The December issue of Forbes magazine includes an interview with Alisher Sharapov, Consulting Partner at Baker Tilly Qazaqstan Advisory, and Olga Zagidullina, M&A Director.
The discussion focused on the evolving economic landscape and its implications for the consulting sector.
At the KGIR forum in Astana last November, Kazakhstan announced its intention to attract $150 billion in new FDI. Based on the average figures for the previous five years, annual investment should increase by about a third to reach this level. Achieving this target will require systemic changes in many parameters, from the investment climate and investor programs to the availability of qualified personnel and quality services throughout the investment and production process.
To facilitate entry and operations in a jurisdiction external to the investor, one of the essential factors is the availability of quality consulting services in compliance with local legislation and tax aspects, as well as assistance in structuring investments and analyzing the investment object with due regard to the local market and its specifics.
Fig. Dynamics of foreign direct investment in Kazakhstan by sectors
An analysis of sectoral FDI dynamics reveals growth in manufacturing, information and communication, and trade, alongside a decline in mining. The gradual shift from raw materials extraction to processing and technology development, as well as the increasing focus on the social responsibility of investors, is leading to changes in all related industries and demand for new formats of services and competencies.
As a sector closely tied to servicing business’s operational and investment processes, consulting is one of the first to feel the shift in client demands and the need for change. While the standard and common consulting services include audit, valuation, accounting outsourcing, tax consulting, and transaction support, more complex demands started arising because of the growing complexity of the business needs. We noticed significant growth in the number of ‘tailor-made’ requests in recent years, often at the intersection of multiple spheres, requiring more complex solutions and a deeper understanding of the industry than a consultant never employed in the industry could have.
Alisher, your profile mentions your extensive industrial experience in the mining and construction sectors; how does this help you in consulting?
A: We had an interesting case involving a technical audit of a facility built as a part of our client’s corporate charity program. This type of assignment necessitates a blend of technical, construction, legal, and financial competencies. High-quality implementation is possible only with a professional technical team and financiers with deep industry competencies. For the project’s successful realization, it is not enough to attract several experienced construction engineers, designers, estimators, and certified specialists in technical and author supervision; the most challenging thing in this case is properly integrating all the technicians and financiers into one team. Also, at the initial meeting stage, it is necessary to clearly understand the client’s request, as the terms of reference do not always entirely reflect the scope of work; the task is often written by people who do not possess relevant competencies. Conducting the project within the framework of such terms of reference may lead to misunderstandings between the client and the consultant. That is why having industrial and consulting experience is a key factor in the realization of such projects.
– Can you tell us how the requests for consultants from the big players have changed?
O: It is evident that a notable evolution has been observed in the business management approach adopted by numerous clients, who are progressively moving towards a more comprehensive vision and integration of different aspects of the business into a single system. This results in requiring strategic consulting that creates feasible value-added for the company, instead of the typical “pretty strategy presentation” with a big name on the cover, created to end its days on the shelf of the CEO’s office, never opened by anyone.
This year, we engaged in a similar project to integrate budgeting and planning systems, management reporting, and motivation systems into a single logical structure for one of our clients. This allowed the client to set goals more transparently, visually track the interrelationships between products and departments, and balance the interests of different groups within the company. The task affected all client’s divisions. For successful implementation, it was necessary to combine our understanding of the “pains” of the business, which we had thanks to our experience of employment in a similar company and an independent view from the outside. Understanding the specifics of the industry, after analyzing the processes and products, we developed a unified model of planning, performance evaluation, and motivation aligned with key objectives, drivers, and areas of responsibility. The result was presented for actual use within the company, along with recommendations for change.
Recently, there has been an increasing number of complex requests, such as restructuring of holdings and groups to build a more optimal model in terms of business processes and economic efficiency. Such requests involve various tasks from assisting in strategy development and analyzing novel business areas, building relevant financial models, attracting investors – to building internal management reporting systems.
Furthermore, the outsourcing concept has expanded beyond accounting to encompass human resources and financial functions traditionally performed internally. Such functions include market analysis, building a project investment model, project “packaging,” and fundraising.
