
Killing Strategy: The Disruption of Management Consulting - ALee
https://www.cbinsights.com/research/disrupting-management-consulting/
======
projectramo
For all you consultant-haters out there: there are some services that are very
natural consulting engagements. They have the following properties:

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.

~~~
Retric
Logically that sounds good, but in practice most of the work is done by people
without specific related backgrounds.

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.

~~~
hinkley
Have you ever done consulting?

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.

~~~
exelius
Rework is often the profit strategy when the client comes to us with a lowball
price in mind. Don’t chalk it all up to dishonesty; many times we have to do
exactly what the client asks us to first, watch it fail, then suggest a more
expensive path for rework.

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).

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exelius
As a management consultant, I 100% agree.

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.

~~~
sseveran
I have seen this as well. At a role earlier in my career it turned out we had
a major engagement with McKinsey around figuring out what was actually
happening in some of the most areas most critical to the future. One could
rightly point out that this is a symptom of dysfunctional senior management
but I think that oversimplifies the issue. Organizations are built over time
and simply hiring a new CEO is not really the answer. Its not like a public
company can just fire its entire leadership team, even if that is the right
thing to do.

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.

~~~
exelius
Yeah... consultants really do bring a lot of value for things that are
complex, infrequently performed step functions. Of which there are a _lot_
within a company.

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.

------
johan_larson
I've never understood why the management consultants get so much money for so
little. They are, in the end, selling the labor of clever and well-
credentialed but woefully inexperienced people at really eye-popping rates.
You'd think any well-run company could get the same sort of insight from its
own people. It's really a masterpiece of packaging and brand-building, as far
as I can tell.

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?

~~~
ajiang
I've been in this role. It is pretty common at Fortune X00 companies to have
its own people have "the answer" or "an answer" but either 1) not have the
conviction to bet their careers on it, i.e. don't rock the boat, 2) don't care
enough to push for it, or 3) don't have the credibility to get the attention
of the senior executives.

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.

~~~
knightofmars
"1) not have the conviction to bet their careers on it, i.e. don't rock the
boat, 2) don't care enough to push for it, or 3) don't have the credibility to
get the attention of the senior executives."

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...](https://www.ted.com/talks/ray_dalio_how_to_build_a_company_where_the_best_ideas_win)

~~~
mgmtconsultant
You linked to a TED Talk from Ray Dalio at Bridgewater - a company that has
hired McKinsey and BCG frequently. It's not as simple as just communicating.

The reality is that strategy consultants sell services targeted at senior
management at large corporations, a category that ~0% of Hacker News falls
into.

------
startupdiscuss
There have always been many alternatives to consulting.

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.

------
mwexler
From the top link: "When the client-consultant relationship is functioning at
its best, the consultant gives the client: ... * Execution: The roadmap to
choosing and implementing the changes to be made."

I think many of us might define execution as more than coming up with the
roadmap.

------
aj7
There was a saying in the valley: You hired a consultant when you needed to
fire someone high up.

------
crispyporkbites
This is a great explanation of what management consulting is and how it's
evolved over the past 60 years, but the title is a bit clickbaity - I kept
reading through expecting to see how the big 3 were going to be disrupted but
in the end the article concludes with:

> 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.

------
vps85
[https://hbr.org/2013/10/consulting-on-the-cusp-of-
disruption](https://hbr.org/2013/10/consulting-on-the-cusp-of-disruption)

------
sah2ed
Nitpick. The article wrote:

> _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._

~~~
baldeagle
I think the article is using ‘over’ to be ‘preferring A instead of B’ while
you are using over to mean ‘A applied to the set of B’. I agree it is
ambiguous.

------
thescrutinizer
Anecdotally, I worked for an advisory and reporting company that produced
reports and ranked them in a hazily defined index (the company was later
bought by another, larger advisory company). The way the sausage was made was
not pretty. The research staff consisted largely of recent ivy league
graduates with little experience or knowledge of the domain or of statistical
methods. Data was largely collected from the web. Initially, collection was
done by hand, but we were working to automate as much as possible (though the
leadership did not quite appreciate the need to invest in tech and did not
understand the dao of building software services). In some cases, the data
collected was woefully below the minimum sample size you'd need to be
justified in drawing any sort of meaningful conclusions (there wasn't even a
sense of what a minimum sample would look like, and not much concern about
these things when these issues were brought up to management). I recall
researchers telling me that the metrics and ranking were adjusted for
important clients, something that smells to me like pay-to-play. The data
science team was wholly unqualified. The management across the board was
unqualified. The article suggests insider trading practices inside consulting
companies. I had a similar suspicion, though not something I can prove, that
insider knowledge was being laundered through cooked data and presented as
"rigorous, data-driven insight".

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.

