Advertiser Carl Ally once said, “A consultant is someone who borrows your watch to tell you the time and then keeps the watch.”
Consulting is a big industry that is in high demand and attracting the attention of the brightest college students from around the world. According to IBIS World Statistics, the management consulting industry is valued at $263.5 billion in the US alone and is projected to grow to $357.2 billion by 2026. Almost all Forbes 500 companies consult management consultants at least once every 12 months. More than a third ask for help more than four times a year. “Whenever I read The Wall Street Journal’s ‘Who’s News’ column, I’m like, ‘Geez, what consultant did that?'” said George Whitmore, owner of a consulting firm. Ivy League graduates flock to consulting firms after their undergraduate degrees. According to the school newspaper, 22% of Harvard graduates who enter the job market after college go into the consulting field. Even the Vatican hired Mckinsey & Co. and other consulting firms. So what makes “watch theft” such an attractive industry? Where did it all start?
The first spark of what would later become management consulting came from a book called The Principles of Scientific Management. In his work, Frederick Taylor argues that management must be viewed as a science with clear rules and structures. He said to his fellow engineers that “taking on scientific management in the future would easily double the productivity of the average industrial worker”. He saw companies doing tasks haphazardly and believed that for any given task there was a “best” approach. Taylor’s methods saved railroad companies millions of dollars and inspired the strategy revolution of the 19th century.
Arthur D. Little, a chemist at MIT, felt that Taylor’s approach was too systematic and that a more individualized methodology was needed for each client. He founded a consulting firm that later adapted to a more structured approach and remains one of the oldest and largest consulting firms to date.
In truth, the strategy dates back to ancient times. In the Bible, Moses led millions of people out of Egypt and had no effective way to deal with the nation’s numerous problems and issues. His father-in-law introduced a more effective system that allowed every individual to be heard.
Fast forward to the 1930’s and the advisors’ reputation wasn’t the strongest. One counselor remarked that he was too embarrassed to tell his mother that he was a counselor and instead passed on that he was a pianist in a brothel. Things changed when McKinsey & Co. were at the forefront of strategic management. James O. McKinsey focused on highly qualified MBA graduates and sought to distance himself from the academic management crowd. He founded McKinsey & Co. His focus was on “why” managers did things, rather than how they did them.’ Labeled Consulting Engineers, the firm focused on combining accounting and engineering and law to form the first tier of the firm to design.
In the 1960s, other firms followed McKinsey’s lead, and the Boston Consulting Group entered the scene. In an attempt to shape the narrative of corporate leaders, rather than just providing behind-the-scenes advice, BCG broke the notion that consultants are only hired when companies are going through tough times, and instead focused on the company’s future and its future growth aspirations. Many of the frameworks and structures popular today emerged during this period, such as Porter’s Five Forces, SWOT Analysis, and the Rule of Three and Four.
Although the emergence of powerful, widespread business ideas was generally good for business, one consulting firm found that building long-term relationships with clients was a better business model than short-term strategy work. In 1973, Bill Bain left BCG to form Bain & Co. and joined Mckinsey and BCG to be recognized as what is now known as “the big three”.
Then, in the 1970s, came the race to globalization. Prior to this era, all major corporations derived most of their revenue from the United States. After 1970, Mckinsey led the global race with more than 50% of its sales outside the United States. The company has spent years building long-term relationships with companies overseas and it has paid off.
Over the years, other consulting firms focused on strategy emerged, such as Parthenon, LEK, Monitor, and others. Many companies began to focus on implementing the strategies they recommended in order to have longer engagements and build customer relationships.
Consultants today work on a wide range of projects aimed at using data to improve businesses by solving complex business problems. Also, many large companies have dedicated internal teams that focus solely on their own strategic initiatives. Businesses have important decisions to make and are willing to pay big bucks to have those decisions made for them. Because of this, they hire the best and brightest to help them decide on the future of their business.
This new wave of strategy has taught many companies that they must look at each component of their business as a unit, where each component influences the other. While strategy will change as technology continues to evolve, it will be a crucial core of any business for years to come.
Caption: Consultants help companies address problems more efficiently and streamline business initiatives
Photo credit: Unsplash