9/19/16

Hey all,

Looking for some thoughts on how you guys, looking at those actually in the industry, think the strategy consulting market is changing or will change in the upcoming 5-10 years. If you're in college but would like to chip in a few thoughts that's cool, but the usual 'MBB is superior to anything'-opinions I've seen quite often are not very helpful.

I think there are a few things happening in the strategy consultancy industry right now

  1. McK is struggling with its scale, as we can see in rigorous price cuts on projects and the amount of implementation work that's going on there. They now have an implementation arm to keep the operational and strategy work separate, but I think this will end up hurting their brand in the long-run. Most people choose McK over the B's on prestige, and having an implementation arm will detract value from the McK brand, and thus from the talent it attracts.
  2. In Europe, Roland Berger will either join top pack or fail. But I'm predicting a fail considering it's struggle in their main markets (DACH) and the offers they have to bring to take away talent from MBB
  3. Strategy& will abolish within five years as clients do not want to pay a premium for people upgraded from PwC consulting all of a sudden, also, a lot of talent has moved away since the merger in Europe

These are questions I have no clue on and would love your thoughts:

  1. Do you think BCG will catch up to McK either in revenues or prestige?
  2. Will Bain catch up to BCG in either revenues or prestige/brand recognition?
  3. Is Bain likely to be bought in future years?
  4. Do BCG or Bain have to specialise in a few areas to keep it's elite status in the long-run? (e.g. PEG, corporate turnaround) If not, do you expect them to move onto a Big4 consultancy model with both implementation and strategy?
  5. Are the Big4 likely to acquire one of the MBB players, 10 year horizon?

Comments (18)

9/20/16

Trends :

(1) McKinsey is actually playing it smart by building up its operations practice. Traditionally strategy work is becoming less and less of a revenue generator for management consulting firms. I'd be more worried for BCG and Bain with their lack of operations solutions compared to McKinsey. McKinsey has reaffirmed it's commitments to its core values under Dominic Barton's leadership and has chosen to grow less aggressively as a result. I believe that Deloitte S & O and McKinsey & Company will be the major players in management consulting 10 years down the line.

I do believe that McKinsey has lost some of its appeal recently though. When going through recruiting, many of my friends did not like McKinsey's culture or people as much as the other B's. This is just anecdotal evidence though.

(2) I don't know enough about the European market to make a comment here.

(3) Agreed. Strategy& has been on the decline since the merger. On the other hand, Monitor's merger with Deloitte has gone the other way. Partners at Monitor were generally happy and accepted the merger. Booz & Company lost a lot of talent and many partners were poached by MBB post merger.

Questions :

(1) BCG has been growing faster than McKinsey recently but that's also easier if you're smaller to begin with. I think BCG is a fantastic company but they seem to follow suit on a lot of what McKinsey does recently. From branding, to Perspectives to office openings. They need to be more innovative and not follow/be under McKinsey's shadow.

McKinsey also has a very strong presence in Asia which BCG still seems to be catching up on.

(2) When going through recruiting, I always felt a slight difference between McKinsey & BCG vs. Bain. In my opinion, Bain has actually been losing some of its prestige and quality recently. Maybe that's a function of size and scope. Bain doesn't have as strong thought leadership as McKinsey & BCG. In terms of revenues, they have been growing really fast and they are hiring their biggest class to date. Though Bain's Partners have always been after superior growth while not focusing much on ethics and financial stability. Not sure if this will cause them trouble in the future too.

(3) Maybe but most likely not. They're growing well, have an abundance of projects and still attract top talent. Maybe things will change when the next economic recession hits. I do believe that Bain needs to scale up fast if it wants to stay around for the long term though.

(4) BCG and Bain should move into that model if they want to maintain their status and prestige. All the boutique and specialized players are being bought out by Big 4 and other firms.

(5) Not sure but it's an interesting thought. I do think Deloitte S&O will cause some concerns to MBB if they can fix their global partnership, improve their thought leadership and carry on improving their prestige to justify larger fees. PwC could potentially become a leader too but they have a tough ask ahead of them in terms of attracting the right talent and rebuilding prestige.

