The Future of Strategy Consulting
I’ve been having a great discussion with over his article on the past and future of consulting, and I’ve been thinking over his last comment for a few days now:
When you say "good strategies aim to create long-term sustainable competitive advantage. But they also need to immediately inspire focused and aligned decisions. If this doesn’t happen, the long-term will never happen either" are you referring to some sort of benefits realization metric in the short term?
How to evaluate value realized?
I've seen a few frameworks over the years, but I feel they end up in the same bucket... More numbers and PowerPoints, but what is the client left with ultimately?
And I feel we’re almost talking about the same thing here. The importance of measurable value creation, the crucial role of implementation… I fully agree that if you can evaluate the value realized, you should! And through this simple action, you can then align incentives, pricing structures, business models… You can achieve skin in the game.
However, while his perspective addresses the entire scope of consulting and advisory, I focus more on the strategy consulting niche. Which is part of consulting, for sure, but it does have some critical specificities.
Strategy Consulting × Management Consulting
If there is one thing that critically distinguishes Strategy Consulting in particular from Management Consulting in general, I would say it’s this:
Strategy Consulting is naturally focused on long-term value creation, whereas Management Consulting can focus on a variety of time horizons.
Now, there’s a lot of debate over how to do this thing, how to create “sustainable competitive advantages” over the long term so that you create disproportional value. They span from classical positioning schools to resource-based views of the firm and playing-to-win synthetical frameworks (my particular favorite) and beyond.
Now, I will have to ask the reader to take in faith that well-executed strategy projects do help create long-term value. There may be some justified cynicism in this regard, particularly given how many people confuse what strategy is—and mistakenly expect strategic outcomes from non-strategic projects. But place Roger Martin or Richard Rumelt in a room with any competent C-Level, take a great strategist to talk with your main execs, and you will get the difference.
Besides the how, though, an essential feature of this lens is that it is really, really difficult to measure long-term value creation in the short-term. And yet, strategy consulting projects are executed and paid for in the short-term.
So, how can we square this circle?
Most “strategy” firms don’t even try
An open secret in the consulting industry is that strategy engagements make up ~10% of the total revenues of the leading strategy firms, if that—with significant consequences for their talent development and basis of expertise. Here is Roger Martin:
Thanks to the success of strategy as an offering, McKinsey, BCG and Bain gained access to the C-suites of the world's companies to an extent never seen before by outside advisors. Sure, the big accounting firms had access to the CFO, but not the CEO to the extent of the strategy firms. This access positioned them to do lots and lots of work other than strategy - like post-merger integration, overhead cost reduction, salesforce reorganization, and digital transformation.
These projects turned out to be gigantic in comparison to strategy assignments - literally orders of magnitude greater in revenues. Selling and performing these kinds of non-strategy projects helped these firms become huge. They are all private so getting reliable numbers is difficult but recent estimates put their annual revenues in the $4 billion (Bain) to $10 billion (McKinsey) range. At that size, there is absolutely no way to sustain the revenues by doing strategy work because the assignments just aren't in big enough revenue chunks. As a consequence, strategy (by my definition) has become a small line of business for these firms. Strategy is still beloved because it is their heritage. But it is proportionately tiny for each of them.
As a result, these firms are no longer the major sources of new strategy insights or key developers of strategy talent that they once were. Make no mistake about it, these are great firms that do great advisory and transformation work with great people - just not in strategy to a major extent anymore.
So, in these cases, “what is the client left with ultimately?” If they only hire the strategy project, just numbers and PowerPoints. If they employ subsequent advisory and transformation work—a disguised form of implementation—then yes, that’s where the MBB magic starts happening.
Which is not a good answer. A good strategy project should get the client somewhere, not just “prime” them to hire more work.
Relying on the client doesn’t help either
Here is Roger Martin, again:
The majority of 'strategy consultants' don't even have a useful definition of strategy, let alone are able to consult usefully. If a client doesn't know a thing about strategy, they won't be able to distinguish between a strategy charlatan and a strategy advisor.
Which is a great sentiment. I share it. The best clients I’ve worked with have been those who knew enough strategy to be helpful.
But we can’t always count on it. Even with long introductory chapters on “education,” we cannot get clients completely up to speed in the few weeks that strategy projects usually run. I’ve tried it.
A proposal: aim for immediate impact
So, let’s go back to my comment that we “need to immediately inspire focused and aligned decisions. If this doesn’t happen, the long-term will never happen either.”
I base this on a failure mode I’ve seen happen quite a few times in my career. The “PowerPoint” is ready, the presentations have been delivered, the C-Level seems aligned… and the expected organizational transformation doesn’t happen. Why?
Sure, they didn’t hire us for implementation (I don’t blame them; it might have run 2-4× the price of the strategy design). But even that is not enough. I’ve seen strategies get executed without external implementation assistance, and sadly I’ve also seen implementation projects that could not make a strategy fly.
What distinguished each case was whether the designed strategy was just technical, or also inspirational for everyone in the company!
I don’t make fake-motivational like “make a better world (somehow)” or greed-inspiring like “double our org size in order to triple our bonuses.” I mean inspirational as in transform the organization into a better place that we understand.
Good strategies bring clarity. They are simple to understand. And within this simplicity the inspirational vision must be evident enough to inspire focused and aligned decisions.
How should this be measured? I don’t have a clear answer, but a simple survey at the beginning and end of the project would help. Just ensure it’s not only for the C-level; it should be done across most of the organization.
That’s a form of skin-in-the-game I’d like to see…
An addendum: stoicism and consulting
We perform our best work when our values and principles drive it. That’s my belief. And I love applying the principles of stoicism to my work, because
Stoicism sets it somewhat apart from other forms of self-help, which focus more on making you feel better. Stoicism tackles this and goes beyond it by helping the practitioner, and the world around them, be better.
That’s on his amazing “Handbook for New Stoics.” And, for me, great consulting / great strategy consulting brings us closer to our nature:
The most important aspects of human nature, the Stoics thought, are twofold: that we are social animals (and are then deeply interdependent with other people) and that we are capable of reasoning-based problem solving. So to live according to nature means using reason to improve social living.
Great consulting does that. Great strategies do that. So let’s do that. Let’s use our reasons to improve the lives of those around us.
Isn’t that a simple, clear, inspirational strategy?
All the best,
-Felipe
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