TL;DR

• There are 12 key components to our updated Factory-Consultancy Framework:
  1. Project uniqueness
  2. Delivery complexity
  3. Pricing model
  4. Degree of customization
  5. Talent mix and cost
  6. Staffing difficulty
  7. Service maturity
  8. Sales cycle
  9. Client concentration
  10. Revenue predictability
  11. Contract negotiation complexity
  12. Presence of substitutes
• Almost all of them have a few key activities needed to move right toward consultancies.
• We've also updated our Factory-Consultancy Diagnostic to account for the new components and give agency leaders an even better idea of where their shop lands.

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Shifting Towards Consultancies

Last time, we published an update to our Factory-Consultancy Framework for digital agencies.

We got a lot of great feedback on that newsletter but there were a lot of similar questions about the various components and how to shift more toward a consultancy.

While there's a lot of nuance around these, we're going to cover the basics and some general thoughts on how to shift each component toward a consultancy-style shop.

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An Updated Diagnostic

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We've updated our updated our Factory-Consultancy Diagnostic to account for the new components and give agency leaders an even better idea of where their shop lands.

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Twelve Key Components

Project uniqueness

How similar are your projects across clients? In factory mode the challenges, scope, and outcome look familiar every time, so discovery is mostly nonexistent. On the consultancy end, every engagement is context-specific, and you need deep discovery phases to define both the problem and the plan of action.

To shift right, structure your value around a paid diagnostic, frame hypotheses before proposing solutions, and define what is in and out of scope early. You will lengthen the sales cycle, but you gain pricing power and a stronger value story.

Delivery complexity

Consider the various moving parts involved in execution. Factory work follows a straight line with few handoffs and a clear checklist. Consultancy work follows its own path that’s discovered throughout the engagement.

To shift this toward consultancy, look for adjacent points of value that you can deliver that reinforce the core challenge you’re solving for your client. It’s easy to get sidetracked here, so make sure that you have a clear idea of what that core challenge is and don’t simply increase complexity for the sake of it.

Pricing model

Pricing should match value creation, but you can’t ignore market forces. If you’re a factory-style shop that has a ton of competitors, then you’re at the mercy of market rates for the challenge you solve. That’s your cap. The trick here is when factories find an efficiency that allows them to protect their margins while pricing below market. Many factories will publish rates with fixed fees or rates tied to specific deliverables. Consultancies' prices are based on expected outcomes.

Moving to consultancy-style pricing goes along with project uniqueness and delivery complexity. As those rise, you’re naturally pushed to charge for discovery phases. Your focus as an agency also shifts to outcomes, which again flows into pricing based on the value you deliver.

Degree of customization

How much can a client customize a project? Factory work changes only at the edges, and buyers choose from pre-defined options. Consultancy work is shaped to the client’s exact needs, even when the client doesn't know what they are yet.

To move right, narrow your ideal customer profile, offer a detailed discovery phase to scope the project from, and leave structured room for tailoring in proposals. Delivery risk and staffing needs increase, but win rates with executive buyers also typically rise.

Talent mix and cost

Who performs the work matters. Factories lean on entry and mid-level implementers, which keeps the blended rate down. Consultancies require senior specialists for projects that substantially increase costs, especially the cost of low utilization.

To move right, after you’ve developed your offer, packaging, and pricing, hire experts, push seniors into (real) thought leadership roles, and coach the team to connect their work to business outcomes.

Staffing difficulty

Some teams are easier to build than others. Factory roles have a larger labor pool and faster onboarding. Specialty consultancy roles are scarce and take much longer to train.

To move right, consider the "up-or-out" model of management consultancies, document how you solve classes of problems, and pair juniors with seniors on live work. Recruiting slows and capacity planning gets tighter, so make sure you're investing in top-of-funnel activities to avoid utilization traps and build a cache of ample cash or credit lines to draw on to bridge pipeline gaps.

Service maturity

Place each offer on a novelty curve. Factory offers solve established problems that buyers already recognize. Consultancy offers tackle emerging or shifting problems that often require significant client education and reframing.

To move right, make sure you're offering services closer to the leading edge that the early adopters find attractive. You can still weave in some commoditized services, but they shouldn't be what you're known for. You'll spend more time educating the market but you'll be rewarded with fewer price-conscious shoppers.

Sales cycle

Factories close quickly with few stakeholders and light procurement. Consultancies sell through multi‑stakeholder conversations, reference calls, legal review, and executive scrutiny.

To move right, design your sales motion to speak to multiple stakeholders and budget time for lengthy procurement and payment hurdles. You will need more pipeline coverage, yet average contract value and win rates improve with the right ICP, buying committee, and sales collateral.

Client concentration

Factories spread revenue across many smaller clients. Consultancies depend on fewer, larger accounts that drive a big share of the top line.

To move right, specialize on serving a dedicated ICP and grow within key accounts via strong account management practices. When one, or a few, clients begin to dominate (+20% of revenue) don't shy away from growth there, but invest the gains in building other client relationships up as well.

Revenue predictability

Factory revenue is steadier because it's a volume play with similar sized clients that typically smooths out any major jumps, or lulls, from large clients. Consultancy revenue is lumpy because clients are larger and timelines are longer.

There's not a lot to do to here since revenue unpredictability happens naturally with becoming a consultancy, but build this into your growth plans and budget for it to get a bit choppier as you transition.

Contract negotiation complexity

Similar to project customization, factories work off standard MSAs and SOWs with light edits. Consultancies face heavier negotiation, bespoke terms, and vendor risk reviews.

To move right, assemble a contracting kit (include insurance, security and compliance documents), assign a point person for contracts, and prep your own council to be available to review requests rapidly.

Presence of substitutes

Consider how many credible alternatives a buyer sees. Factories operate in crowded markets where speed and price dominate. Consultancy offers face fewer true substitutes and compete on capability and judgment.

To move toward a consultancy, sharpen your problem definition (along with your ICP), name the few situations where you are the obvious choice, and showcase proof that rivals cannot match (proven ROI stories are a must).

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Twelve Key Components

It typically takes a lot of work to align an agency with their preferred model but once we do, the impact is impressive. So many core strategic questions that used to be intractable problems are now simple to answer. It's worth the work.

Hopefully this list helps some shops get closer to the kind of agency they'd like to run.

Until next time!

-Nick

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