5/8/2014 Management consulting: To the brainy, the spoils | The Economist

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As the world grows more confusing, demand for clever consultants is booming
May 11th 2013 | NEW YORK | From the print edition
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Dilma’s tight skirt

ELITE management consultancies shun the spotlight. They hardly advertise: everyone who 257 people recommend this.
might hire them already knows their names. The Manhattan office that houses McKinsey &Next in Business X
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Company does not trumpet the fact in its lobby. At Bain & Company’s recent partner The life of 959 peopleconsultant
a young recommend this.
meeting at a Maryland hotel, signs and name-tags carried a discreet logo, but no mention of
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press release in April, counts as the braggart of the bunch.
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From the print edition May 11th 2013

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Consultants have a lot to smile about (see table). The leading In this section Daily chart: Brave new world

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5/8/2014 Management consulting: To the brainy, the spoils | The Economist
three strategy consultancies have seen years of double-digit To the brainy, the spoils Graphic detail - 1 hour 11 mins ago

growth despite global economic gloom. In 2011, the last year PowerPoint Rangers
for which Kennedy Information, a consulting-research group, Bargain boats
has comparable revenue numbers, Bain grew by 17.3%, BCG Sloths: Sticky on the inside
Get a lifelog Babbage - 1 hour 48 mins ago
by 14.5% and McKinsey by 12.4%. All three are opening new
Chasseurs d’ambulances
offices.
Worth paying for? Eastern Ukraine's referendums: Calling
Big trends that befuddle clients mean big money for clever Putin's bluff
The lust for Latino lucre
Eastern approaches - 2 hours 4 mins ago
consultants. Barack Obama’s gazillion-page health reform
Microsoft blues
has boosted health-care consulting; firms would rather pay up
Reprints
America’s gardening business: Privet
than read the blasted thing. The Dodd-Frank financial reform equity
has done the same for financial-sector work. Energy and Schumpeter - 3 hours 34 mins ago
technology are hot, too. Related topics
House prices: The same old song
Companies are reluctant to talk about their use of consultants, A.T. Kearney
Buttonw ood's notebook - May 8th, 11:11
and consultancies are relentlessly tight-lipped. Bain is said to BCG
use code-names for clients even in internal discussions. Such Deloitte
secrecy makes this a hard industry to analyse. Housing markets: Buy, buy or bye, bye
Free exchange - May 8th, 10:09

It also lets stereotypes flourish. McKinseyites are said to be “vainies” (who come and lecture
clients on the McKinsey way). BCG people are “brainies” (who spout academic theory). And
South Africa’s elections: Early results
the “Bainies” have a reputation for throwing bodies at delivering quick bottom-line results for
Baobab - May 8th, 08:37
clients.

In fact, the big three all learn from each other. All three now use their alumni networks to More from our blogs »
gather intelligence and generate business—something McKinsey is famous for. All three
stake some of their fees on the success of their projects, a practice once associated with
Bain. And all three show off their big ideas to the wider public, as BCG’s founder was once
among the few to do. Most popular
Recommended Commented
Consulting is no licence to make easy money. Cynics sneer that clients spend millions on
consultants only to give the boss an excuse to do what he planned to do anyway. But that 1
Chinese and
would be implausibly wasteful in these days of tight budgets. Consultants today cannot just
American GDP
deliver a slideshow and pocket fat fees. Even the elite three now make most of their revenue forecasts
from implementing ideas, from finding ways to improve clients’ internal processes and from Catching the eagle

other tasks not traditionally considered “strategy consulting”.

2 The weakened West: What would America fight
As the elite firms move down into implementation and operations, they are meeting big new for?

rivals hoping to move up into the loftier realms of strategy. Over the weekend of May 4th-5th 3 Letters: On the IPCC, Russia, Afghanistan,
banks, jobs, Parliament, beer, cheese, Adrian
partners at Roland Berger, a mid-tier consultancy, met to discuss a possible buyer for their Mole
firm. The most likely candidates are thought to be PwC, Deloitte and Ernst & Young, three of 4 Geopolitics: The decline of deterrence
the “Big Four” accounting firms (the other is KPMG). 5 Politics this week

The big accountancy firms now do more consulting than McKinsey, BCG and Bain. Much of
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this involves manpower-intensive tasks such as technology integration. But their strategy
and operations practices are ambitious, too. In January Deloitte bought Monitor, a brainy
strategy firm, out of bankruptcy. In 2011 PwC bought PTRM, a respected operations
consultancy. All four have scooped up smaller firms too. A successful Big Four bid for
Roland Berger would reopen an old question: can the Big Four crack the elite tier?