My prediction is that the top players will be MBD in a few years (McKinsey, BCG and Deloitte).

Management Consulting Interview Course
9/21/16

Think we all have the same tendency on (1). As soon as McK loses prestige over the B's they're in for a rough time, and I think BCG is definitely closing in on it in the US and EMEA markets, although still far out. I'm just not sure what the change to end-to-end solutions brings as the 'pure strategy' work is what draws the talent to the MBBs. This is only the perception though, as we all know how much implementation in terms of PMIs, PMOs, and orgs is being done lately at all three.

For the others:

(1) Agreed, McK has first mover advantage in Asia, might also be culture wise as McK is stronger on branding in my opinion, not only recruiting-wise but also selling-wise.

(2) Agreed partially. Bain has problems as soon as Allen and Zook disappear from the stage. They're really the center of the organization. Bechek seems to be doing a good job though, and the industry seems to start to favor Bain over McK on a lot of projects, causing McK to do rigid price cuts to keep or win long-term engagements. Nevertheless, Bain lacks thought leadership and innovative ideas. They're operating within the framework, and doing that really well, but not really re-defining the framework itself it feels like. They're more about optimisation than innovation it sometimes feelsl like.

PE DD is really attractive though for a lot of starters I think, but as soon as PE goes down the drain (see Hillary2016) they might lose both a lot of appeal and revenue.

(3, 4, 5) BCG seems to have had quite a rough summer but are building up their ops arm as far as I know. I think they're even hiring people for the ops and strat arm specifically. But once again, not sure what this will do for branding. Boutique players might become more interesting for talent if they can match prestige and PD opportunities in a few years. Perhaps the boutique firms within the Big 4 might have a second coming (e.g. Parthenon) as they are backed by the scale of the big 4 but are separated enough to be seen as an entity in itself.

Agree on Deloitte closing in, but not within 5 years. They need time to change their partnership model and build prestige as you mentioned. Then again, they do have the brand recognition, and as soon as they can bundle that with exclusivity/prestige they'll be a heavy hitter. Bain needs to scale up fast or go into a niche.

MBD or MBBD might indeed be a prospect.

9/22/16
Koloniaal:

Think we all have the same tendency on (1). As soon as McK loses prestige over the B's they're in for a rough time, and I think BCG is definitely closing in on it in the US and EMEA markets, although still far out. I'm just not sure what the change to end-to-end solutions brings as the 'pure strategy' work is what draws the talent to the MBBs. This is only the perception though, as we all know how much implementation in terms of PMIs, PMOs, and orgs is being done lately at all three.

For the others:

(1) Agreed, McK has first mover advantage in Asia, might also be culture wise as McK is stronger on branding in my opinion, not only recruiting-wise but also selling-wise.

(2) Agreed partially. Bain has problems as soon as Allen and Zook disappear from the stage. They're really the center of the organization. Bechek seems to be doing a good job though, and the industry seems to start to favor Bain over McK on a lot of projects, causing McK to do rigid price cuts to keep or win long-term engagements. Nevertheless, Bain lacks thought leadership and innovative ideas. They're operating within the framework, and doing that really well, but not really re-defining the framework itself it feels like. They're more about optimisation than innovation it sometimes feelsl like.

PE DD is really attractive though for a lot of starters I think, but as soon as PE goes down the drain (see Hillary2016) they might lose both a lot of appeal and revenue.

(3, 4, 5) BCG seems to have had quite a rough summer but are building up their ops arm as far as I know. I think they're even hiring people for the ops and strat arm specifically. But once again, not sure what this will do for branding. Boutique players might become more interesting for talent if they can match prestige and PD opportunities in a few years. Perhaps the boutique firms within the Big 4 might have a second coming (e.g. Parthenon) as they are backed by the scale of the big 4 but are separated enough to be seen as an entity in itself.

Agree on Deloitte closing in, but not within 5 years. They need time to change their partnership model and build prestige as you mentioned. Then again, they do have the brand recognition, and as soon as they can bundle that with exclusivity/prestige they'll be a heavy hitter. Bain needs to scale up fast or go into a niche.

