This is part 1, chapter 2 of a series of articles on The Asia-Pacific Centre for Research (Acre), Inc. which celebrates its 20th year as an enterprise on August 23, 2009. Acre, Inc. is a full service marketing research and IT consulting agency.
Seeds of enterprise are aplenty. In the history of ACRE, there were four. The first, which was the subject of part 1, chapter 1 of this series (posted on 12 July 2009), is the need to embrace and take a risk on new technology. The fourth will be the subject of part 1, chapter 3.
The two other seeds, which this chapter will discuss, relate to the intrinsic values of consulting – first, as an excellent source of employment and second, as an enterprise that can effectively function to provide other enterprises with boutique services that are unique and very specific.
A Source of Job Opportunities
Borrowing from Porter’s model on competition, service consulting has extremely low entry barriers. As an enterprise, it is easy to start. It requires a reasonable amount of financial capital, perhaps something that one saves after a few years of executive or technical work.
It relies mainly on human capital, the skills that the consultant already possesses either honed from work experience or learned from top graduate schools. Overhead and the cost of managing operations are low. The sophistication needed to become operationally efficient is rather on the soft side.
On the other hand, the skill needed to manage stakeholders and develop clients is quite high. Success and profitability depend a lot on value created for the client and the satisfaction (by the client) that such value has indeed been created. Many talented consultants come and go because of failure to create impact or value over and above what already exists.
Moreover, commitment to the objectives of the engagement, as defined and understood by the client, is a primary consideration. Such commitment must be demonstrated through a consultant’s passion for meeting deadlines, constantly communicating with the client and service orientation.
Consultants who move over from industry to consulting to academe have egos that become convenient plots for corporate horror stories. The dynamics in every engagement and in every environment are so diverse. Management doctrines and principles become effective only as they are understood and accepted.
Consulting, particularly on services, has tremendous potential for creating jobs – quickly and in a sustainable fashion. Government and job creators must have a deliberate strategy for supporting service consulting. Our employment statistics need every bit of support and creativity.
The latest Labor Force Survey (April 2009) indicates that our labor participation rate is only 64%. Unemployment rate plus underemployment rate are at a hefty 36%. You can imagine what it was during the pre-acreinc@20 days when the country was just starting to recover and government was hounded by military adventurism.
Supporting service consulting has a very low cost input and huge value added. For example in market research, one standard project provides temporary job opportunities for at least 10 people. An unusually big project may provide jobs for at least 50 people. When acreinc@20 expanded to data conversion in 1992, a natural service expansion because research deals a lot with data processing, the company employed about 70 encoders, 30 for the first shift and 20 each for the second and third shifts.
The thought of creating jobs and providing economic opportunities that required low-level entry skills and were potentially sustainable was certainly an important seed in the formation of acreinc@20 as an enterprise.
A Relevant Outsourced Service
Graduating with a master in business administration (MBA) degree in a prestigious school at a time when an MBA tag was at its premium was one of the highlights of my career both as an educator and businessman. I learned the fundamentals of managing an enterprise. It boosted my confidence with the thought that I had the resume to back up my deeds. The years in graduate school expanded my network. There, I met a future business partner, one of a few who successfully wrote and completed the business thesis within the last term. The other one is currently the Secretary of Labor.
In our business policy class where half of the enrollees transferred to another section after the first session, these two gallantly responded to every question fielded by a businessman-professor who was known for his quick wit and for terrorizing slow-thinking students. It was only in that class where I saw a junior executive classmate literally shaking as he stood up to respond.
About three years after graduation, my MBA classmate called me up and presented a business proposition. He had a technical background and just recently left a manufacturing outfit that he managed. He earned so much from his share of incremental profits, that is, profits that the firm earned over and above what it normally made before he was brought in to manage the company.
He had the cash. He had the technical knowhow. He knew the market. He just needed someone to razzle-dazzle the bankers and potential partners with some attractive financial packaging to complete the business start up puzzle. I was a young consultant with several clients in my list, a few years out of business school and with a flawless work experience. I was raring for some action and the desire to test my theories.
About a month from the time that we met, we had a corporation, a manufacturing plant with the basic facilities for precision engineering to produce wood cabinets for television and stereo, venture capital from a progressive bank for our working capital, and enough equity to retool some of the facilities we needed.
Venture capital was widely promoted by the bank at that time and we were among the few given that facility. I thought that the start-up time was record breaking. Later on, I learned that much of it was because of our background – two young professionals with an MBA degree. It was not about the project, definitely not.
We started with a bang. We ended (after three years) with a bigger bang. The due diligence study was not diligent enough. It was done for a purpose, that is, to start the business and get it going. As an investor with a financial stake, I did not have the objectivity to recognize the pitfalls and safeguards. I was too involved with making the concept work.
The demand for precision wood cabinets was high. The design for television and stereos at that time required a high ratio of wood to TV. In fact, in the first two years, we did very well and captured a fairly good share of the market. We deliberately closed our eyes on the trend – from wood to synthetic and from a high to a low ratio of wood to TV. We knew it was happening. Our youthful enthusiasm and recklessness got in the way.
In retrospect, if we had a consultant or someone without an emotional stake on the business, we could have intelligently managed the risk and put in the safeguards to make the operations more sustainable. On the third year, the demand for knife blocks in the export market was really booming and the karaoke (the design of which was for wood cabinet) was starting to become a trend. We started developing the designs and systems. However, we decided to call it quits. We lost the energy to retrofit for a new system.
That became one of the seeds of acreinc@20, the realization that there is an intrinsic value for consultants and people with the professionalism to dig through the maze of trends and statistics to recommend ‘go or no go.’ Acreinc@20 started as a marketing consultant with expertise in market research, statistics and financial analysis.
(This is the second chapter of part 1 of a series of articles on the history of acreinc@20. Part 1 talks about the pre-acreinc@20 days and attempts to answer the questions: What were the conditions that led to the development of this new enterprise? What were the challenges? What were the management and enterprise development principles that became the bases for the new enterprise? What were the resources needed to start it up and roll over for long-term viability? For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)
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