Moving from a single-product, owner-run enterprise into a complex and large-scale national one is a difficult task. First, you have to build production facilities massive enough to achieve the desired economies of scale. Second, you have to invest in a national marketing and distribution effort to ensure that sales have a chance of matching that scaled-up production. And third, you have to hire, train, and trust people to administer your business.
Those people are called managers, and in the first half of the American Century, they were in very short supply. The benefits to successful first-movers were gigantic. In industries where only one or two companies took the plunge early, they dominated their field for a very long time to come; this group includes well-known names like Heinz, Campbell Soup, and Westinghouse. A ten-year merger mania, from through , also brought the creation of a number of corporate entities the likes of which the world had never seen—1, companies were crunched into megacorporations, including stalwarts like U.
Power had to be ceded to the extremities. The question was how. It was a quandary that beguiled some of the great thinkers of the time, including political scientist Max Weber, who argued that a systematic approach to marshaling resources through bureaucracy was a necessary and profound improvement over pure charismatic leadership.
To put it another way, the problem is exactly where within the company to lodge the power to make different kinds of decisions. According to Chandler, DuPont sent an emissary to four other companies experiencing similar issues—the meatpackers Armour and Wilson and Company, International Harvester, and Westinghouse Electric—to ask what they were doing. And the answers were remarkably similar: The innovators moved from the centralized system to a multidivisional structure with product and geographic breakdowns.
The concept left operating division chiefs with total control over everything except funding resources. Top managers took a more universal view of the business, monitoring the divisions and allocating capital accordingly. Steel, all employed some variant of this model. But by and large, they had developed these ideas on their own, a process of trial and error that was costly and time consuming.
They would have much preferred hiring outside experts to help them with it, if only such experts existed. This was a huge commercial opportunity that called for an entirely new kind of service. Unwittingly, the federal government did its part to create the modern consulting business. Starting in the last part of the nineteenth century, Washington made periodic regulatory efforts to curb the power of big business, including the Sherman Antitrust Act, the Federal Trade Commission Act and Clayton Act of , and the Glass-Steagall Act of The intended effect of these measures was to prevent corporations from colluding with one another to fix prices and otherwise manipulate the markets.
The unintended effect, according to historian Christopher McKenna, was to accelerate the creation of an informal—but legal—way of sharing information among oligopolists.
Who could do that? Regulatory efforts paid another rich benefit to the likes of McKinsey: Restricted from cutting backroom deals with each other, firms were thus obliged to actually compete, which meant they needed to make their operations more efficient. Here again, consultants were the answer. But perhaps the circumstance that most aided the creation of the consulting industry was the entry of a new, key player into business itself.
Empire builders with names like Carnegie, Duke, Ford, and Rockefeller had built huge, vertically integrated companies, but they had neither the time, the talent, nor the inclination to create and carry out management systems for those entities.
Its project work focused on corporate finance, environmental risk, information management, operations, strategy and organization, technology and innovation, and a host of other services to maintain the competitiveness of its clients. Today, Arthur D. Little has a range of showcases for its ground-breaking thought leadership, including Prism, its biannual journal that touches on emerging industry trends, strategic thinking and operational excellence.
Our professionals approach projects by getting to the heart of the question. From there, information is extrapolated, reviewed and assessed to determine more effective ways to operate, go to market, and increase revenues. Little is not a bureaucratic culture but one that is collaborative and forward-thinking. Our people consistently epitomize those values via the way projects are defined and managed throughout their lifecycles.
Our clients recognize this value and seek us out when faced with these challenges. As we continue to expand our market presence and take on projects that enrich the career goals of our professionals, the next years of Arthur D. The publication of these frameworks does pose a threat to the value proposition of management consulting firms. As Clayton Christensen writes in the Harvard Business Review, the most prestigious management consulting firms today operate like a black box.
Companies bring them a problem, and they produce a solution. Visibility into what happens during that process is highly limited. Criticisms about opaque business practices have been leveled at many management consultancies and technology companies alike. But Palantir, in particular, has faced enduring questions about precisely how its software gathers and analyzes data and how its clients — most notably the federal government — act on that data. Investors expect to see demonstrated proof of the likelihood of future growth — a problem compounded by the fact that, for Palantir, proving the value of its services while preserving its closely guarded secrets remains difficult.
As the company continues to make moves into the commercial arena, questions about how its products work and the true value of its consulting services could become increasingly problematic.
By demystifying the management consulting process, books, classes, and blog posts bring more transparency to the marketplace of ideas. They can do this because of consulting turnover. McKinsey, the big consulting firm that has pressed the hardest for growth, has more than 30, alumni. These alumni graduate with great strategy credentials, and they have to do something with them.