MBD or MBBD might indeed be a prospect.

I completely agree that the scaled approach to consulting delivery is the wave of the future (which honestly makes me nervous considering my firm only has ~4,000 employees globally), but why is only Deloitte ever mentioned in this context? Am I missing something? I'll probably get yet more monkey shit from the Deloitte fanboys, but if Deloitte can challenge MBB in 5-10 years, then what's stopping the other Big 4 + Accenture from doing the same? They all have consulting services on a huge scale, albeit at difference levels of maturity. I believe Deloitte was the only Big 4 to keep it's consulting arm in the wake of SOX and therefore had a head start on the other Big 4, plus Accenture had to rise from the ashes of Arthur Andersen dissolution.

EDIT: Added some more info below

In terms of Strategy, Monitor was a top-notch firm so I understand why Deloitte can tout this is a key performer. However, when I started in consulting my second-choice firm was Parthenon and, from what I understand, the Parthenon-EY merger has been pretty successful. They have a huge carve out in the CDD and M&A space and I believe a very strong healthcare practice (although I could be wrong). Sure, Strategy& has been a bit of a flop, but it's still a major player doing extremely impactful work. Anyone know their revenues? KPMG Strategy seems to an underrated group on this forum, perhaps because they are new and small and therefore not getting the brand-name recognition but, as I mentioned in another post, my former roommate worked there and said it was an excellent shop. I don't know much about Accenture Strategy but ACN seems to be investing a lot in the unit.

If all of the Big 4 have solid strategy arms at this point, what's stopping them from closing the gap with MBB like it is being posited that Deloitte is doing? I'm talking about a 5-10 year horizon, not today. Please enlighten me.

9/22/16

Parthenon merger has been successful, but the size of the practice is incredibly small, they for the most part only do work for smaller companies, and they only play in a handful of industries. It's not close to being synonymous with Deloitte's strategy division.

9/22/16

Your assumption that all big 4 has a solid strategy arm is wrong. Only Deloitte is somewhere up to scale on strategy work. The rest of them we, my firm and geography, really never see. Strategy& will not survive probably, see reasons above. Could have been a challenge if the merger did succeed.

Also, not sure where you're getting Accenture from? They're really considered an IT firm. I'd place Big 4, especially Deloitte really a level higher.

9/22/16

I second this. McKinsey Solutions has acquired dozens of technology start-ups and is offering a lot of capabilities centered around data sciences and analytics. It's a good way to diversify and prepare for the future. The Solutions arm is a subsidiary and the traditional McKinsey consultants are a separate practice so I don't think it will hurt their brand. I spoke to a family friend of mine who is an Engagement Manager when I was interviewing for McKinsey's analytics arm and she mentioned that the Organizational Health Index that McKinsey Solutions came up with is critical in her performing her job. I imagine it is difficult to come up with sound strategic advice without taking into account technology and analytics.
I would say watch out for Accenture/IBM as well because both are investing a lot into Artificial Intelligence. IBM Watson is going to change the way a lot of organizations do business.

Best Response
9/20/16

I think BCG will establish itself as the top strategy player, Bain gets absorbed by another company, and McKinsey has a slow but steady decrease in prestige. Of the MBB, McKinsey has been - by far - the worst at getting up to date with work life balance issues and cultural issues. The minute McKinsey doesn't have an objective prestige advantage over BCG/Bain, I can see them losing nearly all cross-offers. Bain I think doesn't have the scale to survive, and I also think that when the PE industry has another bubble burst, Bain will be in A LOT of trouble due to their over-reliance on PE DD. BCG has the best culture of the three and from what I see, submits the best work.

I also am very bullish on Deloitte, but that's a bit homerism. I think they will actually become McKinsey's biggest competitor, as McKinsey builds out Ops, Tech, and implementation, and Deloitte continues to expand strategy/Monitor-Deloitte. You're already seeing Deloitte beat McKinsey A LOT on bids, and they aren't winning by cutting prices.

