#13 The world eaters are architecting the new world order

Note: This is the 13^th post of the book after the introduction. If you’re new to the book, start with the introduction. Or visit the full table of contents.

This is an intermission, a pause to call out something important. There’s an insidious creep, a glacial movement, a global dynamic that’s affecting us all. And not in a good way.

Build back better, a new normal, a decade of change in a year. There’s a lot of talk about how our new world needs to take shape to stop us from falling off a precipice. Our world and the future safety of us all, is being eroded by the impacts of global industry — of that there is no doubt. But the architects of our future are already at work, they have always been there. The new world is in the hands of the people building back industry.

Management consultants.

What’s wrong with that

You might think this is a good thing. Management consultants are the smartest girls and guys in the room right? Safe hands. But there are clear signs that they are not the people to be stabilising our volatile world or entrusting with our future. That they are in fact rapidly laying down the track to stay the path we’re on, accelerating the economic juggernaut towards the cliff edge.

Management consultancies are classic, shareholder driven, hierarchical organisations. As we’ve extensively laid out in #TheFalseEconomy; classic, shareholder driven, hierarchical organisations are a big part of the problem. You can revisit #10 Don’t turn the table. Flip it for the why. These are the people tasked with transforming industry, and they are doing big business. If you take that at face value, you’re essentially throwing the cause at the problem and expecting things to get better.

“The global management consulting market reached a value of 160 billion U.S. dollars”

Statista Research Department, Feb 5, 2021

MC’s are re-architecting the future of big industry, transforming business, because clients are asking for it. Clients are scared, they’re desperate. Every industry is being disrupted by new entrants into the market, new ecosystems of tech savvy start-ups applying lean innovation to their go-to-market strategy. Start-ups have the ability to see a user or market need and act on it. Rapidly spitting out a new proposition then scaling fast with venture capital backing driving market penetration and eating into big businesses market share. Until Covid-19 hit, the start-up’s competitive advantage of new ways of working and emerging technology were the things that business feared. Now it’s sustainability. That’s a whole other ball game. But we’ll come back to that.

“consultants are like a religion, they give people hope”

Anatoly Roytman — Senior MD, Accenture Interactive, 2008–2020

The majority of business leaders don’t understand the technologies drastically reshaping the economic landscape: Quantum, Data Science, Blockchain. They also don’t understand new ways of working — design thinking, lean innovation, agile and how these map to reshaping your entire organisation as a; platform business, a product business, a customer centred organisation. These ways of working are far more important than any tech’, because they’re upstream of any technology, any actual thing you make. They’re how you ideate, validate and de-risk a business idea, tech’ is just a delivery enabler. Leaders don’t understand these things and people are fearful of what they don’t understand, because it makes them feel vulnerable. Both co-founders at Po3 have seen this first hand while teaching the executive leaderships of the world’s largest businesses about exactly these subjects. As educators in how emerging tech’ and ways of working are re-shaping the business world, we were very much in demand. Everyone wanted to be in the know, everyone wanted to understand, because without that knowledge how could they possibly react to market threats?

Where does big business usually go when they don’t have the answers? Yeah management consultants. Funny thing is, MCs don’t get new ways of working. It’s kryptonite to them. Because these new ways of working are based on fundamental principles at odds with MCs own way of working. It’s this that will ultimately disrupt management consultancy. And it’s overdue. Industries that have proven the most vulnerable to disruption have been those with:

• One or a few major players
• Relatively outdated business practices
• Slow technology adoption

Yup, yup and yup.

1 2 3 strikes and you’re out

STRIKE 1

Management consultancies are historically brought in to solve problems that organisations can’t solve themselves, because the organisations don’t have the answers and they believe MCs do. This has been MCs schtick since forever, knowing the answers. Having a vast repository of expertise gathered over the years through in-depth, research heavy, industry specific work. All whilst recruiting the brightest minds from the best universities and putting them through rigorous psychometric and aptitude testing.

The issue with this is, new ways of working and modern problem solving methods set out — no one person knows the answer to complex problems or what the eventual solution will be. You only know there’s a problem. From there it’s about facilitating open discussion, ideation, research and testing with diverse groups of people involved in every area of the problem statement: stakeholders, users, experts — regardless of seniority or authority. With a clear problem statement and a clear purpose, you use collaborative ways of working and data to find the answer.

