Strategy: now there’s a $50 cigar of a word, says Mick James. Strategy consulting - up or down the mountain?

While the rest of us

mortals scrabble around

in the bin for the

dog-ends that make up

tactics, in the C-suite,

the halls of the United

Nations and the hotels

of the Bilderberg Group,

the great and the good

savour the heady aroma

of strategy.



Or at least they did:

if the Bilderberg Group,

for example, ever was a

“shadow world

government”, I suspect

they’d have sought

voluntary redundancy by

now. “Global warming?

Giant oil slicks?

Financial meltdown?

Sorry, we don’t do that

any more. Try the G7. Or

Davos.”



As above, so below.

Strategy consulting has

been having a

predictably torrid time

recently partly due to

the general constriction

on spending, but partly

because strategic

options tend to get

constrained in a

recession. To put it

crudely, you generally

know when you’re screwed

and don’t want to shell

out thousands to have

that opinion confirmed.

“Blue sky” thinking is a

drug on the market.



So this is nothing

new, but strategy firms

usually survive

recessions and bounce

back afterwards.

Sometimes this may

involve a bit of a call

on partners’ resources,

but this generally

proves a worthwhile

investment for the

considerable payback

once the economy gets

back on track.



Recently, however,

strategy seems to have

got caught in a more

pervasive trend – the

tendency to look for

increasingly pragmatic

solutions, and also to

bring the strategy

function in-house,

either by having a

dedicated strategist or

appointing strategy

house alumni to senior

positions.



So it was interesting

to hear strong rumours

emerging of a proposed

merger between AT

Kearney and Booz & Co,

to create an entity

within sight – in

revenue terms at least –

of the mighty McKinsey.



There’s a logic to

this: Kearney, although

sometimes described as a

“strategy” consultancy,

has always focused much

more on the high-end

operational areas that

have benefited from the

shift in client focus.

Merging with Booz gives

it more of a seat at the

high table, and a

persuasive argument that

it can add more value to

the work of functions

such as procurement if

that work can be aligned

more closely to high-end

strategies. Booz gains

respite from the cyclical nature of

strategy consulting by

being aligned to more

stable revenue streams,

and also gets to benefit

from the practical

fruits of its

theoretical labours.



(A note here: “Booz”

should not be confused

with world’s most

annoyingly named

consultancy “Booz.Allen

& Hamilton” or

“BoozDOTAllenAMPERSANDHam

ilton” as I’d have to

describe it to every

sub-editor. They dropped

the dot and the

ampersand a while ago,

to become “Booz Allen

Hamilton” and then

divested all the

non-governmental work,

together with the dot

and the ampersand to

create “Booz & Co.”, the

entity that may now

merge with Kearney. This

will all become clearer

with a new post-merger

name, hopefully not

“Kearney & Booz” which

sounds more like a

vaudeville act than a

consultancy.)



But – and this is a

big but – mergers at

this end of the market

are quite rare. Like for

like mergers offer

little from the

individual partner point

of view. These firms

operate in a fairly

narrow market, so simply

growing market share

narrows opportunities

while increasing the

number of peers you have

to share your toys with.

Scale is not such an

issue in consultancy

generally these days,

and it’s more likely

that McKinsey’s size is

a function of its

success rather than a

cause. Even further down

the value chain, where

scale is important,

mergers and acquisitions

do need a logic beyond

simply ‘embiggening’

oneself, but this can

normally be expressed in

geographical or sector

footprint, or in

acquiring intellectual

property.



What is happening

here though is somewhat

different – a merger up

and down the value

chain. These are a lot

more difficult to pull

off, because once you

cover too much of the

value chain the

difference in the

business drivers (and

margins) can begin to

pull the business apart,

like a car with two

steering wheels.



There’s also the

chance for rivals to

start nibbling at both

ends of the chain,

taking out commoditised

stuff at the bottom end

and attempting to evict

you from the top end by

questioning the purity

of your motives and

“niching” you as a mere

implementer.



This has historically

had the effect of making

the integration of a

strategy firm with a different type of

consultancy a tricky

business. Strategy

boutique OC&C, for

example, managed to pass

through the Coopers &

Lybrand organisation

like a Kopi Luak coffee

bean though a civet cat,

emerging with it’s

distinctive nutty

flavour pretty much

intact at the other end.

ATK had a somewhat more

fraught passage through

the bowels of EDS but

still came out of it a

bit chewed but broadly

recognisable as its

former self.



In each case the

solution to the

contradictions of

covering different parts

of the value chain was

an increasing separation

that ended up calling

into question the point

of the portfolio itself.

That’s an embarrassing

and risky position to be

in, as it can also raise

doubts as to your

ability to consult in

precisely those tricky

areas of market

positioning and

portfolio management.



As annoying as it is

to deal with on a

face-to-face basis, the

total differentiation

strategy of McKinsey –

which wouldn’t even

acknowledge that the

phrase “strategy

consultancy” has a

plural – does seem to

work. You can get

irritated with the lofty

attitude of strategy

firms, and indeed of

strategy consultants

themselves (“I could

tell you what I do for a

living, but your tiny

human brain would

explode!”) but when

you’re dealing with a

group of clients who

only need to look at

their payslips to be

reminded of their own

infallibility, by God,

do you need it.



And we need it now

more than ever. Everyone

is so mired in

day-to-day drudgery and

the sheer inevitability

of everything, that

we’ve forgotten that in

the past it really was

possible to

revolutionise management

thinking. Many of those

ideas that we now take

for granted came from

consultants who were

willing to grapple with

the issues of management

on an intellectual

plane. Now the world of

business is gagging for

some new ideas: rather

than simply being very

sensible, strategy

consultants need to come

out and prove they

really are as incredibly

smart as they think they

are.



So the solution for

strategists is not to

come down from the

mountain but to try to

tempt everyone else back

up to that lofty peak.

After all, once you’re

above the clouds, the

sky is always blue.

