Consultant or "Spy"

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by Adrian W. Hollander, C.P.A., CISA, CIA, CBA, CFSA,

President of COMPLUS Inc. – Professional Controllers

What's the difference between a "consultant" and a "spy" ?????

Consider the situation of a "consultant" who claims a "vertical market" specialty. Working in such a "market" means that the consultant serves clients which must be very much alike. Such similar companies usually are in the same industry and/or serve the same markets. In short, these clients are very likely to be competitors. The usual objective of hiring a consultant is to buy some knowledge that will help to improve the business. Consultants often sell what they have learned from client #1 to client #2. Am I missing something or is this kind of "consultant" really just a "spy?" Of course, client #2 may be deliberately looking for a "spy" in order to catch up. If you’re client #1, do you worry?

There is a way, though, for a consultant to sell, ethically, to competitors. The assumption, on which this strategy is based, is that the clients consider the consultant service necessary, but not part of their way of differentiating from each other. An example of this idea is illustrated by comments attributed to Lee Iacocca when he led Chrysler. He is said to have observed that all cars needed mufflers that passed government emission tests. Consumers didn’t make buying choices based upon the type of muffler used. So, why not cooperate to meet the government requirements and compete where differences could be significant. To implement this concept a consultant must work with several clients together. Possibly a trade association might be a willing mediator to encourage sharing of ideas and pooling of resources. That way development costs for common benefit can be divided among many clients rather than being incurred separately by each. There is often significant savings possible for all.

When trying to produce a competitive advantage, though, think about the motives of the people you pay to help. If (or when) your project is successful, what do the people who were involved do next? Is your being first enough of an advantage to let your helpers duplicate (or improve upon) their work for somebody else? What can you do to stop them (if you wanted to)? The questions are generic; the answers are unique. Making your choices will not be easy.

A COMPLUS Controller refuses to be a "spy." We work FOR the companies who pay us. We do not work for competitors of clients we serve. We expect to be part of our clients’ competitive advantage. We expect to be part of the management team for a long time. If there is any doubt about the possibility of "conflict of interest," we ask the affected client for permission to serve another. In doubtful situations, when approved by our client, we will still suggest that the two companies be served by different people. Current clients have preference. WE want each client to feel as if he/she is the only client we have, even though he/she knows better.