| Topic Name: |
The Death of Strategy Consulting |
| Message Name: |
Lay got it right |
| Date Posted: |
02/19/2002 |
| In Reply To: |
There will always be a market for strategy consulting services; it just might not always be as big as it was in 1999. The recession (if it even is a recession--4Q GDP will be positive when all the revisions are done and the NBER could declare that there actually never was a recession) has forced consultancies to redefine what markets they're competing in and how they serve those markets.
Too many consulting firms tried to be both "brain," "gray hair," and "procedure" firms. The idea is that Brains are full of smart people with a lot of general expertise (a Bain or BCG for instance), gray hairs have a lot of expertise in particular areas (e.g. McKinsey), and procedure firms do a particular procedure very well (e.g. auditing firms). In a tight market, when customers rationalized their budgets and focused very clearly focused on what they needed, the firms that tried to be everything to everyone ended up with no clear positioning.
That said, the reason McKinsey and some well-positioned firms have been hurt is more a cost problem. Consulting is a fixed cost, variable revenue industry, and McKinsey and some other expertise-based firms had a high cost structure supporting their experts, the McKinsey Quarterly, large reasearch staffs, etc. However, costs seem to have been brought back into line in many firms whose employees I've talked to.
This recession (or recessionette as some economists are calling it) has been great for consulting for several reasons:
(1) weaker players have been eliminated and have left the market; the players that remain have retrenched in their core businesses and are better differentiating themselves
(2) the industry has substantially lowered its cost structure
(3) there is significant pent-up demand for consulting services that is just now being released
(4) firms learned that growing too fast is as much a problem as growing too slowly
(5) the talent market is a buyer's market
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| Message: |
and I even understand why someone would wannabe Ken Lay right now ... but let's keep to the point.
Consulting is not dead, nor will it be within the next two or three decades. The original post confuses recovering from a five-year binge with joining AA. The world economy, and tech in particular, are recovering from an investment bust. Consulting, as it always does, went along for the ride and, as the lagging indicator it is, got thrown from the mount. Others will saddle up and ride on.
Regarding strategy consulting, Sherman, set the Wayback machine for the early 1980's when Fortune took on the strategists for their lack of traction and relevance. While I saw merit then [and now] in their criticism, the market thought differently, thus ushering in the golden age of strategy consulting. Post 1985 recession growth made the 1970's appear calm.
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