Clayton Christensen writes,. It might seem that if companies are hiring ex-consultants to do their strategy in-house, and are working less with the big consulting firms, it would be trouble for the big management consultants. However, it is indeed still growing — and the key to understanding why may lie in the fact that approximately a quarter of all management consulting spend concerns technology. After technology, the next fastest-growing sector of consulting was risk and regulatory consulting.
Similarly, the economic impact of the Covid pandemic may result in increased spending on management consulting as corporate entities seek to solidify their position in an increasingly tentative global economy.
Even as management consulting frameworks become public knowledge, and as more and more of the consultants who implemented those insights may be on the job market every year, this does not necessarily replace the utility of consultancies when it comes to new and emergent issues.
Consulting firms are tasked with looking ahead to figure out what major development will matter to their clients next.
Welch instituted a new rule that GE would only be involved in an industry if it could be the 1 or 2 player in the industry. He sold off underperforming businesses, laying off , people in the process.
Even more impressive, however, was the level of execution on that focus. But there are limits to the insights that even the most visionary management consultants can offer. The increasing demands of modern business have prompted many consulting firms to leverage technology to enhance their offerings. Coming up with a strategy and actually helping a client implement that strategy are two completely different things.
Consulting firms have been aware of this for a long time. Contrary to the narrative that consultants just tell companies what to do, without helping them do it, the strategy side of consulting has always existed alongside a dedicated execution side. From the s through much of the 21st century so far, however, the strategy side has been the dominant force inside most management consultancies.
Selling pure strategy is almost always a higher-margin activity, especially when you can package up your strategy into certain, repeatable templates. Strategy on its own has become more commodified, forcing a reconfiguration. Big consultancies, more and more, are having to double down on execution in order to stay relevant and useful.
By the mids, every consulting firm knew the average client company needed help executing on their recommendations. Each consulting firm dealt with this pressure differently, but one firm emerged as a standout: Bain.
Bain had always prioritized intimate client relationships where it could drive greater value, preferring a few high-value engagements to having more numerous but less valuable relationships. The company made 3 crucial decisions early on about how it would work with clients to make that happen:.
This link prompted concerns of a conflict of interest for Bain. At the same time, that embedded team of Bainies helped Guinness sell companies from its portfolio and make a powerful expansion move into hard liquor with a few strategic acquisitions. Profits for Guinness grew six-fold after these changes, and Bain was never officially accused of any wrongdoing.
Today, Bain — like every major management consulting firm — is focused on the rise in need for digital and technological consulting. In the s and s, a corporation would have gone to BCG for help understanding which lines of business to cut and which to invest more money in. The execution of that recommendation is something any CEO could handle.
Eden McCallum and BTG bring ex-consultants and other strategically trained, experienced operators together to form lean teams for client projects, and contract them out without the overhead of working with a conventional management consulting firm. There are billions of dollars a year in massive, business-rethinking kinds of projects that CEOs can only justify to their board if they hire a big name like Bain or BCG.
They can build a client base among companies looking for more niche help and more routine projects with better defined parameters and clearer expectations. A new CPG brand, for instance, trying to figure out how to price its products has a fairly routinized problem on its hands.
Most crucially, they can do all of this independently with a SaaS dashboard, without waiting for a team of analysts from Bain to deliver the results. Solutions is a proprietary analytics tool that lets companies access certain insights on their own, with McKinsey there as an outlet for actually putting those learnings into practice.
This effectively flips the conventional consulting model on its head. Rather than going to McKinsey for advice and having it crunch the numbers to develop insights, this model allows a company to look at data to form its own hypotheses. After that, it can go to McKinsey for help making further sense of the data and for deciding how best to respond. In this way, with Solutions and NPS Prism, respectively, McKinsey and Bain are both using their expertise to offer companies better tools instead of selling their expertise directly and charging by the hour.
Corporate legal departments were once regarded as backwaters for lawyers. The real clout, and money, lay in outside corporate law firms. Over time, as outside law firm fees rose higher and higher, companies started to look for alternatives.
Globalization was driving new transnational legal issues, and this increased complexity made it beneficial for business leaders to have legal support close and on-call at any time.
While corporate law firms have their purpose, corporations now mostly prefer to keep their legal work in-house. Similarly, consulting and strategy teams could be increasingly brought in-house, rather than hired externally. As Clayton Christensen points out, the inside counsel model is made possible by the fact that general counsels and their staff today have access to powerful legal workflow and on-demand staffing tools like Axiom.
They can get customized support from networks like AdvanceLaw. And they can outsource more basic tasks like document and data review to firms like LeClairRyan, which run leaner and cheaper than a conventional law firm.
A lot of the value that traditional management consultants have offered their clients has been similarly disrupted by technology. 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 that Fortune CEOs hire to get the board off their back. First name. Last name.
0コメント