Consulting=money suck?

I suppose the value consultants provide is intrinsically tied to the reason they're hired. If you are running a really lean organization, consultants act as extra sets of arms and legs. They increase the bandwidth a company has to handle crises or one-off projects that the business isn't naturally designed to tackle. Due diligence in an investment setting is a prime example--not just for funds, but for companies too. I've worked in both lean funds and lean corporate development teams, and in both cases, we tended to use consultants on large deals because we simply didn't have the staff to do all the work internally. Even at a multi-billion dollar company with 100K+ employees, the number of people who were useful on a deal team was exceedingly small, so you bring in consultants to fill the gaps.

Speaking of gaps--consultants don't just provide additional bodies when needed. Sometimes, consultants really do have specialist knowledge outside the expertise of your organization. Pension consultants, for instance know more than I ever care to learn about pensions. On any large deal,, this can be a big issue and their knowledge is worth something in that context. The same is true in restructuring. Alix, Alvarez and Marsal and FTI have few strategists and many CPAs. Those guys tend to be pretty useful when it comes to making operational improvements in businesses, even if their projects tend to last 18 months or more.

Further, you could make a similar argument for economic consultants when it comes to competition policy. While not enforced as often as they probably should be, the whole of the West has laws concerning anti-competitive dealmaking. The likelihood that you have an expert on competition policy on staff at your firm is low, so getting an opinion from one of the specialist firms who do that sort of thing BEFORE wasting a bunch of time and money on a deal that ultimately goes nowhere is definitely worth the price. The same can be said for consultants who specialize in regulatory policy. If you're a non-US entity attempting to buy a US company, it definitely helps to know if CFIUS is going to stop you from making the acquisition, force you to divest some assets to do so, or compel you to own the business by proxy. To that end, I also see value in tax consultants and lawyers because there is such an abundance of tax law in existence that if you're doing cross-border deals, you might just be wasting your time if the taxes don't work out. No matter how good your internal tax guys are, they can't be experts in all the world's tax regimes, so paying for consultants in this context also makes sense.

There are many other types of consultants that are worth paying for, but I suppose that 'consultant' in the context you were using it was specifically meant to connote MBB strategists. I'm not sure I see a lot of value in what they do. The kids who work there tend to be very clever, so I've hired a couple, but I don't find any special magic in MBB strategies these days.

I think that 25 years ago, the big strategy shops really did have knowledge that corporates lacked. Back then, information was far more difficult to come by. Data wasn't so readily available. And market intelligence was a thing discussed over business lunches. In the era of Windows 95, producing high quality decks was immensely difficult. PowerPoint sucked back then and Excel only handled 65K lines and was slow AF when moving between arrays. The execs at any company in the mid-90s were born in the 30s, 40s and 50s. They didn't know how to use computers at all, so even a modicum of data analysis combined with a sleek presentation was enough to justify MBBB's price points (Booz used to be in there in those days). 

Obviously, those firms have evolved since then, but they're still mainly known for their strategy legacy. The whole reason Booz Allen Hamilton started losing prestige relative to the other MBB firms was because it moved into operations and tech work in the early 2000s--long before MBB did. Doing so watered down Booz Allen's rate card and made it more difficult for the firm to compete for the comparatively more prestigious strategy work their peers were still chasing. This ultimately led to Carlyle buying out the legacy strategy partners at Booz Allen and splitting the business. Perversely, MBB have all moved into ops and tech work these days, but they've managed to retain their rate cards even though less than half the work at any of those firms is truly 'strategy' work these days. 

I feel like that fact is lost on many employers who simply seek to hire ex-MBB consultants. A huge percentage of their consultants aren't strategists these days. It matters materially which projects you get staffed on. I think a lot of people get staffed on some shitty projects and do their best to make them sound good on their CVs, but don't have a huge amount of impact. But because corporate execs today were just starting their careers in the 90s, they still remember the legacy of those MBB firms. That's a major reason why those firms retain their prestige even while their work product and strategies have become increasingly less impressive.

To their credit, MBB all recognize this. That's why they started to diversify their revenue streams about a decade ago. McK started going after what they called 'asset-based' consulting. Essentially, they wanted to 'productize' some of their service offerings. That led not just to an increase in ops and tech work, but also to the creation of McKinsey New Ventures. You might have noticed that BCG did the same thing. Booz attempted to do so with Booz Digital, but those partners eventually left to join BCG Digital. Bain has always had a larger portion of its revenues coming from longer-term operations contracts than McK or BCG, and I don't think Bain has really strayed as much from its strategy and ops heritage as the others, which is why it's also the smallest of the three.

In any case, I think consultants have value--though that value is situational. I see less value in general strategy consulting these days. The skill sets that were really the province of H/W/S MBAs turned MBBB consultants 25 years ago are much more commoditized now. Still, they have their place. They provide some CYA for C-suite execs when making big decisions. They provide even more CYA for BoDs. They have some clever employees capable of data analysis and presentation production--that has some worth. But a lot of what strategy consultants do today isn't worth the price they charge for those services. I suspect that as a new generation of execs come to power, MBB's rate cards will be under serious pressure. This will further push them to alter their business models and will probably ultimately hurt prestige in the field. But as the rate cards drop, I think consultants will become comparatively more attractive to use as a flexible workforce, so you will probably see even more consultants as that happens. Just what the world needs, right? More consultants...