What on earth is a challenger consultancy and why do we need them?
Management consulting is a very weird industry, firstly it’s massive, something valued in the region of $1tn a year … you don’t need someone from KPMG that’s wads of cash.
It’s also pretty shadowy. If you don’t know what I mean, go ask a management consultant what they do. I can almost guarantee you won’t get a single straight or clear answer. If you do, then you should let me know about that person because I’d probably be pretty keen on hiring them.
As a society, we’re normally pretty good at exposing, parodying or just telling stories from such realms. There’s countless dramas and documentaries about the good, the bad and the downright weird of most professions set in hospitals, schools, legal firms, the police, courtrooms and suburban paper companies but not so much in management consulting — House of Lies with Don Cheadle perhaps being the one notable exception … but then, did anyone who wasn’t working for Deloitte, McKinsey or Bain actually watch it?
“The only thing that we need to figure out is what makes them think they can’t live without us for the next three years while we infect the host and bleed them dry.” — Marty Kaan, House of Lies
There are these guys though. It’s 99% accurate. A first for something produced by a management consulting. https://www.instagram.com/crazymgmtconsultants/
Literally every big company in the world is engaging one or many management consultants in some way, shape or form. That isn’t a bad thing, a management consultant can be a great help — a biased opinion I will admit. At their best, consultants bring specialist skills, experience and capacity to companies without the burden of bringing on more full time employees.
The problem starts with the business model, consultants make money by selling hours. Seems fine on the face of it, but it’s the start of a long and slippery slope. To make a lot of money in management consulting, you need a lot of bodies whose time you can sell. To keep the costs down, consultancies get a lot of junior people with a half decent university education and bill them out as much as possible in little pyramids or pods. A few analysts, a senior consultant, a manager handling the daily client interactions, a senior manager providing ‘oversight’ and a partner who swans into the important meetings to sell the next phase. Internally they call this leverage.
I could write a book about the inner workings and flaws of big consultancies but I’ll save that for another day.
Simply, big consultancy needs to keep a lot of people ‘utilized’, the old blokes at the top spend most of their time focussed on excel spreadsheets from resourcing systems. The young and eager people at the bottom are sold this glamorous and important lifestyle travelling the world and advising CEOs on their business. The reality is an awful lot of stressed people in the middle, spending more time on internal meetings, second guessing what their client or partner wants, looking to jam as many people onto a project as possible, charging out young people learning on the job at crazy hourly rates, hiding behind quite a lot of business buzzwords to appear more competent and then either withholding the most important pieces to ensure the client has become dependent ensuring continuity of the engagement.
You may detect a slight bit of bitterness in here but I can assure you it’s most driven out of experience. You’re not incentivized to help your clients in a big consultancy, you do that because you personally care, the firm is more bothered about you creating leverage, ensuring people are billable and thinking about the ‘on-sell’.
The thing is, I actually really like consulting work. I love the variety of working with different people in different industries and I like to think I’m pretty good at the bit of consulting I do well, helping companies and the people within them do things either differently or better, specifically creating products their customers actually want and will pay for.
Management consulting almost certainly isn’t going anywhere, though I suspect their fees are going to take a bit of a hit as a result of Covid-19. *sidenote, this is a great time to hire young consultants kindly trained and laid off before they got too tainted.
Almost every industry has had or is having its challenger moment, it’s certainly true in banking right now thanks to digital banks threatening the established incumbents, it’s happened already to telecoms companies as messaging apps ripped out the established business models, we’ve seen low cost airlines do it to flag carriers and so on.
Consultancies have often survived by the old adage “you don’t get fired for hiring IBM/McKinsey/Deloitte”. But I’m not sure that’s true anymore.
The big firms were safe in that they got through procurement, had the admin behind them to deal with that burden, gave people a safe job on a decent salary. It’s never been so easy to set up a business as now, it’s never been more easy to be more connected, to find great talent, it’s never been so normal for people to work freelance and we’ve even learned to do all this without the need for people in the office.