Investment activity grows, particularly in cross-border projects. We work with foreign investors in Kazakhstan and help Kazakhstani companies expand regionally. We believe that a strong regional network and ability to provide one-stop-shop services provide a significant competitive advantage, and we are proud that Baker Tilly has offices in all Central Asian countries. We work closely with our colleagues, sharing competencies within the region. The increasing complexity of tasks requires skilled personnel, industry experience, and specialized resources, including databases and experts.
The change of tasks to more complex ones leads to the need for more qualified personnel, industrial experience, and additional sources of information: databases, industry indicators, and narrow-profile specialists engaged on a project basis.
– What is the core difference between standard and “tailor-made” consulting?
A: By standard consulting, we mean typical tasks that involve the use of a single competence: audit, taxes, accounting, valuation, and business registration.
Therefore, the first thing that distinguishes “tailor-made” consulting is the problem statement itself. These projects require a combination of several competencies in terms of types of service, industries involved, and geographies; they require deep immersion, industry knowledge, and creative solutions “at the intersection” of several areas. If we refer to D. Kahneman’s terms, standard consulting is everything that can be done by a consultant within the framework of “system one”; “tailor-made” consulting requires involving “system two”.
The second difference is the approach. Another helpful feature of industrial experience is the presence of cases where you act as the customer of consulting services. On the customer’s side, you can clearly see the difference in the consultant’s goal setting: with a template approach, the consultant perceives their primary objective is to “make a report” rather than add value to the business. A superficial understanding of the industry, multiple report pages, and a lack of clear conclusions are frequent phenomena for standard consulting.
The market for standard consulting was born under regulatory pressure, and the core criteria for selecting a provider of a standard audit or valuation report are compliance with legislation, speed, and cost. As management approaches have developed, businesses demand help finding solutions that add real value to the client’s business. A consultant with industry experience can combine insider and outsider perspectives, industry practices, and best experience from other sectors, keeping the core focus on adding value to the client’s business.
In our company, the entire management team and some of our employees have diverse industrial experience in the mining, construction, financial, FMCG, and education sectors; we understand the specifics of the market from the inside when we engage in projects across these business verticals. Many employees have internationally recognized certificates. “Tailor-made” consulting requires flexibility of thinking and creative contribution from the consultant – it is impossible to provide high-quality services of this kind in the situation of staff turnover and burnout. That’s why we invest a lot in people: we invest in training and certifications, organize retreats at least twice a year, and introduce flexible schedules. Yes, this leads to higher checks for clients compared to those who don’t invest in such things, but at the same time, it ensures quality.
Pricing of template consulting offers has historically been lower, which will continue to be the case. The primary concern is the nature of the results the company will obtain in exchange for the expenditure. At the stage of commercial proposals, the client often compares on price, overlooking the quality of the content. In the case of template consulting, solving standard problems it is less critical, but in the case of more complex tasks there is a higher chance to save a few percent and get a completely useless result. For example, Due Diligence, which is quite standard for the investment process, differs significantly in its content depending on what approach is used – the standard “audit” approach or an approach closer to the Private Equity format.
– How do you feel about using artificial intelligence in your market?
A: The integration of artificial intelligence is a pervasive phenomenon, extending to various sectors, including the consulting market. The utilization of tools such as Chat GPT in numerous organizations has led to the automation of routine tasks, thereby enhancing operational efficiency and reducing the cost of producing template reports. In fact, our audit colleagues have already optimized up to 80% of routine work using machine learning models. However, it is imperative to acknowledge that these tools are merely instruments, not substitutes, for the critical thinking skills of analysts. Their efficacy is constrained in contexts that deviate from standard consulting scenarios. All sources, data, and conclusions derived from artificial intelligence must be verified and critically assessed; it is not a substitute for human thinking when unconventional and creative solutions are required. The integration of artificial intelligence has the potential to transform template consulting by reducing its cost and accelerating delivery, thereby exacerbating the existing disparity in quality, depth of immersion, and cost between standard and “tailor-made” consulting services.
In summary, there has been a shift in investment interest business verticals with higher processing levels, vertical integration, growing interest in neighboring markets, and a more holistic approach to strategy and planning by management. Operating within this evolving context necessitates a novel, meticulous approach, profound industry knowledge, and an unwavering emphasis on the added value that a consultant can offer. The market demands customized solutions – and we bet on “tailor-made” consulting.
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