I agree with ops assessment of Strategy&.

9/21/16

For the most part, I agree with the comments above. However, no firm is going to catch up to McKinsey, BCG or Bain for quite some time for a few reasons:

  1. Although we glorify strategy consulting to be the engine of cutting-edge corporate analysis and philosophy, that's often not the case. Frequently firms are brought in to rubber-stamp executive decisions and in fact are incentivized to provide a supporting recommendation - I've seen this at my firm (top boutique strategy firm.... think LEK, OW, ATK, Mars, etc.) and even more so at MBB because reputation is the warmest affirmation a CEO can receive (hence the term, "no one ever got fired for hiring McKinsey"). Firm reputational rankings take years to change so, for the foreseeable future, the lions share of this work will continue to go the top firms.
  2. Bain will not be bought out anytime soon, I'm not sure why people keep thinking this. Booz & Co. was nearly too expensive and many Big 4 firms eyeing the acquisition dropped out because the price was too high. Bain's revenue is over double what Booz's was when it was acquired so given a conservative P/S of 1.5, we're looking at a $3-3.5b buyout. That's big for a company with no physical assets or IP.
  3. Maybe I'm too hard on the Big 4, but I don't see "MBD" ever happening, at least not for a long time. I agree that the industry is trending towards end-to-end consulting initiatives (Strategy > Implementation > Risk) where the Big 4 and Accenture (let's face it, those five are kind of all the same) will see tremendous increase in responsibility but, at the end of the day, I just don't see the high-end work being ceded from the top firms. I've actually had very little experience with the big D (I never see them on our proposals.... I see lots of MBB and top boutiques and, for some reason, tons of Strategy& / PwC), perhaps because of my vertical, so maybe I'm being to hard on them. The Big 4 business model just seems too commoditized to lend itself to high-end work. The only way this could happen is if the rest of the top boutiques are squeezed out of the market and purchased by larger Big 4 + Accenture firms AND THEN gain significant ground.

Don't know what's happening in Europe, I'm a patriot and don't care about those socialists across the pond. As for BCG vs. McKinsey, I think they will continue to focus on their core competencies (McK on organizational design, BCG on product strategy) and Bain will continue to dominate PE, but I'm too tired to write anymore so I'm going to stop.

9/22/16

I'm not sure why this got so much monkey shit thrown at it. There is a lot of truth on this comment. The bigger trend is "pure strategy" - whatever that means now - dying out. It's extremely rare that my MBB/Tier 2 friends and I get company-defining work - most of the time it's operational strategy, op model design, etc.

9/24/16
itsalwayssunnyinflorida:

I'm not sure why this got so much monkey shit thrown at it. There is a lot of truth on this comment. The bigger trend is "pure strategy" - whatever that means now - dying out. It's extremely rare that my MBB/Tier 2 friends and I get company-defining work - most of the time it's operational strategy, op model design, etc.

It gets MonkeyShit because half the board here work at Deloitte (eg. Hilary2016 aka opsdude1 aka Deloitte employee), so if anything gets said that doesn't align with what HR feeds them, some shit is thrown. Shit like "you see Deloitte beating McKinsey in a lot of bids" and not via price cuts just isn't in line with what any insider with privy knowledge of the industry would say.

The hate for Deloitte comes from exactly the price cutting nature of how they do win things - which by the way is often to do an entire "relationship" project invested for free in the hopes of winning future business. Of course these sorts of investment "projects" aren't unique to Deloitte (they happen at MBB too) - it's just that Deloitte is notorious for coming in with these tactics, and much more so than some of it's peers like Oliver Wyman, who are genuinely taking deals off MBB via their relationships and specialties in specific practice areas. Deloitte isn't known for any particular specialty on the strategy side.

But good on the internal marketing team for selling that Kool-Aid. And go ahead, throw more shit - it's not going to stop the fact that the behavior I'm seeing above isn't coming from some internal brochure but an apt description of exactly what C-Level execs babble about when trying to negotiate prices down while using Deloitte as leverage.

