Killing Strategy: The Disruption of Management Consulting
cbinsights.com
cbinsights.com
1. A particular company will need the service infrequently
2. Many different companies will benefit from the service
3. The service requires a lot of manpower
4. The service is complicated and has a learning curve
So, to provide a concrete example, suppose you want to re-negotiate all your contracts with all your suppliers. This is the bread and butter of many large firms. However, you can't do it all the time, you only want to do it once every 10 years or so. It is quite complicated and requires a lot of people with experience doing it, and almost any company will benefit from doing it.
This is exactly when you would hire a consultant that is known and respected in this area.
This touches on one other thing that large consulting firms have, and that is global reach coupled with great internal networking and knowledge management. Bank A needs to comply with new government regulation which is similar to that passed 6 months ago in country B where we did a similar engagement. No point re-inventing the wheel a dozen times when that country B team is a few clicks away and can guide you through what they did (and more importantly what they learnt along the way).
The problem is the company can't judge work quality if they don't understand the domain. So, it boils down to most companies over billing and under delivering.
The problem is that the company can’t judge the size of the problem they have. When you don’t know what you’re asking you are very likely to get sticker shock.
If two agencies put in a bid on your job, where one is planning to profit on rework (dishonesty) and the other is estimating for all the unknowns, you’re going to go with the first guy because you like his price better. And then you’re gonna get taken to the cleaners.
The right call is the right call, even if the client dislikes the price. But sometimes you have to let the client fail before they’re willing to listen to you (the bigger the implementation, the more true this tends to be).
The consultants can cover the scope and do their job, but if the client doesn't listen and exectute then it's like the long gone consultants will be blamed. The status quo persists, etc.
We try to staff experienced people on engagements, but they get bored and leave the company because all we do are bullshit implementations. You have to give people career progression opportunities, which in consulting means managing teams through execution and training them up.
Put another way, it's the consultant's job to tell you what you might not want to hear. In plenty of orgs / cultures this isn't the case. In such cases, staff doesn't like consultants because from the front line the consultant is stating the obvious. However, it really management and leadership who should get the heat because they are the ones who define the culture where info doesn't easily transfer across the layers from see'ers and do'ers to the decision makers.
The problem for many of the pure strategy firms is that clients just bring them in for 2 weeks at the end of a project to “rubber stamp” the strategy. Of course, corporate boards got keen to this strategy and realized they didn’t really need MBB at all and should trust their people more — which is the whole reason the article was written.
Everyone in the industry has seen the writing on the wall for at least a decade. There is a reason the big 4 all went around buying up mid-market strategy firms 5-10 years ago; the market losers were on fire sale and the winners were vulnerable. But the wars there are over; everyone is focused on partnering with software companies for the next round of cloud ERP implementations.
I would say the main function of a modern management consultant is twofold: we bring in best practices from outside, and we help companies communicate. Best practices is an obvious function, but the communication is where most companies really fall down.
Often, it’s simple things like the product group never formalized the formats for their user stories / features, so we simply help them drive standards around things and make sure the dev teams intaking the stories understand the change as well.
90% of what we do is change management or in preparation for change management. Those are things that companies will probably never be good at.
And by the way, we still do the business strategy too; it’s just baked in to the implementation work these days.
I ended up feeding a lot of data to the McKinsey team who as it turned out were really smart and helped in both directions, both connecting our team with other parts of the company that might be able to leverage what we were building and also helping our team craft our message to gain the broadest visibility. We could have done it all ourselves but given that they were already there it greatly speeded up the process.
The final thing I will say is about costs. With an engineering budget that ran into the hundreds of millions annually, saving a couple million on consultants might seem like an easy optimization to make and it will make no material difference to the company. If they do add some value it will probably be at some multiple of what they cost.
But ultimately, when you’re talking complex software implementation, you need folks who understand both the business context and the tech context at a deep level. Those people tend to be consultants, either working independently or employed by a major firm (or more often recently, working independently and brought in by a major firm).
The job you’re often doing here is switching between multiple business (HR, finance, IT, etc) and technology (application, network, cloud, service, etc) layers. You really DO need MBAs, about half of whom are former engineers with 5+ years of experience. This is complex work that takes nuance and soft skills. If companies could do it themselves, they wouldn’t hire us to come fix their broken Workday/Salesforce/whatever implementations.
There are a ton of us too. My MBA program 7 years ago was teaching modern ML/AI (with profs from the school’s top-ranked CS dept) and DevOps. The MBA has become far more tech focused than it was in the past; I would expect modern coursework to include some intro to cryptography if not cryptocurrency.
Let's be clear; I'm not talking here about specialist consultants with deep industry experience and consequent insight. Those make sense to me.
I'm talking about generalist corporate-strategy/management consultants who are peddling what sure looks like a suite of industrial command+control or planning+strategy techniques. How could they possibly be providing enough value to be worth hiring?
Tax evading?
> You'd think any well-run company could get the same sort of insight from its own people.
The paradox is many companies disenfranchise their own employees through hierarchy and politics.
* Insights across the companies competitors (because they have / had engagements with them)
* Insights from other industries / markets
* Experience with a certain situation (assuming similar trends happen in different industries at different times)
Employees of the company might have similar knowledge but distributed across many instead of focused in the consultant team.
Their objective is to get paid, so they bypass many of the mechanisms that middle management uses to undermine executive initiatives.
Consultants get past all three of these challenges to surface a good solution and in the process get buy-in from everyone who needs to agree in order for a major change to be made.
Additional point is that usually there is involvement of industry specific specialists that advise project teams. They put in fewer hours, as they're not needed for the more mundane project work (slide making). Often times they're hyper-specific to the topic at hand, e.g. former CEO of competitor.
