When selling a plan is not enough
A fast-changing context
Clayton Christensen coined the term disruptive innovation in 1995, since then many industries from music to manufacturing experienced huge changes in their business; often small players arriving from nowhere disrupted big markets.
A CB insight report titled “Killing consulting: the disruption of management consulting” (link) showed insights about the future of consulting firms.
According to the report, industries with the most vulnerabilities are the ones affected by three aspects:
- few competitors;
- outdated business practices;
- slow technological adoption.
Today consultants are selling guidance and strategies, but unfortunately, their recommendations become out of date faster than ever due to the impressive evolution of technology and fast-changing customers.
Often, strategy failures start from the first move into the execution process. In a world that forces companies to use an agile strategy, consultants are slow to adapt, they are inflexible and inefficient.
Companies choose to “buy” consultants because they have information, expertise, and insights useful to improve future projects and products.
- Information: In the old days of consulting firms, consultants could get data that were impossible for a normal company to get. They would set interviews, observations, surveys, and many other activities to get information and show companies how their products were used. Today every aspect is digitized, companies can get real-time data about purchasing, delivery time, fulfillment, and usage. There are also startups like Tableau that help organize and display data in an easy way.
- Expertise: Companies need experts and consulting firms have the power to create a huge network of experts around the world. Today, many startups help companies to connect with experts. GLG network for example is a huge database.
- Insights: Since the beginning, consulting firms have created frameworks to get insights from data like Swat, 2×2 matrix, Porter Five. These are all tools created by consulting firms but today they are accessible to everyone because former consultants left the companies and started their own business, writing books and teaching courses.
Move to Execution
Selling advice was a high margin activity especially because consultants were able to create a template and replicate it several times.
Data accessibility, expertise and insights are not enough today, companies need to unleash activities as soon as possible, this is the reason McKinsey acquired Carbon9 to strengthen cooperation between designers, developers, and data experts. Bain created Digital Ventures, a division focused on digital that looks more like a startup accelerator.
From selling strategy to selling solutions
McKinsey, one of the biggest consulting firms with 10B+ in revenue, showed a big move from strategy to execution.
According to Shaan Puri (link) McKinsey reduced “pure strategy” revenue from 70% to 10%, maybe because clients were demanding more tangible solutions than plans and advice. Shaan Puri explained what pushes consultancies like McKinsey to the next level, they have what most software companies don’t: distribution.
Today 80% of the Fortune 500 companies already work with them, and their brand is known by every CEO in America. Most of all they can sell the software with a much larger consulting contract.
Following this strategy, McKinsey created a division titled McKinsey Solutions and acquired more than ten companies over the last 5 years. What McKinsey Solution is able to generate is quite impressive, merging consulting expertise and tangible actions really push the market to the next level. (link)
A great case study is the last America’s Cup, one of the oldest and best-known sailing races in the world. In 2021 Emirates Team New Zealand had a new crew member: an Ai system (link).
McKinsey developed a virtual simulator that could test hydrofoil designs, their goal was to speed up the iterative process of design and testing by compressing in one hour what humans can learn in one year.
After 8 weeks of machine learning processes, the algorithm was able to predict results with a digital twin.
The simulation can run 24/7 without requiring any human intervention and can simulate a sailing problem with a tree complexity of 2900 (just know chess is about 120).
Selling pieces of advice is not enough anymore in a world where technology is reshaping the global economy.
According to the latest Technology Report (link), published by Bain Consulting, having a good software development process is no longer a capability, it’s an imperative across all industries.
Many consultants were used to selling a plan without embracing an agile culture. Since the end of the last century, markets have been characterized by volatility, ambiguity, uncertainty, and complexity, all aspects that made it impossible to set a strategy without an agile culture and strong control over execution.
Culture is the key component, as Peter Drucker said: “Culture eats strategy for breakfast”.