9/21/16

I think MCK is playing it smart - it's operational practice is going to help the firm weather some storms, although it has been pretty exposed to having its strategy work eaten up by BCG, who I'd reckon are also privately shoring up their own operational capabilities on a much smaller scale and keeping it hush so they can play the prestige card. BCG has made some acquisitions but largely run them independently instead of leveraging the BCG umbrella which probably has negative impact on the short run, but may preserve the brand name long term.

The real open questions are:

What's going to happen to Asia? McKinsey does have the dominant investment in this area (BCG second, Bain practically a non-player) but even with the growth it's a pretty risky low margin area; I think we'll find out within 5 years what's going to happen and if the investment was timed correctly

What's going to happen to Bain / boutique consultancies? McK & BCG have made the top end of this space really hard to compete in - every 3 years I reckon the two combined are expanding at a rate equal to the size of the rest of high end strategy industry (including Bain). Actually don't think Bain is a good acquisition target but could see poachings start to happen if paychecks from PEG stop flowing in

Deloitte? Probably going to get monkey shit for this anyways, but even Bain views McKinsey/BCG with much more concern than Deloitte. Deloitte ultimately competes with MBB on a cost basis alone, and sells a different version of that Kool-aid to its employees. What's more likely to happen is that there going to brush up against MBB more and more frequently, but only because Mckinsey is pushing downwards, and not because Deloitte has actually made significant headway into the high-margin strategy space. With that said, I've got pretty good feelings about Deloitte's long term future (which is backed by a tremendous balance sheet) - but I see that future as a powerhouse with a lot of revenue at significantly lower margins.

9/22/16

Biased here as I'm part of the strategy arm of a Big 4 - definitely see MBBD happening in 5-10 years, for two simultaneous reasons:
1- The entry of McKinsey, BCG and Bain in more operations-focused projects;
2 - Big 4's ability to provide advice on strategic, but minor works for departments, opposed to the whole Client

No reason to see why Bain should be acquired. I am betting much more on ATK/RB/Startegy& mergers or stand-alone acquisitions, which will still take about 5 years or so. On top of that, Bain has definitely growing (new offices at least) and cimenting itself as the consulting firm for PE.

So, OP, in that time horizon we'll see in my oppinion the MBB&M (for Monitor Deloitte) in the top strategy niche, then some boutiques and for the rest of consulting, Big4+Accenture.

9/22/16

Accenture bought Kurt Salmon today

9/24/16

After Strategy& I think the era of the big buyouts is over. As Canadien16 mentioned, paying $3.5B for Bain is insane, particularly if a buyer is a Big 4 firm. In a post SarbOx world Big 4 firms can't have the same clients as audit and consulting, so depending on number of mutual clients not only is a firm with no real physical assets or IP being bought for billions, but you quickly see multiple partners leaving since their clients overlap with audit. That's part of the reason Strategy& merger has been such a sh**show, lots of partners have jumped ship to competitors because under SarbOx they can't sell to their clients anymore. So why in their right mind would a Big 4 firm buy a company like Bain, or even LEK, and immediately see 10-25% of partners jump ship. The merger logic doesn't work here from either the buyer or seller side.

I could see Accenture, or even IBM, being a player for a firm like Bain, but in those cases I think integration would be an actual nightmare, from a cultural standpoint if nothing else. Hard to see what either company would gain.

The Monitor & Parthenon acquisitions worked b/c the firms are small, Kurt Salmon may work for the same reason.

11/19/17

Deloitte is definitely a class apart from the rest of the Big 4 in Strategy Consulting

11/22/17

From someone in the APAC region, most interns would opt for Strategy& here as opposed to Deloitte S&O. The presence and exclusivity is very limited, not to mention that the compensation is terrible (think 60% of what MBB pays). I've heard that D S&O is strong in the US, but its presence in my region is, at best, mediocre.

11/22/17

In the European market it is the same story. In Germany Deloitte is not even comparable to S&, OW, ATK, Roland Berger (Salary, work, reputation). I think this MBBD meme might only apply to the USA.

11/22/17

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