Monitor Bankruptcy: Is the Consulting Industry in Trouble?

by Phil Stott | November 19, 2012

Monitor Group's recently announced bankruptcy and subsequent buyout by Deloitte has been met in some quarters with the distinct sounds of schadenfreude. Whether your preferred metaphor involves "your mechanic get[ting] into a car accident because of faulty brakes" or "the cobbler's shoes," one clear idea is emerging from much of the coverage of Monitor's demise: there's precious little that tops the irony of a consulting firm going bust for want of the ability to deal with changing market conditions—especially when one of the founders of the firm is none other than management theory demi-god Michael Porter.

But while there have been plenty of sly digs thrown Monitor's way in the past couple of weeks, the wider question of the overall health of the consulting industry remains open. To put it bluntly, was Monitor merely a victim of its own hubris—a simple cautionary tale for those in the industry to learn from—or is the industry itself in trouble?

Is the strategy industry crumbling?

Writing at Spend Matters, scenario planning expert Art Hutchinson offers the following indictment of much of his own profession:

"Monitor was known—among other things—as a purveyor of scenario planning services. Unfortunately much of what passes for scenario thinking is only pseudo-effective executive entertainment. Such work is too often tied to rigid, self-affirming models for organizational change that don't break the hubris trap. What I like to call 'organizational antibodies' work to surround and kill that which is foreign—even that with the power to save."

While he goes on to offer a model of scenario planning that he claims does effective work—with no prizes for guessing who might have founded a firm that does such work—Hutchinson's dismissal of a large swathe of the consulting industry echoes the kind of criticism that is usually leveled at it from the outside. As such, it's almost akin to the Emperor's tailor having an attack of conscience and admitting that his new garments might not be exactly as promised.

Over at Forbes, meanwhile, former Monitorite Peter Cohan argues that:

"Monitor believed too much in the value of its own brilliance. It 'tried to be so creative that it often failed to give the simple best solution. When someone asks for Kleenex, they don't need customized Kleenex.
And the recession hit Monitor particularly hard because clients needed well-tested solutions that were inexpensive to implement and that would deliver quick results. Monitor could not deliver such solutions."

On the surface, that could indeed spell wider trouble for the industry—at least until we're in a period where the economy is back on the sort of footing where clients will feel comfortable pushing boundaries. After all, if "tried and tested solutions" are the answer to everything, the need for consulting services becomes ever more diminished every time those solutions are implemented—it could even creates a case for companies to simply have in-house strategy experts. However, there's much more to the Monitor story than that.

Monitor's failings

In the same piece quoted above, Peter Cohan points out that one of the biggest problems at Monitor is that the firm didn't follow the rules of business laid out by its most prominent founder—Michael Porter. And indeed, in a recent appearance at the World Business Forum in New York, Porter stated that innovation is often given too much priority at companies. While he took pains to stress that he wasn't advocating against innovation, he pointed out that companies that succeed tend to be the ones that execute strategies consistently, rather than breaking new ground—the antithesis of what appears to have been the case at Monitor in recent years.

Additionally, Monitor hasn't been alone in facing tougher market conditions over the past few years. In a recent opinion piece for Quartz, A.T. Kearney managing partner Paul Laudicina described how his firm dealt with a cash crisis in 2008:

"We decided against any wholesale cut in our headcount. In my view, doing so would only boost our profits in the short-run at the expense of our competitive position over time. So we managed to hold our worldwide team of nearly 3,000 employees together and nursed the firm back to health.  The strain on our bottom line was only temporary.  High morale and robust growth have followed, allowing us to take back our place in the top tier of the consulting world."

While Monitor also attempted to make it through with resorting to layoffs, its bottom line issues proved more lasting. A key reason for the difference: A.T. Kearney's diversification and willingness to focus on more bread and butter solutions ensured its survival.

There is such thing as bad publicity

There is one area concerning Monitor's demise where all commentators seem to be in agreement: the firm's decision to take on work in Libya in 2008 was disastrously bad for PR. In the aftermath of the Arab Spring, it's easy to state that the firm shouldn't have been involved with the Qaddafi regime, and the decision to do so can seem inexplicable (generous fees aside). But Libya—and the rest of the region—looked very different in 2008. At the time, the Qaddafi regime seemed more or less permanent, with the only chance for genuine change in the country—something even members of the Qaddafi clan acknowledged was necessary—likely to come from internal initiatives. As such, the situation in Libya may have seemed like a genuine, if risky opportunity to leave a lasting legacy, not to mention to reap some serious kudos for the firm. As we know, things turned out differently, and the firm ended up losing the gamble it had taken in a very public manner.

With all of that in mind, the picture that is emerging does seem to favor the conclusion that problems within Monitor were largely to blame for its demise. While continued economic weakness undoubtedly played a role, the success of other firms in the same industry suggests that, had Monitor acted differently at the first signs of trouble —either by cutting costs or shifting focus—that it might be in a very different position today.

--Phil Stott, Vault.com

Filed Under: Consulting | Job Search | Workplace Issues


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