We don’t have the answers. You do

STRIKE 2

Consulting is a bums on seats game, billing for people’s time. Every consultant has their own revenue target, they gotta make BANK. The constant drive for sales growth and dog eat dog internal competition incentivises bloated inefficient costly teams on the ground. To scale the consultancy model and create some efficiency outside this bums on seats billing, every consultancy has a framework, something under lock and key that will be licensed out at a price. The monetisation of IP.

Problem here is open-sourcing. Collaboration. Thank god it’s rife. All the things we talk about in the #TheFalseEconomy are open. All the problem solving methodologies we talk about are well documented and accessible. And trust me, with these things, the diverse peoples we mentioned in point 1. and great facilitation, you can solve any problem.

Everything should be open

STRIKE 3

Closely linked to consultancy killer no.2 we take another look at how a consultant’s success is entirely linked to their ability to meet sales targets. They are incredibly well rewarded for bringing in big billings. This is the sales culture of the business. As a junior associate you have small sales target but you are many and your billings feed into those of the person above you in the hierarchy. As you go up the food chain, all billings roll up into the person at the top. Each person gets remunerated based on their performance against sales targets, which are reliant on the people working below.

Everyone wants to work up the chain, people progress based on their ability to bill, not their ability. Regardless of how that billing came about. You can see how this might not result in finding the best solution for the client, if your own survival is entirely down to making sales, this undoubtedly biases your decisions. As you can also imagine this generates an inherent mistrust of other consultants, it’s every person for themselves. You form a tight knit group of collaborators who can effectively sell together within your function, in order to survive. Like a prison gang, you got each other’s backs — but no-one elses. This is raw capitalism at play. You don’t help someone else close a deal if it doesn’t financially reward you. If you work in strategy, you sell more strategy people, to meet the strategy team’s target.

You can probably see where this is going. Modern problem solving begins with framing the problem, knowing that no-one knows the solution (1) then trusting in a shared process (2) and finally collaborating in a multidisciplinary, cross functional team to work towards an answer. This collaboration is essential. You have one team, one goal, one unified purpose. This will not happen because MCs are financially incentivised to do the opposite.

Problem solving is the goal. Not making bank.

AND YOU’RE OUT!

The management consultancy model is not fit for purpose.

“[W]e’re still early in the story of consulting’s disruption… More likely than not, alarms won’t sound until it’s already too late in the game.”

Clayton Christensen in 2013.

Clayton was a Harvard Economist and Professor of Business Administration, he coined the phrase “Disruptive Innovation”. His thinking influenced Steve Jobs and pioneer Andy Grove at Intel. Quoting from Clayton in the video below, rather than telling Andy what to think, he taught him how to think. Flipping the consultant’s role from advisor to facilitator. He saw disruption coming to the consultancy sector in 2013.

MCs are not daft, they’ve seen that for years now clients have been buying something they don’t have in their arsenal. So they’ve tried to fix the problem the only way they know how, by throwing money at it.

Two types of work.

When you work in management consultancy, you know there are essentially two areas of work. Re-designing the old, if we’re playing buzz word bingo it’s transformation. Then there’s designing anew. Ie innovation. There’s far more money in transformation, because what exists already is big, complex and hard to change — it needs tonnes of resource to move the needle. Businesses tend to want to transform despite the large costs, because it feels less risky for them to change an existing thing than build something new and unknown, unproven. Better to keep the revenues flowing. Management consultancies have always been happy in the transformation space because they have scale, they can resource up in a moment’s notice, taking on behemoth change management programmes, and banking the commensurately large cheque that goes with them.

Innovation (or more sensibly called, the future of your business), has until relatively recently been seen as something to do on the periphery, requiring certain specialists skillsets and tools outlined in 1 2 3 strikes. Skillsets and tools that management consultancies never had. At least until MCs slowly woke up to the fact that first digital, then design boutiques were eating their lunch. Not only that, but these boutiques were building things in an entirely new way, generating a different kind of value, building a whole new business case. User-centred design and design thinking were suddenly en vogue. Not starting with the question “how do we make the most margin on this?” but “what problem are we solving, what is it that people need, how do we best provide it?”.

What does a big firm do when faced with this dilemma? Either buys the competitor to take them out of the market, or absorbs them into The Borg to build and rapidly scale a new capability. Either option brings the work and the clients with, bolstering market value and control. The latter is obviously the more strategic, why kill a business when clients obviously want what boutiques are selling and it’s something the big firms didn’t have.

The recent past.

From the early noughties, tech and software companies knew they needed good design, not just tech’ performance to make great digital products, and progressive tech businesses started making strategic acquisitions of design boutiques.