1. Poor executive leadership. 2. Poor executive leadership. 3. Poor executive leadership.
When you breed a culture of fear and silence this will always be the result. It's the CEO who says, "I'm not surrounded with people who say 'Yes' to me. I'm surrounded with people who share my vision." The CEO, after having replaced, removed, and reassigned anyone who is willing to call into question a decision made by the CEO, will make decisions without any real feedback from their executive team (an echo chamber).
The alternative?[0] The CEO who lets and encourages everyone to speak their mind. The CEO who rewards those with differing opinions and seeks truth by asking "Why?" instead of shutting down dissent. The CEO who actively seeks out executive leadership that will challenge them to justify their decisions and to keep a written record of those decisions.
[0]https://www.ted.com/talks/ray_dalio_how_to_build_a_company_w...
The reality is that strategy consultants sell services targeted at senior management at large corporations, a category that ~0% of Hacker News falls into.
This isn’t to say that consultants are without agendas. It’s just different agendas.
Also, it's way easier for me to get actionable knowledge talking and surveying people than making models or any complicated stuff. I still have to polish this knowledge and bundle it in a way that executives can consume it, but most of the times it is what I do.
Executives in Spain tend to be very old-fashioned.
A big decision looms - a new product, a new market, whatever it is, it requires the full attention of a team of people to just outline the knowledge needed to make rational decisions in it.
You're also worried about tunnel vision of your own team, success tends to bread that.
This is when you hire outside help. Temp workers to research and present a deep topic. They don't decide, you do. But rather than putting people on full payroll and then maybe need to axe them, you have them do a project.
Absolutely valuable, if employed correctly.
And don't underestimate what a McKinsey or BCG can pull in terms of network. Their research can go into places where your team simply can't reach. Good VCs act the same way btw, the value of a16z for a small startup as an advisor and door opener is the same as McK or BCG for a public co.
In some cases, of course, management consultants are hired to give cover to unpopular decisions or even to send a message to one’s workforce. In The Firm, Duff McDonald argues McKinsey in particular “might be the single greatest legitimizer of mass layoffs in history.”
“If you were a CEO and felt you needed to cut 10% of costs but didn’t feel you were getting buy-in from your employees,” he wrote, “the hiring of McKinsey generally got the point across quite clearly.”
You'd be thinking wrong. Companies hire consulting firms _because_ they can't get the same types of insights from their own people... mainly due to the fact that their people have jobs doing other things and can't stop to spend a few months doing nothing but research.
Also sensing some bias here: consulting firms work in teams with a mixture of new graduates and people with "deep industry experience and consequent insight" in order to provide a mix of expertise and exposure to new technologies/techniques coming from academia. If your experience with consultants was as a line employee or middle manager, you likely interacted only with the new grads from the team because they do most basic research and interviewing, so be aware that there may have been more experienced people on the engagement.
I wouldn't overestimate the value of the dedicated research they do. In my experience, the research was mostly interviewing and getting educated about a market and technology that the product managers, etc. were already familiar with.
It felt like sort of a waste of money but it did validate pretty much what we were doing anyway. They created some elaborate financial model which was fairly useless but which was the sort of thing internal business staff liked.
Net net. It was probably useful from an internal political perspective (which is always a consideration) even if it didn't deliver any particularly novel insights.
But large expensive reliable branded companies are important because if they make a mistake you can’t blame the person who hired them.
Also ex consultants from these firms see their value and process and hire them.
They have thrived not in spite of all the alternatives but because of them. When there are so many choices, quality signals matter.
I think many of us might define execution as more than coming up with the roadmap.
> A lot of the value that traditional management consultants have offered their clients has been similarly disrupted by technology. But as we’ve seen, consulting firms are nimble. It may help that they themselves invented the concept of “disruption.”
> Of course, there’s no guarantee that consulting firms will survive forever in their current state. Every day, there are more ex-consultants ready to share their expertise. Every day, the tools that companies can use to form their strategy get better and more advanced. And every day, consulting firms need to prove that they can be relevant in this new world — and not simply the prestige name Fortune 500 CEOs hire to get the board off their back.
> Bain & Company had always preferred intimate client relationships where it could drive greater value over [more] numerous but [less] valuable relationships.
I think the prepositions were swapped. Judging by the bullet points that follow, that sentence makes more sense with the positions of "more" and "less" swapped as follows:
> Bain & Company had always preferred intimate client relationships where it could drive greater value over [less] numerous but [more] valuable relationships.
The impression I got of this space:
1. Clients, usually executives within large, billion dollar companies, don't really mind spending what for them are pennies on a subscription from a company that claims to know what's up when they feel they don't. They see a company with certain associated credentials and trust the advice.
2. Executives, wishing to justify their own decisions, want to cover their own asses by appealing to "experts". Their employers may come across those reports, see their company ranking highly, and say "Wow, Bob. You've done a great job." It matters little how meaningful the data analysis is. The data analysis is just decorative.
3. The ranking in reports become a self-fulfilling prophecy of sorts. If you rank highly in an advisory report on a certain kind of product, and readers of that report believe the ranking, then this can lead to more sales or whatever.
To be fair, this isn't some kind of Newtonian mechanics. You can't take a bunch of data and just have all your conclusions fall out as a tidy positions in space and time. I am not making the claim that advice cannot be given or that these things cannot be researched to produce meaningful insight. I also do not claim that there are no companies out there producing valuable research. However, my personal experience does make me wonder. Even if and when the claims in the research are true, the appeals to data can become little more than a game of appearances. Maybe, in relative terms, they're not in much worse shape than academia with its data massaging, p-value hacking scandals, and unreplicated/unreplicable studies.