business landscape is dynamic, and there is a vast amount of data to sift through. Filtering out the relevant information, prioritizing what matters, and extracting valuable insights can be overwhelming.
Translating theoretical business knowledge into practical application can also pose challenges. Understanding how concepts and frameworks apply to real-world situations, adapting them to specific contexts, and making informed decisions require practical experience and application.
The business landscape is ever-evolving, with technological advancements, regulatory changes, and shifting consumer behaviors shaping industries. Keeping up with these changes and adapting your business knowledge accordingly can be demanding but crucial for staying relevant.