• 2004 Flextronics — Frog Design
• 2011 Global Logic — Method
• 2012 Google — Mike & Maaike

Large management consultancy’s clients were demanding ‘digital’ solutions that weren’t part of their core capabilities, so they too began a buying spree of some of the most highly respected digital design agencies.

• 2013 Accenture — Fjord
• 2015 EY — Seren
• 2015 McKinsey — Lunar

“According to Ad Age, all the top 3, and 8 of the top-10 ad agencies are not those legacy names that might visit your home nightly with their TV commercials. Instead, they are consultancies like Deloitte, Accenture, KPMG and PwC. Even McKinsey is slowly building an agency arm.”

Forbes April 2016

The battle for the often misappropriately labeled ‘creative space’ from roughly 2011 on was widely documented in the media and in full swing by 2016. I say misappropriately labeled because the creative media industry as it has historically been, advertising, is intrinsically different from the type of problem solving approach taken by user-centred and service design companies. Certainly these days a few agency leaders are woke to the fact that a user-centred approach can be applied to the creation of anything: messaging, content strategy, campaigns, but they’re still surprisingly few in number. It’s a similar thing to industry taking most of a decade, from 2010 onwards to realise that digital is inherent in everything we do. Not a separate business function. So too will be the fate of service and user-centred design techniques (and data and purpose etc etc). They will just become the way everything is done. History repeats. Preach ✊

“The big need is, the battle ground for most of our clients, is now shifting towards … engagement of the user, and that puts experience at the center,”

Baiju Shah, 2013 — Chief Strategy Officer, Accenture Interactive

By 2019 Accenture had made 30 deals for agencies. And the buying spree big consultancy embarked upon has no signs of slowing.

Oil & water don’t mix

I have heard and seen first hand many horror stories of these M&A strategies going wrong. I have not seen one or heard of one go right. These are some of the reasons why:

1. Boutiques are seen as a new product or line of capability, an asset to be sold into clients by big brother. When in actual fact boutiques are the disruptive business model in the MC world. Big brother should be adopting the boutique model, not remaking it in its own image, or selling it as a separate capability.
2. Boutiques are asked to scale 10X to fulfil market potential. But they can’t. People with user-centred design, service design, innovation skill sets are in short supply. All boutiques I’ve ever worked with have large freelancer pools because these specialists prefer to freelance. Because of the great day rates, freedom and varied work. Because it’s a lifestyle.
3. Big brother, in order to track and scale what sells and in order to meet growth targets, treats each arbitrarily labelled specialism as a product; venture design, innovation, design thinking, ux, transformation, cx. This shows a complete lack of understanding about the capability they are trying to build, because all of these are the same thing under different labels. The individual consultants ‘selling’ these services are now suddenly in competition with one another, running in different directions. When they should be kin, collaborators, oneteam. The lack of collaboration is toxic. People leave.
4. Subject matter experts in design and experience, creatives and makers are suddenly given sales and utilisation targets, because they are now in the consultancy growth structure. They don’t like it, they leave.
5. Small boutiques have user friendly lightweight systems with little compliance and regulation restricting best fit solutions. For cost efficiency big brother enforces use of their systems, it slows things down, creates layers of administration and bureaucracy for people who are inherently doers. Suddenly they’re not getting on with their craft. Pointless inefficiency now exists where it didn’t in the name of ‘cost efficiency’. People leave.
6. Methodologies clash, and when people try to collaborate there’s an ugly bastardisation of approach so that nothing makes sense to the client and a pitch fails as a difference of opinion manifests. Or the collaboration simply fails to happen entirely.
7. Big money partnerships with large tech providers mean that client conversations are no-longer technology agnostic. Bias creeps into decision making and it’s no-longer about fixing the client problem but shoehorning in a solution.
8. The concept of ‘we don’t have the answer, just a hypothesis to test’ is completely at odds with the culture of management consultancy, that ‘we give the client a solution’. Preferably a productised one we already have. The cultures of solving a problem, not chasing the $ are incompatible.

The businesses are two different business models, two different cultures. They do not mix. One chases revenues and the other follows a higher purpose. Mirroring our current economy and the emergent trend in purpose driven business.

Interestingly a lot of big firms established separate standalone digital agencies or capabilities, which would seem to recognise these problems right? Not trying to blend oil and water. But it entirely misses the bigger picture. Management consultants need to sunset their old business model and adopt the new. That of the acquired. Because it has fundamentally disrupted the consulting industry.

