"Killing Strategy: The Disruption Of Management Consulting"

Five years after we posted "Clayton Christensen: The Next Industry Headed Toward Disruption--Consulting", it looks like the disruption is here.

From CB Insights, May 31:

Since former Boston Consulting Group consultant Clayton Christensen first used the words "disruptive innovation" in 1995, nimble startups have challenged incumbents in every field from music to manufacturing.

The industries that have proven the most vulnerable to disruption have been those with:

• One or a few major players
• Relatively outdated business practices
• Slow technology adoption

Oddly, management consulting is rarely named in discussions about industries vulnerable to disruption (unless you ask Christensen), despite the fact that it meets all of the above qualifications.

But the disruption of management consulting is not a hypothetical. Management consulting has already been beset on all sides by competitors and new technologies. They have maintained status and growth through prestige, branding, and long-time client relationships, but they’re ultimately no more immune to the forces of disruption than any other industry.

“[W]e’re still early in the story of consulting’s disruption… More likely than not, alarms won’t sound until it’s already too late in the game.” —Clayton Christensen

Like the taxi industry, management consulting is primarily human-driven. Hourly or per diem billing, rather than outcome or value-based pricing, is still the general rule (even as industries like law move away from billable hours). The increasing pace of technological change means that more and more, consultants’ recommendations are out of date nearly as soon as they’re made.

Consulting, in other words, is inefficient, inflexible, and slow to adapt. Any of these weaknesses alone would threaten disruption — possessing all of them points to a major fight ahead.

McKinsey, Bain, and BCG, of course, have weathered existential crises before. These consultancies offer a highly brand-driven, prestigious, and hard-to-quantify product to Fortune 100 companies with plenty of cash to spend.

If you dig deeper into the specific types of services that these firms offer their clients today, however, it’s clear that a tectonic disruption is hitting management consulting just as it has hit many other industries before. It may be a slow and gradual change, and the big names may well endure — no matter how thinned their ranks — but a change is coming.

Table of contents

• The invention of strategy
• The four functions of consulting
• Information
• Expertise
• Insight
• Execution
• Disrupting the disruptors

The invention of strategy
Before Bruce Doolin Henderson opened the doors of Boston Consulting Group on July 1, 1963, the concept of “competition” barely existed in American business culture, let alone strategy.

There were great, successful companies. Companies made plans. Those companies were not, however, thinking analytically and rigorously at a high level about the classic three C’s of strategy: their customers, their costs, and their competitors.

“What companies didn’t have before the strategy revolution was a way of systematically putting together all the elements that determined their corporate fate… the pre-strategy worldview lacked a rigorous sense of the dynamics of competition.” —Walter Kiechel

Before BCG, McKinsey, and Bain, those who owned and ran businesses in America generally dismissed “strategy” as something for generals and political campaigns....MUCH MORE