Some of my highlights..
Consultancies—start-ups and established outfits, including the strategy firms—stood willing to help clients figure out how to make sense of it all. By the end of the decade, some BCG offices derived nearly half their business from projects related to new technology.
Consultancies—start-ups and established outfits, including the strategy firms—stood willing to help clients figure out how to make sense of it all. By the end of the decade, some BCG offices derived nearly half their business from projects related to new technology.
In this emerging world, according to Evans, “the key way to
think about competitive advantage is to think about how to design ecology in
such a way to achieve goals you’re trying to pursue.
The role that strategy consultants play in the business
hasn’t received much attention, but represents a remarkable convergence of
mind-sets, analytical inclinations, and shared profit motivations.
The PE business, is in part the opportunity to actually run
something. What consultants bring to jobs in private equity, at least to hear
them tell it, is experience in improving the performance of
companies—experience based on years of analyzing and advising.
by Bain & Company’s calculations in 2007, 75 percent of
PE firms fail to earn more than their risk-adjusted cost of capital, a figure
undoubtedly made worse by the recent disruptions—will be the ability to ratchet
up the performance of their portfolio companies and, with it, their eventual
sales price.
on “results” and its preeminent skills at Greater Taylorism.
“Quite frankly, it’s the purest type of Bain work there is,” says Dan Haas, one
of the founders of the practice, “because it’s all about creating value, you’ve
got a motivated management team, and the stakes are incredibly high for
everyone. For a firm of impact junkies, it doesn’t get any better than that.”
Bain’s help to its PE clients comes in two forms. Before the
decision to buy a particular business, it will perform what it calls “strategic
due diligence,” surveying the industry and players across the potential
property’s value chain, from its suppliers to its customers....including what parts of it we will want to sell off. After
the purchase has been consummated, Bain then works with its client to develop a
performance improvement plan, particularly for the first one or two years:
targets to be achieved, including financial goals, often plotted down to the
month, with the steps to be taken to get there.
“Every day you don’t sell a portfolio company, you’ve made
an implicit buy decision.”
The issue of what happens to overall employment at
businesses acquired by PE firms was controversial even before the recent
economic crisis. Private equity buckos are inclined to the view that certain
functions, like human resources, can often be outsourced.
The CEO of the mortgage lender, Angelo Mozilo, and his team
were convinced that the stock market wasn’t setting a high enough value on
their enterprise. In strategic planning sessions in 2002, their consultant
advised them that if Countrywide’s market share was higher, so would be their
stock price. The consultant, Eric Flamholtz, a professor at UCLA’s Anderson
School of Management, told how most industries evolved such that one competitor
had more than a 40 percent share, the next more than 20 percent, a third
competitor 10 percent, and the rest mere boutique status. (One can almost see
Bruce Henderson nodding from the great beyond.) This, at a point when
Countrywide’s share was about 10 percent and the market share leader’s was no
more than 13 percent. [And we all know what happened to countrywide]
For students of strategy surveying the wreckage of the
financial system, examples of strategic precepts leading the players astray
won’t necessarily come as a surprise. (Think back to all those companies that
claimed to have been ruined trying to apply the growth-share matrix to
themselves.) What may be more of a shock is how seldom strategy or the consultants
who pushed it creep up in accounts of the misadventures that led to the crisis.
This is not just because of the consultants’ traditional determination to keep
their work confidential
So what were the bulge-bracket consultants doing for their
banking clients? As the Bear Stearns example suggests, much of their effort
went to helping with Greater Taylorism in its most reductive, cost-cutting
form. Often this work came under the rubric “sourcing.” In the 1980s, the
consultants had demonstrated that what was pulling the banking industry’s
profitability down was not the expense of the interest it paid out on deposits
but rather the cost of new branches and technology...
Asked to name sins of omission or commission they may have
committed in connection with the global financial crisis, most consultants will
allow that in their advice they failed to make sufficient provision for risk,
particularly systemic risk