It’s also never been a better time for procurement to cut costs by choosing the little guys that can fulfill the brief better, faster and cheaper. Downtown office towers with your name on them and partner perks don’t come cheap y’know.
The Challenger Consultancies will change things by being transparent on who they are, what they do really well and doing it differently (faster, better and cheaper … though I would hope it’s not a race to the bottom). Being a big one stop shop, bloated from hiring, acquisition and vanity is just a burden these days.
Even after trimming some of the fat, there are two big shifts in how the challenger consulting movement will be better, doing things the big firms just aren’t set up for.
They’re modular, you buy what you need from the best in the business, not whoever happens to be on the bench
We are undergoing a renaissance of new small firms, founded by people who have been in and around big and small consultancies and get the industry as well as a set of new kids on the block taking a path that is much more entrepreneurial.
These businesses don’t want to be everything to everybody, they do their thing really well and collaborate with other people around them who do their bit.
Typically it’s been harder for clients to work with smaller shops, they come with more perceived risk. Procurement look at them as being a risk as they haven’t got 100 years of history behind them, clients look at them and think about the risk of them choosing someone without a brand name. If McKinsey screw up I can blame them, if the small agency screws up then people will blame me.
But that’s now changing, clients are much wiser to the fact that they don’t get the specialists from Deloitte, that so called “banking AI expert” turns out to be a guy 3 years out of college who just rolled off a big Salesforce implementation with a retailer than ran 6 months and $5m over budget. He learned most of what he knows about AI on the flight to the client site that Monday morning …
Likewise, small agencies and consultancies are becoming much savvier about how they collaborate and work with each other. Expect to see a lot more Davids working together to provide real alternatives to the one stop shop Goliaths.
Making things together, not slides.
Entire Instagram followings have been developed based on the fact that as a management consultant, you’re basically just a slide monkey.
Every PPT slide a big consultancy gives you probably cost at least $2k when you take into account it took a minion to write it, a slightly more superior minion to review it, a ‘Manager’ to check it again and tell them not so nicely to redo it, not to mention the partner revisions. That’s all fine because it happened on the clock and they’ve got a timesheet to prove it.
There’s a reason McKinsey like the thud factor of a big deck hitting a client’s desk each Thursday afternoon, each one of those slides is cash money in the bank.
Do you really care about those slides or do you actually care about the impact of what that smart thinking turned into?
The future of consulting isn’t more Powerpoint, it’s actually having the skills to make things. 100 pages on a bank operating model, or 120 pages on blockchain is frankly useless. Mostly because the kids who made it by working till 3am after a psychopathic partner red penned it likely know little more than you do. I know this because I’ve been there.
The future of consulting and where the challengers will win comes in making things. You want a new digital bank? Well us, alongside our modular friends are gonna actually build one with you. The right people on brand, with the right strategy, with the right technology and supported with the people who understand the rules, regulations and commercial impact of it all. We all work for different companies, but for this thing, we’re building it with you, with aligned incentives. I’d like to see EY or Accenture do that, let alone without a dozen change requests as the budget balloons and timeline slips.
Now or Never is our take on what a Challenger Consultancy should be. We’re only going to do the work we know we do really well, we’re going to be super transparent about how we do that work, we’re going to work with the best specialists in the business to round out our skills, and we’re going to align our incentives with those of our clients.
Advisory — for when you need a little outside help, whether that’s a bit of customer research, some inspiration for a new product or some advice on how to make it happen.
Modular projects — for when you need diverse skills to solve a bigger problem, we bring our network of specialist agencies and freelancers spanning brand, creative, technology. Whether you want to build a bank, design a new retail brand, find new value in your data or are seeking some hard to find skills, we probably have the right people.
Ventures — for making something that a traditional project can’t deliver, we ‘co-found’ corporate ventures with our clients, aligning our incentives with theirs, we win when they do, no need to holding back information or finding endless new consulting opportunities.
“I have never seen a management consultant’s report in my long life that didn’t end with the following paragraph: “What this situation really needs is more management consulting.” — Charlie Munger (a very wise man).