“Some of Deloitte’s competitors moved quickly to establish their own digital divisions, including Accenture, which launched Accenture Digital in 2013, and Boston Consulting Group, which set up a standalone firm, BCG Digital Ventures in 2014. Others have held back. Big firms have grappled with the dilemma of how best to showcase their digital capabilities without implying that they lack these skills elsewhere in their businesses.”

FT in 2018

A new frontier: greenwashing

And so we come to the now. Taking stock: management consultancies have not solved the problem… Of how to effectively solve complex problems. They have not understood the nature of the businesses they have acquired or the people in them. They do not get that adopting these business models are the key to management consultancy’s future survival. It’s not to say they won’t have an epiphany. They’re clever people, but also extremely empowered and profit driven. This might blind them to the truth until it’s too late. An extremely senior exec leader for one of the top four firms, told me last week that they had never seen a successful transformation of a large corporate. Never. By their firm or any other. What does that tell you? Firstly that the management consultancy model doesn’t work. Secondly that the chances of management consultancy completely re-architecting their own model around one they have yet to understand? Slim.

Another huge wave of disruption is currently crashing over the consultancy landscape. Sustainability. Since Covid 19 hit the global economy hard, everyone is concerned for the future. What will it look like? How can we stop this from happening again?! Fuck me, the world is on fire and we have to change everything else we’re all doomed. People are awake to the need for change.

Step 1. We have a broad consensus of understanding — the need for drastic change Step 2. How do we move forward… Hmm, we don’t have the answers

In classic style, step forward management consultancies. Trust, they don’t have the answers. They never did. But it doesn’t stop a new buying spree, one that’s on the hunt for sustainability skills to provide answers to a new problem MCs do not understand.

“In its fourth acquisition in 2021, McKinsey & Company has closed a double swoop in the UK aimed at beefing up its sustainability and climate change capabilities. The acquisition of Vivid Economics adds a team of around 130 consultants and staff to McKinsey in the UK, the Netherlands and the US, the largest majority of which are based in London.”

Consultancy UK, March 2021

Time will tell, but my hunch is that it will go the same way as the last decade of M&A debacle. Because until MCs realise that they need to fundamentally re-architect the way they approach problems and design solutions, this will be another bolt on, a new capability to sell. Even if it sells, it won’t fix anything. Not the population scale problems we’re facing. Sustainability consultancy has been around forever. It’s applied to most large projects already, HS2 for instance. You think that’s a project that’s benefiting the environment? A true exemplar of the circular economy? Creating a better fairer world? No, but it passed a sustainability standards checklist.

Sustainability expertise is massively important to have in one, lean, multidisciplinary holistic problem solving team. Alongside; user needs, business needs, market needs, you need sustainability knowhow to consider the needs of humans, our economy, our environment — our future as a species.

We haven’t even mentioned ethics

This isn’t about finger pointing. It’s about waking up to the fact that we can’t continue to outsource the most pressing problems of our time, to people who don’t have the answers. Who don’t even know how to approach the problem. We don’t have time because the world’s burning. Right now. It’s often framed that large organisations outsource to MCs because it shifts responsibility. Large consultancy firms can shoulder the risk to get things done. Well, the risk is too big.

Everything written up until now is about the fact MCs can’t solve the big problem because they don’t know how. But, there’s a strong case that they shouldn’t because they’re simply not the right people. Not ethical enough to be the ones in charge, not incentivised to get to the answers we need, not diverse enough to understand the problem. Another sign the MCs industry is being radically disrupted right now, is that the court of public opinion is in session, and the recent evidence is damning.

Read:

• McKinsey and the opioid epidemic — BBC
• McKinsey and the toxic internal culture — Economist
• Management Consultancies diversity problem — Telegraph

If you want a long read or something to watch, I’d recommend the below. They were recommended to me by someone who spent a decade at the top of the management consultancy food chain.

• Read this: Dangerous Company
• Watch this: House of Lies

The final act

So what does all this mean? It means Management Consultancies have the power, the scale and for the moment, the ear of industry to do what’s needed. They can save us, they are the architects of our future. They just don’t know how, and time is running out for them.

This is a call to arms. We’re throwing down the gauntlet. If any big firm out there wants to work with us to do this right, we’re game. Because we don’t frame problems without thinking about the way forward, we can help you. To create radical change, you need radical action.

We have a plan. A plan to sabotage industry. In a good way ;)