Monday, December 7, 2015

The Lords of Strategy Have No Clothes

There’s a dirty little secret inside the premium strategy consultancies. They don’t do strategy. At least, not anymore.

What is it that they do instead? They sell--over and over--the same project plans that large corporate clients like to buy in volume. Across dozens of offices, years of experience, and millions of highly-educated man-and-woman-hours, they’ve accumulated a treasure trove of project designs, complete with tested managerial hooks, client friendly value-propositions, and confidence-inspiring project plans: all of these in pitch decks generously populated with detailed task lists, abundant supplies of sample infographics and disciplined-looking Gantt charts. Cumulatively, this trove of PowerPoint files generates billions of dollars of revenue for these firms every year.

This is the core competitive advantage of firms like McKinsey, The Boston Consulting Group and Bain and Company: their proprietary repositories of intellectual property, trade secrets that capitalize the labor of thousands of Harvard MBAs and allow special ops teams of selling partners to appear as if they’ve solved a number of knotty problems many times before. These repositories (we called ours KM at BCG) empower, as one example, a partner in Hamburg to sell a million dollar project based on the three year old experience of a partner in Dallas she’s never met.

It wasn’t always this way. Back when the early strategy firms opened up the market for premium advisory services, partner groups took a far more restrictive view of knowledge sharing. At BCG, client presentations were rigorously destroyed, all except for a single copy retained in the aptly named “inviolate file.” New consultants were instructed never to dare to even breathe a client name to family members. Client relationships with a firm like Bain and Company were even offered exclusively within an industry. Their clients viewed the fact that they had engaged the consultancy as a competitive advantage, one that shouldn’t be disclosed lest it betray the bold strategic thrusts that were under development.

Finding deep strategic insights based on original, quantitative analysis was the work of the strategy consultant. Once upon a time.

But as years passed and as the firms grew, repeating the heroic quest for insight became exhausting for the premium strategy firms (one business journalist famously labeled them The Lords of Strategy). Magical insights were tough to schedule onto a project timeline. Larger consulting staffs lost the requisite mentorship to recognize insights as they served an apprenticeship in the craft of strategy. Most importantly, consulting partners learned something important about their own business. Insight was far less profitable than copying the tried and true.

Moving away from the real practice of strategy was a good business decision for these firms. But for all kinds of reasons—the pitch to fresh-faced new recruits, maintaining the price premium, brand consistency—the premium segment firms continue to dress themselves up in the mythical finery of “strategy.”

Truth be told, it’s not true. The Lords of Strategy have no clothes.

Does anyone really care? Perhaps not. But to the extent there is demand for insight based strategy work, however small it might be, there are other options. If your business is part of this demand, one of those options might be XLP.

At XLP, we strive for something different in our advisory work. First of all, we don’t seek strategy work in large volumes. We don’t aspire to being all-singing, all-dancing jacks of all trades. We don’t need to feed a voracious billability machine with an endless supply of moderately difficult tasks. Most of all, we’re not looking to build our teams’ nest eggs with consulting profits. We have no intention of competing with McKinsey, Bain or BCG.

Instead, we do advisory work to keep ourselves sharp. We price our engagements (true quests for insight) at a discount to the premium consultancy billing rate. We place the burden for partner wealth generation on the capital-based legs of our business. Our incubation and investment legs look to derive value from our advisory work based on the quality of the analytics and the original nature of the insights we often (but not predictably) can uncover. As a consequence, our partners only seek a selective profile for our advisory clients rather than trying to profit from a global sharing network. And unlike the global consultancies, we happily offer within-industry exclusivity; we don’t want to leak our (or our clients') experience to competitors like a sieve. This puts pressure on us to distill non-obvious solutions from our analysis. We welcome it.

We realize that many, perhaps most, clients will be in the market more for reliable deliverables than for unexpected insights. But what about the small set of clients who are looking for real strategists and who believe our cutting-edge, quantitative approach provides novel insights for their business? Well, you might not want anyone to know you’re working with us, because the strategic insights we develop together just might become a part of your competitive advantage.