It is too early to know whether the brainboxes of Monitor will fit comfortably into the Deloitte
juggernaut. When EDS, a computer-equipment and services provider, bought A.T. Kearney,
a midsized strategy firm, cultures clashed calamitously. A.T. Kearney bought itself free in
2006.

Nonetheless, Mike Canning, the head of Deloitte’s strategy consulting in America, says the
Monitor integration is going smoothly, and that clients are showing new interest in Deloitte. Is
Deloitte competing with McKinsey, Bain and BCG for work? “Day in, day out, on a regular
basis,” says Mr Canning. Dana McIlwain of PwC echoes that: “We are definitely competing
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5/8/2014 Management consulting: To the brainy, the spoils | The Economist
today, and only more so in the future.”
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Bob Bechek, Bain’s boss, puts it differently: competition with the Big Four is up “very slightly
in the past few years, but I mean like a couple of percentage points”. He salutes the Big Stay informed today and every day
Four: they do what they do well and profitably. But he argues that the heavy-lift, repeatable Get e-mail newsletters
work at which they excel is a different kind of business. Strategy consultants concoct novel Subscribe to The Economist's free e-mail
newsletters and alerts.
solutions to unique problems, which is hard.
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Rich Lesser, BCG’s boss, acknowledges the challenge from the Big Four, but is confident.
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Having new rivals is nothing new, he says. Tom Rodenhauser of Kennedy Information postings on Twitter
reckons that the Big Four “are cracking the C-suite, but they’re not first on the speed-dial for
strategy work”. Follow The Economist on Facebook
See a selection of The Economist's articles,
The elite firms are keen not to seem complacent. While boasting about opening offices in events, topical videos and debates on Facebook.
Bogotá or Addis Ababa they acknowledge that emerging-world bosses are not blown away
by flashy names. The consultants aim to win trust with quick projects that show bottom-line Advertisement
results, before looking to book longer engagements.

Clients in the rich world are changing, too. Fifteen years ago Indra Nooyi, then the head of
strategy (now the boss) at PepsiCo, was a demanding client for consultants, having been
one herself at BCG. She was a rarity at the time. No longer: the consultancies have seen
many of their alumni go on to fill senior positions at big companies.

Some, such as McKinsey, make it easy for big firms to poach their people, by putting
potential employers directly in touch with consultants who tick the right boxes for a vacancy.
The idea is that this outplacement service makes McKinsey a more attractive place to work.
It also keeps the talent churning, constantly refreshing the firm’s intellectual capital.

Clients are increasingly demanding specific expertise, not just raw brainpower. McKinsey
and BCG, in particular, are hiring more scientists, doctors and mid-career industry types,
and reducing the proportion of new MBAs in their ranks.

Vainie: “Vidi, vici”

The firms spend big sums on “thought leadership”: ie, papers, books and conferences. This
is not all airy-fairy theory. McKinsey has invested heavily in proprietary data. Its boss,
Dominic Barton, says: “With the push of a button we can identify the top 50 cities in the
world where diapers will likely be sold over the next ten years.” The firm invests $400m a
year on “knowledge development”, and Mr Barton touts its “university-like capabilities” to
impart it to its consultants.

It is fashionable to complain that consultants “steal your watch and then tell you the time”, as
one book put it. But customers clearly value what the consultants offer. Otherwise, the elite
three and the Big Four would not be growing so fast.

Things are harder for the next tier, however. Old firms such as A.T. Kearney and Booz &
Company (which considered but abandoned the idea of a merger in 2010) are seen by
some potential clients as too small to bestride the globe but too big to be nimble. They will
watch Roland Berger’s fate with interest.

Correction: In the original version of this article the table mistakenly claimed that Boston Consulting Group

has 6,200 employees. It actually has around 9,000 employees of which about 6,200 are consultants. This

was corrected on May 14th. Our apologies.

From the print edition: Business

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